Author Topic: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement  (Read 24637 times)

ReadySetMillionaire

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Hello all. First post here, so I hope this is in the right sub-forum.

I know, you read this title and likely thought I'm an idiot for incurring that much debt. I could go on and on about how I got myself into this position, but there's no more time for excuses or self pity: I'm sleeping in the bed I made, and I'm only looking forward now.

So I have $150,000 in student loan debt, mostly from law school. Despite having pretty good grades (top 30%) at the best law school in the state, I didn't have a job after passing the bar. However, I successfully obtained a grant from my school to work at a firm in my hometown. The grant only paid $2,000 to work there for three months, but since I was able to live with my mom, I made it work.

Lucky for me, this gig at a local firm turned into a full time associate position. I now make $47,500 per year and have great benefits (they pay 90% of healthcare costs, pay all my bar/CLE fees, and contribute 3% to my 401k, even if I don't match). I'm happy with the work/life balance here and can see myself being here for a long time.

But back to the elephant in the room: I have $150,000 of student loan debt. I actually just made my first huge payment towards my loans ($2,200) and got the principal balance down to $148,500. Small chunk, I know, but it's a start.

But now I'm looking for more advice as to what I can do to get out of debt as quickly as possible. It's the first step to the road of a Mustachian and I want to get there so, so, so bad.

My monthly budget is as follows:

Income (after taxes and 401k contributions): $2,550

Rent: $225 (living with girlfriend, renting from family friend, and managing the building to get a discount)
Car: 2007 Ford Focus, paid off, keeping it until the engine explodes.
Gas: $60 (above-described discounted rent crushes any auto savings I'd make by living closer to work).
Car Insurance: $86
Groceries: $200
Utilities: $81 (includes 50% paying of DirecTV...my girlfriend and I love sports and this is our one luxury).
Cell Phone: $75 (looking into Ting when my contract expires)
Mom's Life Insurance: $40 (mom has $450,000 whole life policy and each of us three kids pays $40/month to keep it current).
Social: $50-75 (probably 1/3 of what my friend's spend)

At the end of all this, I'm left with about $1,617 to do whatever. That's almost my ten year fixed payment, but...

I'd like to throw all of this towards my debt, but (a) I'm saving for an engagement ring/wedding, and (b) my GF is desperate to buy a house. She's been living in this small one bedroom loft for three years before I moved in. Things are tight and this is non-negotiable for her: she wants a house and she's going to save for the down payment no matter what I tell her.

Furthermore, and I think critically, she is going to help me pay off my loans when she is done paying off hers (she makes $67,500 and has about $35,000 left in student loans). In short, once she's done with her loans (3-4 years), I'm confident she'll be able to help me get out of my hole pretty quickly. And because of that, I feel obligated to help her save for a modest house.

Which leads me to my ultimate question regarding that $1617 at the end of each month. Right now my plan is as follows.

Save $100 for an engagement ring/wedding.
Save $400 for down payment on a house (she is matching).
Put the rest ($1,200 or so) towards student loans.

In the meantime, I'm also torn about maximizing income. Should I pour my heart and soul into law and hope that gets rewarded, or should I be cutting grass on the weekends and throwing that towards my loans?

Also, is my desire for balance between saving for a house and getting out of debt misguided? I can't tell whether I've rationalized this as an investment in my relationship with my girlfriend (giving her the happiness of buying a home and in return getting her to help me pay off my loans) or simply a bad choice, so I'd love to hear people's responses, no matter how harsh.

Any thoughts or comments on our plans? Is my compromise towards my debt okay? Any and all comments appreciated, no matter how harsh.

Thanks.

« Last Edit: February 26, 2015, 12:19:18 PM by ReadySetMillionaire »

crispy

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #1 on: February 26, 2015, 12:20:34 PM »
Is there a reason why you are paying for life insurance for your mom?

ShoulderThingThatGoesUp

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #2 on: February 26, 2015, 12:24:28 PM »
I proposed with a $200 ring. In 2009. Rings have literally zero utility.

(My wife ended up throwing said $200 ring across the room in 2013 when she was pregnant and we both had food poisoning, because the pregnancy/dehydration made her fingers swell, it was hurting, and food poisoning is awful. Child and marriage are doing great.)

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #3 on: February 26, 2015, 12:27:17 PM »
Is there a reason why you are paying for life insurance for your mom?
She can't afford it and was going to cancel the policy if we didn't start paying it.

If MMM ever met her, he'd punch her in the face. She's 57, has $120,000 left to go on her mortgage, constantly raids her 401k, has 3 dogs, bought a brand new car 3 years ago, and is using her tax return to pay the $6,000 credit card balance she's been carrying since December.

But, she thinks she's frugal because she buys clothes from the thrift store and buys tennis shoes used.

It kills me inside a little. I'm trying to really have her re-consider her expenses, but that's been very, very, very difficult thus far. I'll stay persistent.

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #4 on: February 26, 2015, 12:29:00 PM »
I proposed with a $200 ring. In 2009. Rings have literally zero utility.

(My wife ended up throwing said $200 ring across the room in 2013 when she was pregnant and we both had food poisoning, because the pregnancy/dehydration made her fingers swell, it was hurting, and food poisoning is awful. Child and marriage are doing great.)
I plan on spending somewhere between $500-1000. The saving is also for an eventual wedding as well.

MishMash

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #5 on: February 26, 2015, 12:30:10 PM »
I had 94k when I graduated, best day EVER was the day I sent in the last payment.

I'd suggest some side hustles to increase your debt payment, I worked 2-3 jobs during repayment.  Everyone needs lawyers, think about posting on elance or something.

garion

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #6 on: February 26, 2015, 12:32:35 PM »
Have you looked into some sort of government job? That seems to make the most sense with your level of debt unless you are planning on making the big bucks soon. Then you can just do  income-based repayment for 10 years and be done.

midweststache

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #7 on: February 26, 2015, 12:39:49 PM »
Is there a reason why you are paying for life insurance for your mom?
She can't afford it and was going to cancel the policy if we didn't start paying it.

Do she need whole life insurance? Are your siblings (who are paying $40/month for this) her dependents--anyone under 18 or disabled to the point where her death would leave them destitute/homeless? Between your and your siblings, could you not cover funeral costs? If the answer to these is no, cancel the policy.

House + Student Loans > Ring + Wedding - allow your financial distributions to reflect this accordingly.

What are the interest rate(s) on your student loans? Your GF's?

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #8 on: February 26, 2015, 12:47:11 PM »
I had 94k when I graduated, best day EVER was the day I sent in the last payment.

I'd suggest some side hustles to increase your debt payment, I worked 2-3 jobs during repayment.  Everyone needs lawyers, think about posting on elance or something.
Being a firm environment (about 25 attorneys), It'd be extremely difficult to do any "freelance" work outside the firm. That's contrary to how the infrastructure of the firm works and I don't think the BOD would let it fly.

Also, in the long run, I'd be better off bringing those clients to my firm anyway. They'd need help down the line and a partner's income is largely determined by how much he/she brings to the firm.

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #9 on: February 26, 2015, 12:49:41 PM »
Is there a reason why you are paying for life insurance for your mom?
She can't afford it and was going to cancel the policy if we didn't start paying it.

Do she need whole life insurance? Are your siblings (who are paying $40/month for this) her dependents--anyone under 18 or disabled to the point where her death would leave them destitute/homeless? Between your and your siblings, could you not cover funeral costs? If the answer to these is no, cancel the policy.

House + Student Loans > Ring + Wedding - allow your financial distributions to reflect this accordingly.

What are the interest rate(s) on your student loans? Your GF's?

I've thought about the life insurance part and I disagree with your thinking. She's 57. Say she lives until 90 (really pushing it). That's $10,800 in contributions from me to receive $150,000. Am I missing something here?

As for the interest rates, they vary. Some are 7.55%, some are 5.16%. I'm keeping up on interest on all my loans (plus a little principal) and then throwing everything at the 7.55% loan until it's done.

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #10 on: February 26, 2015, 12:51:15 PM »
Have you looked into some sort of government job? That seems to make the most sense with your level of debt unless you are planning on making the big bucks soon. Then you can just do  income-based repayment for 10 years and be done.
Because pretty much every law school student graduates with enormous debt, government jobs are incredibly tough to come by. I looked and looked and wasn't able to find anything.

Thus, I've shifted to focusing on maximizing income and making the most of private practice. In the long run, that seems better than (kind of) intentionally suppressing my income by getting a government job just to pay off my loans.

midweststache

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #11 on: February 26, 2015, 12:58:41 PM »
Is there a reason why you are paying for life insurance for your mom?
She can't afford it and was going to cancel the policy if we didn't start paying it.

Do she need whole life insurance? Are your siblings (who are paying $40/month for this) her dependents--anyone under 18 or disabled to the point where her death would leave them destitute/homeless? Between your and your siblings, could you not cover funeral costs? If the answer to these is no, cancel the policy.

House + Student Loans > Ring + Wedding - allow your financial distributions to reflect this accordingly.

What are the interest rate(s) on your student loans? Your GF's?

I've thought about the life insurance part and I disagree with your thinking. She's 57. Say she lives until 90 (really pushing it). That's $10,800 in contributions from me to receive $150,000. Am I missing something here?

As for the interest rates, they vary. Some are 7.55%, some are 5.16%. I'm keeping up on interest on all my loans (plus a little principal) and then throwing everything at the 7.55% loan until it's done.

Fair enough on the life insurance. You're post read like you were focusing on immediate measures, so cutting that cost that seemed like an immediate fix. But I understand the long-term focus.

I'm also working on the "lots-of-student-loans-but-wants-a-house" with my partner. We've reached a compromise that works for us. As with all relationships, they're give and take.

If the amount of loans at 7.55% is comparatively low to the rest ($50,000 or less), could you compromise to pay those off first and then focus on buying a house? If it's more, that would be a tough bargain to make (many more years of waiting), but that interest rate ain't no joke...

2ndTimer

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #12 on: February 26, 2015, 01:04:31 PM »
First:  Good move minimizing your rent by managing the building.

Second:  Are you and your GF on the same page with regard to the engagement ring/wedding expense.  Sounds like she might prefer that money to go toward house savings.  But stretch that out as long as you can because... 

Third: When I got married I was making almost twice what the Hub made.  Now I am a slightly handicapped person who keeps house and we live on his income.  A friend of ours was diagnosed with leukemia in his 40's and they have been getting by on his wife's income for several years now while he recovers from the bone marrow transplant.  Suppose, you make all your decisions assuming the best possible financial outcome and  then one of you has a traffic accident and you have to get by on one income.  It happens.   

Guesl982374

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #13 on: February 26, 2015, 01:04:34 PM »
I had 94k when I graduated, best day EVER was the day I sent in the last payment.

I'd suggest some side hustles to increase your debt payment, I worked 2-3 jobs during repayment.  Everyone needs lawyers, think about posting on elance or something.

Income, income, income.

Look for ways to improve your skills to get a higher paying job. Look for side hustles and throw all money at the debt. I personally think you are crazy to be buying a ring and thinking about a downpayment in your situation, especially given the sweet rent deal.

As for the GF. Its personal and you need to make sure you are both on the same page financially (both want a similar kind of house, lifestyle expectations, split or shared finances, will she really help with your SL, etc.) Talk about it and write it down.

ZiziPB

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #14 on: February 26, 2015, 01:08:48 PM »
Quote
She's 57. Say she lives until 90 (really pushing it). That's $10,800 in contributions from me to receive $150,000.

Keep in mind that that $150,000 will be worth at least 60% less in 30+ years (assuming average inflation of 3%).

garion

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #15 on: February 26, 2015, 01:10:35 PM »
Have you looked into some sort of government job? That seems to make the most sense with your level of debt unless you are planning on making the big bucks soon. Then you can just do  income-based repayment for 10 years and be done.
Because pretty much every law school student graduates with enormous debt, government jobs are incredibly tough to come by. I looked and looked and wasn't able to find anything.

Thus, I've shifted to focusing on maximizing income and making the most of private practice. In the long run, that seems better than (kind of) intentionally suppressing my income by getting a government job just to pay off my loans.

Ah, okay, that makes sense. If you are sure you are never going to use a loan forgiveness program, it might be possible to refinance your loans at lower rates. I don't know a ton about that as I haven't done it (yet) myself, but some people on this forum talk about it.

Field123

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #16 on: February 26, 2015, 01:15:28 PM »
I strongly disagree with all the advice regarding the student loans posted so far. Assuming your student loans are all federal, the best option is the "Pay as You Earn" repayment plan.

Use this link: https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action

You can sign into your own account using your student loan PIN number and enter your information for a breakdown of payment options. I promise you that pay as you earn is the way to go. With an income of 48k, I would expect your monthly payment to be in the ball park of $250. This will increase as your salary does, but in 20 years the balance will be forgiven. It will not stop you from getting a mortgage as the banks only look at the amount of your monthly payment, not total debt (speaking from experience on this one).

Pay as you earn really changes the dynamics of student loan debt, especially for potentially early retirees, and takes it from being a "bad debt" to a "good debt" if used properly.

Feel free to PM me with any questions.

RexualChocolate

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #17 on: February 26, 2015, 01:20:31 PM »
You can't really cut expenses. You live very frugally, your prior spending (school) is what's haunting you. You can only focus on income and preventing future spending. So to that effect:

Unless there's a lot of room for salary growth (IE, time to equity partner is low and guaranteed), you would benefit from looking for non legal jobs. That salary is less than a lot of corporate jobs pay people right out of undergrad. Since you went to a reasonable law school and got good grades, you're clearly more than competent enough for any of these, the problem is knowing someone. You did say you're happy there; you'll have to determine if that's worth making sub par wages.

A house is not a wise decision unless you're in a thriving area and play to stay >7 years and is cheaper than renting. 225 for rent per person dwarfs the cost of owning in almost anywhere- if its cheaper than 500/mo to own a house there, I'd reconsider buying anything at this stage in your career as you may have to move for work.

I'd let your GF buy it and finance it on her own without helping save for a deposit, you can pay her rent. I wouldn't co-mingle finances directly until marriage.

Where are you on the whole life policy as far as a surrender basis? 450k sounds like the life insurance policy death benefit. Depending on her age it may be a good deal, but its effectively ~115k of term you're carrying on her that you may not even receive depending on her will. May make more sense to cash it out if its worth anything and divide that now, again, depending on her age.

As for Tank_Esq, the only problem with IBR is the debt load continues to wrack up. What if they change the rules or you really start to make money? But agreed, I'd go this track as well. Stick it to the taxpayer instead. These law schools should really at least send us a thank you letter.

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #18 on: February 26, 2015, 01:23:08 PM »
I strongly disagree with all the advice regarding the student loans posted so far. Assuming your student loans are all federal, the best option is the "Pay as You Earn" repayment plan.

Use this link: https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action

You can sign into your own account using your student loan PIN number and enter your information for a breakdown of payment options. I promise you that pay as you earn is the way to go. With an income of 48k, I would expect your monthly payment to be in the ball park of $250. This will increase as your salary does, but in 20 years the balance will be forgiven. It will not stop you from getting a mortgage as the banks only look at the amount of your monthly payment, not total debt (speaking from experience on this one).

Pay as you earn really changes the dynamics of student loan debt, especially for potentially early retirees, and takes it from being a "bad debt" to a "good debt" if used properly.

Feel free to PM me with any questions.
I've done a ton of research on IBR/PAYE, so much so that I almost wrote a book about it (seriously). I do not qualify for PAYE because of a loan from 2007, but I do qualify for IBR. Thus, my payment would be 15% of discretionary income (not 10%) and my forgiveness date is 25 years. On top of that, there are just too many cons to IBR:

1.   Any calculations on what you will pay in total are built upon a lot of assumptions that are indeterminable (payments depend entirely upon income, which is almost impossible to forecast).

2.   This instability could lead to an incredibly high tax burden, or having to pay back the loan in full after crossing a particular income threshold.

3.   Incentivizes me to make less gross income and reduce my adjusted gross income as much as possible.

4.   Almost certain to cost more over long term (than just paying it back in 12-15 years), especially if I eventually obtain a higher salary after letting interest balloon.

5.   Would require me to file taxes married but separately, thus forgoing substantial deductions annually until loans are paid off (student loan interest deduction; child and dependent care credit; married deduction; mortgage deduction; and several other big ones that amount to a ton of money in refunds each year).

6.   Would have to make plan to prepare for tax liability at year 25 (all of which are less efficient than just paying off the loan).

7. Government could change rules midway through (they pulled the rug out from veterans for God's sake; they could do it to borrowers if they needed the money).

In short, there's just a shitload of cons to IBR. In the short term it seems like the easy way out, but I'd rather maximize income, aggressively pay down these loans, and be done with them by the time I'm 37 (ten years) than base almost every financial decision on my student loans until I'm 52. I think I can accomplish this even while matching my 401k (3%; lame but better than nothing), making minimal contributions to a Roth ($1000 per year, maybe), saving for a down payment on a house, etc.

bmcewan

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #19 on: February 26, 2015, 01:25:38 PM »
Law office partnerships, like big three consulting firms, tend to be a bit of a Ponzi scheme - very few people make it to the partner level and end up killing themselves with 100 hour weeks for years and years, and still never make partner. All of the profits of this labor are concentrated at the top of the pyramid. If you know what your firm charges your clients, you should be able to figure out what I mean.

The best thing to do is to hang tight for a couple of years, and learn everything you can about your profession from the inside. If you're good at sales, start your own practice. Focus on expanding your income, rather than reducing your expenses. Your expenses seem pretty reasonable to me.

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #20 on: February 26, 2015, 01:29:35 PM »
Law office partnerships, like big three consulting firms, tend to be a bit of a Ponzi scheme - very few people make it to the partner level and end up killing themselves with 100 hour weeks for years and years, and still never make partner. All of the profits of this labor are concentrated at the top of the pyramid. If you know what your firm charges your clients, you should be able to figure out what I mean.

The best thing to do is to hang tight for a couple of years, and learn everything you can about your profession from the inside. If you're good at sales, start your own practice. Focus on expanding your income, rather than reducing your expenses. Your expenses seem pretty reasonable to me.
This is what I was saying about work/life balance at my firm. I'm in at 9:00, out at 6:00 (at the latest), and rarely do work on the weekends.

The firm has been around since 1872 and every associate ever has become partner after five years of service. This isn't a huge firm environment like the one you're describing.

As for starting a smaller firm, I've thought about it a lot. That's a bridge I'll cross after 3-4 years of crafting my skills and developing networks. But for now, I'm focused on doing good work here.

tlars699

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #21 on: February 26, 2015, 01:31:02 PM »
I'm looking at your gf's numbers and I'm a bit thrown back- she only has 35K$ in school loans left, and she earns 63K$ a year.
If that 225 is your total rent, wtf is she spending her money on?

If you're going to marry this girl, you need to(right now) talk about the really shitty crap, too:

1. Early retirement, and how you're going to get there, including all of the debt you guys currently have now, and what ideally you would be doing if you retired right now or whenever. Consolidating bank accounts? Is it more prudent for her to max out savings accounts now? Helping each other with each other's debt or pay for what you want to get done?

2. Kids- everything about them, having them, what you're going to do if you have one a bit earlier than expected, what you think "discipline" means, what you want for them concerning education, college, sports, etc.

3. Wedding- does she have it all planned out? Seriously, so many nitpicky details.

4. What you want to do for your family should they need your help in setting up care, or finances(Nail crap about your mom down now- you don't want to become her bail money account, right?)

5. What you're arguing method should be, or how to clearly communicate with each other despite hard feelings at the time.

I'm all for you getting married, but if you're not a religious couple, you're missing out on the free counseling/mediation those couples seem to get from their pastors.
These topics listed above will hopefully open the door to some of those rough topics you may otherwise avoid.

rujancified

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #22 on: February 26, 2015, 01:33:34 PM »
I have lots of questions. You don't have to answer them here, just things to think about.

What is the price for a modest house in your area?
Will you try to do a 20% down payment?
What will you have to pay for a mortgage/ins/repairs
What do you think a wedding will cost? $50 at the courthouse? 3-5k party with some bells and whistles?
What's your GF paying monthly for SL?
What are raises/bonuses likely to be for you both over the next 3-5 years?

^
All of those questions will help you figure out how long you'll be in education debt. If you're comfortable with the timeline, keep doing what you're doing. If it gives you heartburn, you have to think about ways to speed it up (more income/fewer expenses).

Have you both discussed your financial & relationship goals together? Have you discussed timelines together? This is super important. Sounds like you're both focused on debt reduction and increasing short term savings, but do you agree on how best to accomplish? What happens after the house is purchased and the loans are paid off?

Do you like practicing law? If you do, sweet! You can stop reading this. I've been in legal technology for 15 years and have met more lawyers who hate law than those who like it. Many are tied to their jobs because of their student loan balances. If you're not super happy with the job, think about related industries. Finserv companies love lawyers for Audit, Project Management, Compliance roles.

« Last Edit: February 26, 2015, 01:35:35 PM by rujancified »

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #23 on: February 26, 2015, 01:43:44 PM »
I'm looking at your gf's numbers and I'm a bit thrown back- she only has 35K$ in school loans left, and she earns 63K$ a year.
If that 225 is your total rent, wtf is she spending her money on?

If you're going to marry this girl, you need to(right now) talk about the really shitty crap, too:

1. Early retirement, and how you're going to get there, including all of the debt you guys currently have now, and what ideally you would be doing if you retired right now or whenever. Consolidating bank accounts? Is it more prudent for her to max out savings accounts now? Helping each other with each other's debt or pay for what you want to get done?

2. Kids- everything about them, having them, what you're going to do if you have one a bit earlier than expected, what you think "discipline" means, what you want for them concerning education, college, sports, etc.

3. Wedding- does she have it all planned out? Seriously, so many nitpicky details.

4. What you want to do for your family should they need your help in setting up care, or finances(Nail crap about your mom down now- you don't want to become her bail money account, right?)

5. What you're arguing method should be, or how to clearly communicate with each other despite hard feelings at the time.

I'm all for you getting married, but if you're not a religious couple, you're missing out on the free counseling/mediation those couples seem to get from their pastors.
These topics listed above will hopefully open the door to some of those rough topics you may otherwise avoid.
Thanks for this post. I've looked at her budget and it's not as frugal as it can be, but it's not terrible. Her big mistake was buying a brand new Toyota Rav4 when she graduated. That's $378 per month. She also has a very high grocery bill ($300/month) because she is gluten free, had her gallbladder removed, and can't eat a lot of foods that are usually cheap (rice, beans, anything fatty, etc.).

But thanks to your post, I'm going to talk to her other spending. We talk about me and my loans a lot, but not so much hers. I'll change that after your post, so thanks.
I have lots of questions. You don't have to answer them here, just things to think about.

What is the price for a modest house in your area?
Will you try to do a 20% down payment?
What will you have to pay for a mortgage/ins/repairs
What do you think a wedding will cost? $50 at the courthouse? 3-5k party with some bells and whistles?
What's your GF paying monthly for SL?
What are raises/bonuses likely to be for you both over the next 3-5 years?

^
All of those questions will help you figure out how long you'll be in education debt. If you're comfortable with the timeline, keep doing what you're doing. If it gives you heartburn, you have to think about ways to speed it up (more income/fewer expenses).

Have you both discussed your financial & relationship goals together? Have you discussed timelines together? This is super important. Sounds like you're both focused on debt reduction and increasing short term savings, but do you agree on how best to accomplish? What happens after the house is purchased and the loans are paid off?

Do you like practicing law? If you do, sweet! You can stop reading this. I've been in legal technology for 15 years and have met more lawyers who hate law than those who like it. Many are tied to their jobs because of their student loan balances. If you're not super happy with the job, think about related industries. Finserv companies love lawyers for Audit, Project Management, Compliance roles.
What is the price for a modest house in your area?
$125,000-$150,000.

Will you try to do a 20% down payment?
Yes.

What will you have to pay for a mortgage/ins/repairs
30 year mortgage (looking to minimize the payment so we can focus on loans) is looking like somewhere between $550-650 per month. Repairs are indeterminable at the moment.

What do you think a wedding will cost? $50 at the courthouse? 3-5k party with some bells and whistles?
I'm unfortunately thinking the latter. I do think her parents will pick up a lot of the tab, though, based on hints they've dropped over the years.

What's your GF paying monthly for SL?
$790. It's her standard repayment (10 years). Her dad is a CPA and has constantly told her to just pay that amount because her parents are going to help her pay them off once her younger sister goes to college (junior in high school now).

What are raises/bonuses likely to be for you both over the next 3-5 years?
Only been here for about 7 months, so too scared to ask. I'm waiting for the right partner to talk to and the right time.

Have you both discussed your financial & relationship goals together? Have you discussed timelines together?
Yes, but usually the focus is on me, not her. This thread is making me realize this is a team goal (this had escaped me outside of saving for a house).

Do you like practicing law?
Fortunately yes. I like the skill involved and I like getting paid to solve other people's problems.

But yes, good point on getting our timelines together. That's something I'll have to talk about with her.

YTProphet

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #24 on: February 26, 2015, 01:44:34 PM »
Lawyer here who just finished paying off $165,000 in law school / house downpayment debt in 3.5 years. I also didn't have a job at graudation, but hung in there, changed jobs to increase my pay, and saved like crazy. It was tough but doable. I had a bigger shovel to dig out of debt than you have, but you should be able to increase your income.

What state are you in? Regardless of what state you're in, you can make more in the near future if you play your cards right.

Here's what I'd do - learn as much as you can in a practice area that large law firms have (corporate, real estate, environmental, etc). Try to avoid work like insurance defense or personal injury. Work hard and learn a lot. Learn to be able to communicate verbally what you do so that you can kill it in future interviews. Wait until you've been working for 2-3 years, get in touch with a good headhunter who the big firms use, and get a job with a large firm. The large law firms in most states pay $100k+ (more if you're in a big market like CA/NY/etc, but it sounds more like you're in Nebraska or something).

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #25 on: February 26, 2015, 01:49:54 PM »
Lawyer here who just finished paying off $165,000 in law school / house downpayment debt in 3.5 years. I also didn't have a job at graudation, but hung in there, changed jobs to increase my pay, and saved like crazy. It was tough but doable. I had a bigger shovel to dig out of debt than you have, but you should be able to increase your income.

What state are you in? Regardless of what state you're in, you can make more in the near future if you play your cards right.

Here's what I'd do - learn as much as you can in a practice area that large law firms have (corporate, real estate, environmental, etc). Try to avoid work like insurance defense or personal injury. Work hard and learn a lot. Learn to be able to communicate verbally what you do so that you can kill it in future interviews. Wait until you've been working for 2-3 years, get in touch with a good headhunter who the big firms use, and get a job with a large firm. The large law firms in most states pay $100k+ (more if you're in a big market like CA/NY/etc, but it sounds more like you're in Nebraska or something).

Ha, Ohio, not Nebraska.

I know the income at a big firm is great (closest markets are Cleveland, Pittsburgh, Columbus), but I'm scared about the work/life balance. All the partners here don't make as much as the guys up in Cleveland at Jones Day, but they also leave at 5:00, go to all their kids' sporting events, and do a bunch of stuff with their families.

In other words, this would be a perfect firm if I were 10 years out of school and had a couple kids. But I got hired here out of the gate, and if I leave for a bigger firm, I'm not sure if I'll get a chance to be back at a firm like this.

I also don't know if I can stomach moving--both our families are here and will be of huge help if/when we have kids. And by that time, hopefully I'll be a partner and doing okay for myself.

MishMash

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #26 on: February 26, 2015, 01:50:19 PM »
I had 94k when I graduated, best day EVER was the day I sent in the last payment.

I'd suggest some side hustles to increase your debt payment, I worked 2-3 jobs during repayment.  Everyone needs lawyers, think about posting on elance or something.
Being a firm environment (about 25 attorneys), It'd be extremely difficult to do any "freelance" work outside the firm. That's contrary to how the infrastructure of the firm works and I don't think the BOD would let it fly.

Also, in the long run, I'd be better off bringing those clients to my firm anyway. They'd need help down the line and a partner's income is largely determined by how much he/she brings to the firm.

Freelancing can allow you to work with individuals that would never be potential "firm" material, these are people that are looking more for advice, or one time assistance versus on going issues.  My father is a retired DA, to keep himself sharp be turned to the internet and writes posts for a number of sites, essentially people pay a flat fee for an answer to a single question, he advises, teh site sends him a check monthly for all the answers he's provided.  It's not a ton of money, he mainly does it so he's not bored, but it's something that you can do that is easy, can be done on nights and weekends, and doesn't involve long term clients.   The most common questions relate to child support, small business litigation, wrongful termination.

Field123

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #27 on: February 26, 2015, 01:55:40 PM »
I strongly disagree with all the advice regarding the student loans posted so far. Assuming your student loans are all federal, the best option is the "Pay as You Earn" repayment plan.

Use this link: https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action

You can sign into your own account using your student loan PIN number and enter your information for a breakdown of payment options. I promise you that pay as you earn is the way to go. With an income of 48k, I would expect your monthly payment to be in the ball park of $250. This will increase as your salary does, but in 20 years the balance will be forgiven. It will not stop you from getting a mortgage as the banks only look at the amount of your monthly payment, not total debt (speaking from experience on this one).

Pay as you earn really changes the dynamics of student loan debt, especially for potentially early retirees, and takes it from being a "bad debt" to a "good debt" if used properly.

Feel free to PM me with any questions.
I've done a ton of research on IBR/PAYE, so much so that I almost wrote a book about it (seriously). I do not qualify for PAYE because of a loan from 2007, but I do qualify for IBR. Thus, my payment would be 15% of discretionary income (not 10%) and my forgiveness date is 25 years. On top of that, there are just too many cons to IBR:

1.   Any calculations on what you will pay in total are built upon a lot of assumptions that are indeterminable (payments depend entirely upon income, which is almost impossible to forecast).

2.   This instability could lead to an incredibly high tax burden, or having to pay back the loan in full after crossing a particular income threshold.

3.   Incentivizes me to make less gross income and reduce my adjusted gross income as much as possible.

4.   Almost certain to cost more over long term (than just paying it back in 12-15 years), especially if I eventually obtain a higher salary after letting interest balloon.

5.   Would require me to file taxes married but separately, thus forgoing substantial deductions annually until loans are paid off (student loan interest deduction; child and dependent care credit; married deduction; mortgage deduction; and several other big ones that amount to a ton of money in refunds each year).

6.   Would have to make plan to prepare for tax liability at year 25 (all of which are less efficient than just paying off the loan).

7. Government could change rules midway through (they pulled the rug out from veterans for God's sake; they could do it to borrowers if they needed the money).

In short, there's just a shitload of cons to IBR. In the short term it seems like the easy way out, but I'd rather maximize income, aggressively pay down these loans, and be done with them by the time I'm 37 (ten years) than base almost every financial decision on my student loans until I'm 52. I think I can accomplish this even while matching my 401k (3%; lame but better than nothing), making minimal contributions to a Roth ($1000 per year, maybe), saving for a down payment on a house, etc.

You should double check that you aren't eligible for PAYE -- they just passed legislation expanding it to people with loans from before 2010 (or whenever the original cutoff was).

Even if you are ineligible, I would still argue that IBR is your best bet. In fact, I wholeheartedly disagree with every point you made above. Well, there MAY be some merit to your point about the tax burden, but probably not because 1) nobody will have loan forgiveness for at least another 15 years. Most people who analyze this program agree that it is likely congress will make the forgiveness tax free once we get closer to that date. Bills have already been introduced to this effect. Even if there is still a large tax burden, it's really not that big of a deal. It's 20-25 years away which gives you plenty of time to prepare for it and of course you won't owe the total balance, just the taxable income amount. Since you're on this board, hopefully you'll be retired by then and have a low tax rate. Again, the most important thing is that you should have tons of savings in 20-25 years, so you should be able to afford the tax bill.

As to your other points, there is NO INCENTIVE not to make as much money as you can. Yes, the more you make, the more you pay under IBR. However, since it's about 15% of your income, for every extra dollar you make, you keep $.85. So I cannot see any incentive not to make as much money as you can.

It does incentive you to keep your AGI as low as possible. This is different than not making as much money as you can, rather, you should maximize all pre tax accounts possible, which incentives you to save money. Another good thing.

Government cannot change the rules midway through. The terms of IBR were in the student loan contract you signed at student loans.gov with the promissory note... go read it again.

Depending how much you make and when you make it, it is possible to cost you more over the long run. But in that case your biggest problem is making too much money..... is that really a problem? No. And remember, the maximum monthly payment is capped at the standard 10 year repayment amount, so even if you start making $1,000,000 per year in year 18, you're still in good shape.

Basically, based on the facts provided and reasons stated, I could not disagree more with your approach here. I would recommend you re-research IBR and Pay as You Earn before you make another payment toward the loan principle.

YTProphet

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #28 on: February 26, 2015, 01:57:16 PM »
Lawyer here who just finished paying off $165,000 in law school / house downpayment debt in 3.5 years. I also didn't have a job at graudation, but hung in there, changed jobs to increase my pay, and saved like crazy. It was tough but doable. I had a bigger shovel to dig out of debt than you have, but you should be able to increase your income.

What state are you in? Regardless of what state you're in, you can make more in the near future if you play your cards right.

Here's what I'd do - learn as much as you can in a practice area that large law firms have (corporate, real estate, environmental, etc). Try to avoid work like insurance defense or personal injury. Work hard and learn a lot. Learn to be able to communicate verbally what you do so that you can kill it in future interviews. Wait until you've been working for 2-3 years, get in touch with a good headhunter who the big firms use, and get a job with a large firm. The large law firms in most states pay $100k+ (more if you're in a big market like CA/NY/etc, but it sounds more like you're in Nebraska or something).

Ha, Ohio, not Nebraska.

I know the income at a big firm is great (closest markets are Cleveland, Pittsburgh, Columbus), but I'm scared about the work/life balance. All the partners here don't make as much as the guys up in Cleveland at Jones Day, but they also leave at 5:00, go to all their kids' sporting events, and do a bunch of stuff with their families.

In other words, this would be a perfect firm if I were 10 years out of school and had a couple kids. But I got hired here out of the gate, and if I leave for a bigger firm, I'm not sure if I'll get a chance to be back at a firm like this.

I also don't know if I can stomach moving--both our families are here and will be of huge help if/when we have kids. And by that time, hopefully I'll be a partner and doing okay for myself.

That's great that you landed on your feet. That's by far the most important step. However, $47,500 is brutally underpaid for Ohio.

I actually worked for a medium sized firm (100+ attorneys) not far from Ohio and made $100,000 as a first year associate. I worked 8-6 most days and the occassional late night or weekend when necessary. Working at Jones Day is different from working at a place like Thompson Hine or Taft Stettinius. It'll be bad at Jones Day. At Thompson Hine or Taft, your work/life balance isn't going to be as great as an average corporate employee, but work/life balance isn't generally great for anyone making six-figures. And it won't be great even if you make partner at your 25 person firm. Being a partner at any firm is demanding.

Also, I'd totally disagree with about going back to your firm. You think if they needed someone they'd turn down their nose at a former associate who left after 2 years to get 5 years of experience at a place like Thompson Hine? Doubtful. They'd be all over you to come back.
« Last Edit: February 26, 2015, 02:00:14 PM by YTProphet »

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #29 on: February 26, 2015, 02:03:53 PM »
Freelancing can allow you to work with individuals that would never be potential "firm" material, these are people that are looking more for advice, or one time assistance versus on going issues.  My father is a retired DA, to keep himself sharp be turned to the internet and writes posts for a number of sites, essentially people pay a flat fee for an answer to a single question, he advises, teh site sends him a check monthly for all the answers he's provided.  It's not a ton of money, he mainly does it so he's not bored, but it's something that you can do that is easy, can be done on nights and weekends, and doesn't involve long term clients.   The most common questions relate to child support, small business litigation, wrongful termination.
Interesting. Can you PM me a link of places that you did remote side work?

tlars699

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #30 on: February 26, 2015, 02:04:06 PM »
I'm looking at your gf's numbers and I'm a bit thrown back- she only has 35K$ in school loans left, and she earns 63K$ a year.
If that 225 is your total rent, wtf is she spending her money on?

If you're going to marry this girl, you need to(right now) talk about the really shitty crap, too:

1. Early retirement, and how you're going to get there, including all of the debt you guys currently have now, and what ideally you would be doing if you retired right now or whenever. Consolidating bank accounts? Is it more prudent for her to max out savings accounts now? Helping each other with each other's debt or pay for what you want to get done?

2. Kids- everything about them, having them, what you're going to do if you have one a bit earlier than expected, what you think "discipline" means, what you want for them concerning education, college, sports, etc.

3. Wedding- does she have it all planned out? Seriously, so many nitpicky details.

4. What you want to do for your family should they need your help in setting up care, or finances(Nail crap about your mom down now- you don't want to become her bail money account, right?)

5. What you're arguing method should be, or how to clearly communicate with each other despite hard feelings at the time.

I'm all for you getting married, but if you're not a religious couple, you're missing out on the free counseling/mediation those couples seem to get from their pastors.
These topics listed above will hopefully open the door to some of those rough topics you may otherwise avoid.
Thanks for this post. I've looked at her budget and it's not as frugal as it can be, but it's not terrible. Her big mistake was buying a brand new Toyota Rav4 when she graduated. That's $378 per month. She also has a very high grocery bill ($300/month) because she is gluten free, had her gallbladder removed, and can't eat a lot of foods that are usually cheap (rice, beans, anything fatty, etc.).

But thanks to your post, I'm going to talk to her other spending. We talk about me and my loans a lot, but not so much hers. I'll change that after your post, so thanks.
I have lots of questions. You don't have to answer them here, just things to think about.

What is the price for a modest house in your area?
Will you try to do a 20% down payment?
What will you have to pay for a mortgage/ins/repairs
What do you think a wedding will cost? $50 at the courthouse? 3-5k party with some bells and whistles?
What's your GF paying monthly for SL?
What are raises/bonuses likely to be for you both over the next 3-5 years?

^
All of those questions will help you figure out how long you'll be in education debt. If you're comfortable with the timeline, keep doing what you're doing. If it gives you heartburn, you have to think about ways to speed it up (more income/fewer expenses).

Have you both discussed your financial & relationship goals together? Have you discussed timelines together? This is super important. Sounds like you're both focused on debt reduction and increasing short term savings, but do you agree on how best to accomplish? What happens after the house is purchased and the loans are paid off?

Do you like practicing law? If you do, sweet! You can stop reading this. I've been in legal technology for 15 years and have met more lawyers who hate law than those who like it. Many are tied to their jobs because of their student loan balances. If you're not super happy with the job, think about related industries. Finserv companies love lawyers for Audit, Project Management, Compliance roles.
What is the price for a modest house in your area?
$125,000-$150,000.

Will you try to do a 20% down payment?
Yes.

What will you have to pay for a mortgage/ins/repairs
30 year mortgage (looking to minimize the payment so we can focus on loans) is looking like somewhere between $550-650 per month. Repairs are indeterminable at the moment.

What do you think a wedding will cost? $50 at the courthouse? 3-5k party with some bells and whistles?
I'm unfortunately thinking the latter. I do think her parents will pick up a lot of the tab, though, based on hints they've dropped over the years.

What's your GF paying monthly for SL?
$790. It's her standard repayment (10 years). Her dad is a CPA and has constantly told her to just pay that amount because her parents are going to help her pay them off once her younger sister goes to college (junior in high school now).

What are raises/bonuses likely to be for you both over the next 3-5 years?
Only been here for about 7 months, so too scared to ask. I'm waiting for the right partner to talk to and the right time.

Have you both discussed your financial & relationship goals together? Have you discussed timelines together?
Yes, but usually the focus is on me, not her. This thread is making me realize this is a team goal (this had escaped me outside of saving for a house).

Do you like practicing law?
Fortunately yes. I like the skill involved and I like getting paid to solve other people's problems.

But yes, good point on getting our timelines together. That's something I'll have to talk about with her.

I've also had my gall bladder removed and while the first few months were rough while my body readjusted to the way it processed fats vs. grains, it did readjust after about a year.
I can't go crazy out to eat with gutbuster burgers or things with no grain value that are high in fat (aka McDonalds), but I can eat beans, rice, cheese, and baked potatoes with no ill effects whatsoever.
If your GF can't eat certain foods without blowing up the bathroom over a year after her surgery, you should really have her go back to the doctor, and have that checked out.
As for the gluten free, you should still browse stores like Aldi's for options. They have significantly cheaper veggies, fruit, and dairy, and occasionally bring in gluten free options for other items.
Otherwise, congratulations on finding someone you want to spend your life with!

SeniorLibertarian

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #31 on: February 26, 2015, 02:05:39 PM »
I had 94k when I graduated, best day EVER was the day I sent in the last payment.

I'd suggest some side hustles to increase your debt payment, I worked 2-3 jobs during repayment.  Everyone needs lawyers, think about posting on elance or something.
Being a firm environment (about 25 attorneys), It'd be extremely difficult to do any "freelance" work outside the firm. That's contrary to how the infrastructure of the firm works and I don't think the BOD would let it fly.

Also, in the long run, I'd be better off bringing those clients to my firm anyway. They'd need help down the line and a partner's income is largely determined by how much he/she brings to the firm.

Freelancing can allow you to work with individuals that would never be potential "firm" material, these are people that are looking more for advice, or one time assistance versus on going issues.  My father is a retired DA, to keep himself sharp be turned to the internet and writes posts for a number of sites, essentially people pay a flat fee for an answer to a single question, he advises, teh site sends him a check monthly for all the answers he's provided.  It's not a ton of money, he mainly does it so he's not bored, but it's something that you can do that is easy, can be done on nights and weekends, and doesn't involve long term clients.   The most common questions relate to child support, small business litigation, wrongful termination.

I disagree with the suggestion that a lawyer in a firm be encouraged to "freelance" by taking on clients outside of the firm. The suggestion above may work because the referenced lawyer was retired. OP is not retired. If OP were to take on legal work as a "side hustle" outside of his firm, I'd expect his employment at the firm to be short-lived. I'd also expect the situation to attract negative attention from the relevant state Bar -- to wit, conflicts of interest, ethics, fiduciary duties, malpractice, and on and on and on.
« Last Edit: February 26, 2015, 02:16:17 PM by SeniorLibertarian »

rujancified

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #32 on: February 26, 2015, 02:06:58 PM »

What is the price for a modest house in your area?
$125,000-$150,000.

Will you try to do a 20% down payment?
Yes.

What will you have to pay for a mortgage/ins/repairs
30 year mortgage (looking to minimize the payment so we can focus on loans) is looking like somewhere between $550-650 per month. Repairs are indeterminable at the moment.

What do you think a wedding will cost? $50 at the courthouse? 3-5k party with some bells and whistles?
I'm unfortunately thinking the latter. I do think her parents will pick up a lot of the tab, though, based on hints they've dropped over the years.

What's your GF paying monthly for SL?
$790. It's her standard repayment (10 years). Her dad is a CPA and has constantly told her to just pay that amount because her parents are going to help her pay them off once her younger sister goes to college (junior in high school now).

What are raises/bonuses likely to be for you both over the next 3-5 years?
Only been here for about 7 months, so too scared to ask. I'm waiting for the right partner to talk to and the right time.

Have you both discussed your financial & relationship goals together? Have you discussed timelines together?
Yes, but usually the focus is on me, not her. This thread is making me realize this is a team goal (this had escaped me outside of saving for a house).

Do you like practicing law?
Fortunately yes. I like the skill involved and I like getting paid to solve other people's problems.

But yes, good point on getting our timelines together. That's something I'll have to talk about with her.

You guys are going to be such frugal badasses that paying off a 100 or even 150k house is going to be a cake walk! The people around here have said to estimate 1-3% of purchase price of a house for repairs annually. I've owned for 8 years and that's probably accurate overall (some years it's high, some years it's low).

I will say that reading about millenial SL debt makes me want to pick you all up and hug you. The interest rates make my brain hurt! I'm so very lucky to be closer to 40 than 30 - My rates were never above 2 or 3%!

That's great that you love your work! Sounds like you just need to put in a few years and then evaluate next steps.

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #33 on: February 26, 2015, 02:10:43 PM »
You should double check that you aren't eligible for PAYE -- they just passed legislation expanding it to people with loans from before 2010 (or whenever the original cutoff was).

Even if you are ineligible, I would still argue that IBR is your best bet. In fact, I wholeheartedly disagree with every point you made above. Well, there MAY be some merit to your point about the tax burden, but probably not because 1) nobody will have loan forgiveness for at least another 15 years. Most people who analyze this program agree that it is likely congress will make the forgiveness tax free once we get closer to that date. Bills have already been introduced to this effect. Even if there is still a large tax burden, it's really not that big of a deal. It's 20-25 years away which gives you plenty of time to prepare for it and of course you won't owe the total balance, just the taxable income amount. Since you're on this board, hopefully you'll be retired by then and have a low tax rate. Again, the most important thing is that you should have tons of savings in 20-25 years, so you should be able to afford the tax bill.

As to your other points, there is NO INCENTIVE not to make as much money as you can. Yes, the more you make, the more you pay under IBR. However, since it's about 15% of your income, for every extra dollar you make, you keep $.85. So I cannot see any incentive not to make as much money as you can.

It does incentive you to keep your AGI as low as possible. This is different than not making as much money as you can, rather, you should maximize all pre tax accounts possible, which incentives you to save money. Another good thing.

Government cannot change the rules midway through. The terms of IBR were in the student loan contract you signed at student loans.gov with the promissory note... go read it again.

Depending how much you make and when you make it, it is possible to cost you more over the long run. But in that case your biggest problem is making too much money..... is that really a problem? No. And remember, the maximum monthly payment is capped at the standard 10 year repayment amount, so even if you start making $1,000,000 per year in year 18, you're still in good shape.

Basically, based on the facts provided and reasons stated, I could not disagree more with your approach here. I would recommend you re-research IBR and Pay as You Earn before you make another payment toward the loan principle.

Man, you're giving me financial planning whiplash here. I am in the OP in this post on a law school forum: http://top-law-schools.com/forums/viewtopic.php?f=15&t=242595

I was all over the IBR train until I talked with a couple people, my girlfriend's dad (a very-well respected CPA) and my college roommate, who has risen up the ladder at Vanguard in just five years.

Both ran the numbers and concluded that I'd pay almost all of my loan balance anyway. In short, so long as I begin to see substantial pay increases (as I expect, which the other attorney here can show), then my payment will be above my 25 year fixed payment. And that means I'll end up paying this over 25 years, regardless.

Thus, I'm now in the position that I've indicated in this thread: maximize income, pay down this SOB of a loan, and then when I'm making money, I'll be on the road to paying off my house and retiring early.

But you've made some terrific points. I think it can go either way and it's a matter of preference. If you have some numbers you'd like to discuss, feel free to PM me.

PS: I don't qualify for PAYE. It extends only back to 2008 (I think) and I have a loan from 2007.

MishMash

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #34 on: February 26, 2015, 02:27:58 PM »
I had 94k when I graduated, best day EVER was the day I sent in the last payment.

I'd suggest some side hustles to increase your debt payment, I worked 2-3 jobs during repayment.  Everyone needs lawyers, think about posting on elance or something.
Being a firm environment (about 25 attorneys), It'd be extremely difficult to do any "freelance" work outside the firm. That's contrary to how the infrastructure of the firm works and I don't think the BOD would let it fly.

Also, in the long run, I'd be better off bringing those clients to my firm anyway. They'd need help down the line and a partner's income is largely determined by how much he/she brings to the firm.

Freelancing can allow you to work with individuals that would never be potential "firm" material, these are people that are looking more for advice, or one time assistance versus on going issues.  My father is a retired DA, to keep himself sharp be turned to the internet and writes posts for a number of sites, essentially people pay a flat fee for an answer to a single question, he advises, teh site sends him a check monthly for all the answers he's provided.  It's not a ton of money, he mainly does it so he's not bored, but it's something that you can do that is easy, can be done on nights and weekends, and doesn't involve long term clients.   The most common questions relate to child support, small business litigation, wrongful termination.

I disagree with the suggestion that a lawyer in a firm be encouraged to "freelance" by taking on clients outside of the firm. The suggestion above may work because the referenced lawyer was retired. OP is not retired. If OP were to take on legal work as a "side hustle" outside of his firm, I'd expect his employment at the firm to be short-lived. I'd also expect the situation to attract negative attention from the relevant state Bar -- to wit, conflicts of interest, ethics, fiduciary duties, malpractice, and on and on and on.

So simple solution, ASK YOUR BOSS, I do a ton of side hustle work as an engineer, and I'm under contract that all my work is the property of my company.  I sat my boss down and said look...I'm trying to pay off my loans.  Do  you mind if I do side work, outside of work hours....they said nope, I got a signed document from them saying that my side products weren't their property, and off I went. 

Blonde Lawyer

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #35 on: February 26, 2015, 02:30:36 PM »
If you are interested in refinancing your loans, check out my sig.  As others said though, make sure you aren't going to go into public interest work where you would qualify for 10 year forgiveness or otherwise require IBR.  If you are trying to pay standard, those rates can go much lower.

TheOldestYoungMan

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #36 on: February 26, 2015, 02:30:59 PM »
From a philosophical standpoint, I believe that progressive taxation discourages increases in marginal work.  But from a practical standpoint, I try to make as much as I possibly can.  As it turns out, paying the higher taxes actually just provides incentive to figure out how to stash money where I avoid taxes.  :)

Buying my first house was a traumatic experience.  It felt like a financial colonoscopy.  I still have nightmares.  I very much believe, apart from people who really have their financial shit together, that it is a mistake 100% of the time.  It starts to feel like everyone along the way is trying to convince you it's a good idea because they also made the mistake and misery loves company.  Buying a house is a luxury, a hugely expensive luxury.  It is fine to do that if you are comfortable spending the money.

I do own a house now, but I waited until I could afford it in addition to all my other savings goals, bought a small house, and rent out all the space I'm not using.

Everyone I know who did or tried to buy a house with a [significant other not yet married] regretted it.  That's not a statistically significant sentiment, but reference the traumatic comment above.  It's stressful is what I'm saying.  It will cause stress.

You said something about tossing some money in a roth IRA.  http://www.madfientist.com/traditional-ira-vs-roth-ira/

Side jobs for extra money are great.  But I'd try to go for more tradesman type stuff.  In my experience getting paid $300 for a weekend of painting once a month was better for my sanity than delivering pizzas after work.  Walter White seemed to prefer weekend chemistry to everyday carwash cashier, is what I'm saying.  Moonlighting should be avoided unless you get 100% approval from your current job.  I would highly recommend any regular working outside the company be disclosed as well.  Better they know what you are up to and why then find out on their own and guess.  The guesses will always be gambling or drugs.  They will always find out.  Nothing quite like serving drinks on the party boat in your knickers to...your regular job supervisor.

While I know I am not typical, debt felt like a lead weight dragging me down.  And it mattered who I owed.  Paying interest to a bank was like, I can't even describe it.  I know I'd be better off if I leveraged my whatever to pit returns against interest but oh my god it's nice not to owe.  I mean it is nice.  I'd be doing that first.  I don't currently love someone who needs jewelry though, so it's easy to say.

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #37 on: February 26, 2015, 02:46:48 PM »
If you are interested in refinancing your loans, check out my sig.  As others said though, make sure you aren't going to go into public interest work where you would qualify for 10 year forgiveness or otherwise require IBR.  If you are trying to pay standard, those rates can go much lower.

Thanks for the link. The advertised rate from Charter One was 5.19% and I have a meeting with a local branch this weekend to discuss refinancing. If my rate would in fact be 5.19% I think I could really start making a dent in these loans.

Of course, the advertised rate isn't exactly what I'll get. If SoFi gives me a comparable rate I'll check it out. Thanks again.
« Last Edit: February 26, 2015, 02:49:30 PM by ReadySetMillionaire »

Field123

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #38 on: February 26, 2015, 02:53:42 PM »
You should double check that you aren't eligible for PAYE -- they just passed legislation expanding it to people with loans from before 2010 (or whenever the original cutoff was).

Even if you are ineligible, I would still argue that IBR is your best bet. In fact, I wholeheartedly disagree with every point you made above. Well, there MAY be some merit to your point about the tax burden, but probably not because 1) nobody will have loan forgiveness for at least another 15 years. Most people who analyze this program agree that it is likely congress will make the forgiveness tax free once we get closer to that date. Bills have already been introduced to this effect. Even if there is still a large tax burden, it's really not that big of a deal. It's 20-25 years away which gives you plenty of time to prepare for it and of course you won't owe the total balance, just the taxable income amount. Since you're on this board, hopefully you'll be retired by then and have a low tax rate. Again, the most important thing is that you should have tons of savings in 20-25 years, so you should be able to afford the tax bill.

As to your other points, there is NO INCENTIVE not to make as much money as you can. Yes, the more you make, the more you pay under IBR. However, since it's about 15% of your income, for every extra dollar you make, you keep $.85. So I cannot see any incentive not to make as much money as you can.

It does incentive you to keep your AGI as low as possible. This is different than not making as much money as you can, rather, you should maximize all pre tax accounts possible, which incentives you to save money. Another good thing.

Government cannot change the rules midway through. The terms of IBR were in the student loan contract you signed at student loans.gov with the promissory note... go read it again.

Depending how much you make and when you make it, it is possible to cost you more over the long run. But in that case your biggest problem is making too much money..... is that really a problem? No. And remember, the maximum monthly payment is capped at the standard 10 year repayment amount, so even if you start making $1,000,000 per year in year 18, you're still in good shape.

Basically, based on the facts provided and reasons stated, I could not disagree more with your approach here. I would recommend you re-research IBR and Pay as You Earn before you make another payment toward the loan principle.

Man, you're giving me financial planning whiplash here. I am in the OP in this post on a law school forum: http://top-law-schools.com/forums/viewtopic.php?f=15&t=242595

I was all over the IBR train until I talked with a couple people, my girlfriend's dad (a very-well respected CPA) and my college roommate, who has risen up the ladder at Vanguard in just five years.

Both ran the numbers and concluded that I'd pay almost all of my loan balance anyway. In short, so long as I begin to see substantial pay increases (as I expect, which the other attorney here can show), then my payment will be above my 25 year fixed payment. And that means I'll end up paying this over 25 years, regardless.

Thus, I'm now in the position that I've indicated in this thread: maximize income, pay down this SOB of a loan, and then when I'm making money, I'll be on the road to paying off my house and retiring early.

But you've made some terrific points. I think it can go either way and it's a matter of preference. If you have some numbers you'd like to discuss, feel free to PM me.

PS: I don't qualify for PAYE. It extends only back to 2008 (I think) and I have a loan from 2007.

You've clearly thought this out so I guess it is a matter of personal preference. No doubt PAYE is much more beneficial than IBR, so I wonder if you would change your mind if you were eligible for that program?

Regardless, even if the math is close, or even if the expected value of IBR is lower than paying the loans back asap, I still prefer IBR. The reason is that it is a hedge. If something happens and my situation changes and I make $0, then I don't have to pay anything. As long as paying my student loans is tied to my income and as long as I'm making more money because I am a lawyer rather than a guy with a BA in Political Science, I figure the debt is good debt and I'm coming out ahead. Like I said before, if you can create a circumstance where the worst thing that can happen is you're making too much money... well I count that a win.

Someday I'll start a thread on my own situation to get the general feedback, I think it would be a good case study. Basically I have ALOT of student debt, but I also have a very high income and a very high savings rate (thanks to PAYE). I figure that I will be FIRE in 10-12 years. So I'm paying ~10% of my income towards student loans now (doesn't even come close to covering the interest), but I'm also investing all that money that I would otherwise be paying toward the loans which will result in the ability to retire early if I so choose. At least in my situation it seems like a no brainer and while you have less debt than me and a lower income, I think you could make it work for you as well if early retirement is the goal.

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #39 on: February 26, 2015, 03:43:38 PM »
You've clearly thought this out so I guess it is a matter of personal preference. No doubt PAYE is much more beneficial than IBR, so I wonder if you would change your mind if you were eligible for that program?

Regardless, even if the math is close, or even if the expected value of IBR is lower than paying the loans back asap, I still prefer IBR. The reason is that it is a hedge. If something happens and my situation changes and I make $0, then I don't have to pay anything. As long as paying my student loans is tied to my income and as long as I'm making more money because I am a lawyer rather than a guy with a BA in Political Science, I figure the debt is good debt and I'm coming out ahead. Like I said before, if you can create a circumstance where the worst thing that can happen is you're making too much money... well I count that a win.

Someday I'll start a thread on my own situation to get the general feedback, I think it would be a good case study. Basically I have ALOT of student debt, but I also have a very high income and a very high savings rate (thanks to PAYE). I figure that I will be FIRE in 10-12 years. So I'm paying ~10% of my income towards student loans now (doesn't even come close to covering the interest), but I'm also investing all that money that I would otherwise be paying toward the loans which will result in the ability to retire early if I so choose. At least in my situation it seems like a no brainer and while you have less debt than me and a lower income, I think you could make it work for you as well if early retirement is the goal.

You're making enough sense for me to question my strategy of paying down my debt as quickly as possible, so that's a start. Two really important questions, though:

1. What are you going to do about filing taxes separately? If I file jointly, my girlfriend's income would push my payment to an amount that would pay off the loan in 18 years or so; thus, I'd have to file separately. This is a huge loss in deductions and limits investment vehicles. If you're in the same boat, how are you rationalizing that?

2. How would you report income once you retired? Would pulling principal from your investments to live on be considered income? I'm not a tax attorney haha.

Anyway, really appreciating your responses thus far.

Field123

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #40 on: February 26, 2015, 03:53:08 PM »
You've clearly thought this out so I guess it is a matter of personal preference. No doubt PAYE is much more beneficial than IBR, so I wonder if you would change your mind if you were eligible for that program?

Regardless, even if the math is close, or even if the expected value of IBR is lower than paying the loans back asap, I still prefer IBR. The reason is that it is a hedge. If something happens and my situation changes and I make $0, then I don't have to pay anything. As long as paying my student loans is tied to my income and as long as I'm making more money because I am a lawyer rather than a guy with a BA in Political Science, I figure the debt is good debt and I'm coming out ahead. Like I said before, if you can create a circumstance where the worst thing that can happen is you're making too much money... well I count that a win.

Someday I'll start a thread on my own situation to get the general feedback, I think it would be a good case study. Basically I have ALOT of student debt, but I also have a very high income and a very high savings rate (thanks to PAYE). I figure that I will be FIRE in 10-12 years. So I'm paying ~10% of my income towards student loans now (doesn't even come close to covering the interest), but I'm also investing all that money that I would otherwise be paying toward the loans which will result in the ability to retire early if I so choose. At least in my situation it seems like a no brainer and while you have less debt than me and a lower income, I think you could make it work for you as well if early retirement is the goal.

You're making enough sense for me to question my strategy of paying down my debt as quickly as possible, so that's a start. Two really important questions, though:

1. What are you going to do about filing taxes separately? If I file jointly, my girlfriend's income would push my payment to an amount that would pay off the loan in 18 years or so; thus, I'd have to file separately. This is a huge loss in deductions and limits investment vehicles. If you're in the same boat, how are you rationalizing that?

2. How would you report income once you retired? Would pulling principal from your investments to live on be considered income? I'm not a tax attorney haha.

Anyway, really appreciating your responses thus far.

1. Good question. The answer is really dependent upon the student loan/income situation of your SO. First, it's important to note that you do not have to file separately. It's just if you file jointly, then your student loan payment is based on both incomes combined. So filing separately is the answer if your spouse has an income but no student loans. Interestingly, if your wife has a lot of student loans and is also in an IBR program, then there is no negative effect by filing jointly. You are both treated as one unit with both your incomes and both your student loans combined. Also, if your wife has a lot of student loans but no income (say she stays home when you have kids), then her loans are essentially free under the program. Play around with that calculator I linked in my first post to see the different situations.

2. I haven't gotten this far to have this completely optimized, but I would start by withdrawing ROTH contributions because those are not taxable income. Hopefully I will have rental income that I can depreciate as well, so that would also be effectively tax free. After that I would look at the roth pipelines that are so often referenced on this site, although I really don't know enough detail on them to give specific advice. Basically, I am confident from reading this forum that it is possible to retire and report a very low taxable income. Also keep in mind, that I would only have to do this for about 8-10 years before my loans are forgiven.

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #41 on: February 26, 2015, 04:10:52 PM »
You've clearly thought this out so I guess it is a matter of personal preference. No doubt PAYE is much more beneficial than IBR, so I wonder if you would change your mind if you were eligible for that program?

Regardless, even if the math is close, or even if the expected value of IBR is lower than paying the loans back asap, I still prefer IBR. The reason is that it is a hedge. If something happens and my situation changes and I make $0, then I don't have to pay anything. As long as paying my student loans is tied to my income and as long as I'm making more money because I am a lawyer rather than a guy with a BA in Political Science, I figure the debt is good debt and I'm coming out ahead. Like I said before, if you can create a circumstance where the worst thing that can happen is you're making too much money... well I count that a win.

Someday I'll start a thread on my own situation to get the general feedback, I think it would be a good case study. Basically I have ALOT of student debt, but I also have a very high income and a very high savings rate (thanks to PAYE). I figure that I will be FIRE in 10-12 years. So I'm paying ~10% of my income towards student loans now (doesn't even come close to covering the interest), but I'm also investing all that money that I would otherwise be paying toward the loans which will result in the ability to retire early if I so choose. At least in my situation it seems like a no brainer and while you have less debt than me and a lower income, I think you could make it work for you as well if early retirement is the goal.

You're making enough sense for me to question my strategy of paying down my debt as quickly as possible, so that's a start. Two really important questions, though:

1. What are you going to do about filing taxes separately? If I file jointly, my girlfriend's income would push my payment to an amount that would pay off the loan in 18 years or so; thus, I'd have to file separately. This is a huge loss in deductions and limits investment vehicles. If you're in the same boat, how are you rationalizing that?

2. How would you report income once you retired? Would pulling principal from your investments to live on be considered income? I'm not a tax attorney haha.

Anyway, really appreciating your responses thus far.

1. Good question. The answer is really dependent upon the student loan/income situation of your SO. First, it's important to note that you do not have to file separately. It's just if you file jointly, then your student loan payment is based on both incomes combined. So filing separately is the answer if your spouse has an income but no student loans. Interestingly, if your wife has a lot of student loans and is also in an IBR program, then there is no negative effect by filing jointly. You are both treated as one unit with both your incomes and both your student loans combined. Also, if your wife has a lot of student loans but no income (say she stays home when you have kids), then her loans are essentially free under the program. Play around with that calculator I linked in my first post to see the different situations.

2. I haven't gotten this far to have this completely optimized, but I would start by withdrawing ROTH contributions because those are not taxable income. Hopefully I will have rental income that I can depreciate as well, so that would also be effectively tax free. After that I would look at the roth pipelines that are so often referenced on this site, although I really don't know enough detail on them to give specific advice. Basically, I am confident from reading this forum that it is possible to retire and report a very low taxable income. Also keep in mind, that I would only have to do this for about 8-10 years before my loans are forgiven.

1. I've played with the calculators. My payment right now would be somewhere around $890, which would mean I'd eventually pay the loan off anyway (especially after she's done paying her loans and my income increases).

2. You won't be able to contribute to a Roth if you file separately. You can backdoor from a traditional IRA to a Roth right now, but Obama seems intent on shutting that back door pretty quickly.

Field123

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #42 on: February 26, 2015, 04:22:06 PM »
You've clearly thought this out so I guess it is a matter of personal preference. No doubt PAYE is much more beneficial than IBR, so I wonder if you would change your mind if you were eligible for that program?

Regardless, even if the math is close, or even if the expected value of IBR is lower than paying the loans back asap, I still prefer IBR. The reason is that it is a hedge. If something happens and my situation changes and I make $0, then I don't have to pay anything. As long as paying my student loans is tied to my income and as long as I'm making more money because I am a lawyer rather than a guy with a BA in Political Science, I figure the debt is good debt and I'm coming out ahead. Like I said before, if you can create a circumstance where the worst thing that can happen is you're making too much money... well I count that a win.

Someday I'll start a thread on my own situation to get the general feedback, I think it would be a good case study. Basically I have ALOT of student debt, but I also have a very high income and a very high savings rate (thanks to PAYE). I figure that I will be FIRE in 10-12 years. So I'm paying ~10% of my income towards student loans now (doesn't even come close to covering the interest), but I'm also investing all that money that I would otherwise be paying toward the loans which will result in the ability to retire early if I so choose. At least in my situation it seems like a no brainer and while you have less debt than me and a lower income, I think you could make it work for you as well if early retirement is the goal.

You're making enough sense for me to question my strategy of paying down my debt as quickly as possible, so that's a start. Two really important questions, though:

1. What are you going to do about filing taxes separately? If I file jointly, my girlfriend's income would push my payment to an amount that would pay off the loan in 18 years or so; thus, I'd have to file separately. This is a huge loss in deductions and limits investment vehicles. If you're in the same boat, how are you rationalizing that?

2. How would you report income once you retired? Would pulling principal from your investments to live on be considered income? I'm not a tax attorney haha.

Anyway, really appreciating your responses thus far.

1. Good question. The answer is really dependent upon the student loan/income situation of your SO. First, it's important to note that you do not have to file separately. It's just if you file jointly, then your student loan payment is based on both incomes combined. So filing separately is the answer if your spouse has an income but no student loans. Interestingly, if your wife has a lot of student loans and is also in an IBR program, then there is no negative effect by filing jointly. You are both treated as one unit with both your incomes and both your student loans combined. Also, if your wife has a lot of student loans but no income (say she stays home when you have kids), then her loans are essentially free under the program. Play around with that calculator I linked in my first post to see the different situations.

2. I haven't gotten this far to have this completely optimized, but I would start by withdrawing ROTH contributions because those are not taxable income. Hopefully I will have rental income that I can depreciate as well, so that would also be effectively tax free. After that I would look at the roth pipelines that are so often referenced on this site, although I really don't know enough detail on them to give specific advice. Basically, I am confident from reading this forum that it is possible to retire and report a very low taxable income. Also keep in mind, that I would only have to do this for about 8-10 years before my loans are forgiven.

1. I've played with the calculators. My payment right now would be somewhere around $890, which would mean I'd eventually pay the loan off anyway (especially after she's done paying her loans and my income increases).

2. You won't be able to contribute to a Roth if you file separately. You can backdoor from a traditional IRA to a Roth right now, but Obama seems intent on shutting that back door pretty quickly.

$890 on a $48,000 income seems high. Is this including your wife's income, how much does she make? If so, does she have a high enough loan balance to get into IBR or PAYE? Also, is there any chance that she will want to be a stay at home mom someday; you should take that into consideration. Even if you end up having to file separately, the gains from IBR + her income likely outweigh the lost tax benefits and IRA opportunity. Not to mention that you still have 401k (or your other jobs retirement plan, law firms like SIMPLE IRAs) and HSAs to invest in.

It all really comes down to your goals. If you're thinking early retirement, then you need to use IBR so that you can have the rest of your money invested. If your situation ends up being such that Traditional and Roth IRAs are not an option, I'm confident people on this forum can give you some good guidance on where to put that money. Like everything else in this analysis, missing out on IRAs is unfortunate, but it is again a result of the fact that your wife is making money -- which is a good thing for the family net worth.

TXScout2

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #43 on: February 26, 2015, 04:44:37 PM »
If you're not going to do IBR, I would refinance immediately.  It's saved me thousands of dollars already. 

I also graduated from the best law school in my state, couldn't get a job, and ended up working on a stipend for months.  II had $153K of Federal loans at 7.1% plus a $12K private loan at 12%.  Eventually I got a document review job, and I poured every dollar into the private loan while paying IBR on the Federal loans.  That document review job turned into an associate position.

Eventually I refinanced through SoFi, got it down to 3.92% variable rate including the quarter point discount for auto-pay.  After paying that for a while, I refinanced it again through SoFi (no origination fee), now I am down to 3.26% (still variable rate though).  I owe $105K now.  I feel like there may be light at the end of the tunnel (not sure though).

TheOldestYoungMan

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #44 on: February 26, 2015, 05:07:37 PM »
Encouragement!

I was helping a buddy work through his options the other day, and he was sorta exasperated.

He said, "It just feels like I'm in this huge hole with no hope of escape."

To which I said, "yea, but at least you've decided to stop digging."

The "net worth" graph is going to stay in the negative for awhile, but at least it's going to have a positive slope!

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #45 on: February 26, 2015, 08:17:00 PM »
If you're not going to do IBR, I would refinance immediately.  It's saved me thousands of dollars already. 

I also graduated from the best law school in my state, couldn't get a job, and ended up working on a stipend for months.  II had $153K of Federal loans at 7.1% plus a $12K private loan at 12%.  Eventually I got a document review job, and I poured every dollar into the private loan while paying IBR on the Federal loans.  That document review job turned into an associate position.

Eventually I refinanced through SoFi, got it down to 3.92% variable rate including the quarter point discount for auto-pay.  After paying that for a while, I refinanced it again through SoFi (no origination fee), now I am down to 3.26% (still variable rate though).  I owe $105K now.  I feel like there may be light at the end of the tunnel (not sure though).

I was looking into refinancing, but somebody else on a separate forum said I wouldn't be eligible due to my mediocre income and high debt.

What was your experience?

And would you recommend variable over fixed? What are the pros and cons?

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #46 on: February 26, 2015, 08:28:48 PM »
$890 on a $48,000 income seems high. Is this including your wife's income, how much does she make? If so, does she have a high enough loan balance to get into IBR or PAYE? Also, is there any chance that she will want to be a stay at home mom someday; you should take that into consideration. Even if you end up having to file separately, the gains from IBR + her income likely outweigh the lost tax benefits and IRA opportunity. Not to mention that you still have 401k (or your other jobs retirement plan, law firms like SIMPLE IRAs) and HSAs to invest in.

It all really comes down to your goals. If you're thinking early retirement, then you need to use IBR so that you can have the rest of your money invested. If your situation ends up being such that Traditional and Roth IRAs are not an option, I'm confident people on this forum can give you some good guidance on where to put that money. Like everything else in this analysis, missing out on IRAs is unfortunate, but it is again a result of the fact that your wife is making money -- which is a good thing for the family net worth.
To clarify: yes, $890 is using both of our incomes. My payment just on my income is $375.

Her loans are mostly private, so she is ineligible for PAYE or IBR.

I don't think she'd ever be a permanent stay at home mom. Maybe some day down the road, but she has a professional degree, thoroughly enjoys her job and her profession, and I certainly don't want to bank on her not having an income to keep my payments low.

Ultimately, I just don't think IBR is as good of a long term plan as you think it is.

After refinancing, I expect to pay around $200,000 towards these loans. If my average payment over 25 years was $500 per month (a low estimate even if I filed separately), that would be $150,000 in payments alone. Add a huge tax bill (since I wasn't covering the interest) and I ended up paying more towards those loans.

Meanwhile, if I grind hard and pay these off ASAP, when I'm done (hopefully 7-8 years), my GF and I will have about $3000 per month to pay off the mortgage and eventually save. I'd much rather do that and control everything than play games with the tax code and pray the government doesn't change things midstream.

I do appreciate your counter arguments, though, so keep them coming.

Blonde Lawyer

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #47 on: February 26, 2015, 08:36:33 PM »
For those of you arguing pro IBR/PAYE, what is your plan for the taxes on the debt forgiveness? Have you factored that into your equations?

ReadySetMillionaire - I think SoFi is pretty fussy about who they lend to.  I don't know about the others.  It can't hurt to get a quote though.  There is no application fee.

TXScout - interesting that your did 2 refi's with SoFi.  The interest rates seem to have gone down since I refinanced.  I could do it again I guess. 

I went w/ the fixed interest rate because I'm risk averse.  I also feel like rates are at historic lows which means at some point they will start going back up.  I'm potentially still looking at 4 more years until they are paid off so I wanted a guaranteed reduction in rate.  When I get my snowball really going and I foresee a faster payoff I might refi to variable now that I know I can. 

ReadySetMillionaire

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #48 on: February 26, 2015, 08:54:10 PM »
For those of you arguing pro IBR/PAYE, what is your plan for the taxes on the debt forgiveness? Have you factored that into your equations?

ReadySetMillionaire - I think SoFi is pretty fussy about who they lend to.  I don't know about the others.  It can't hurt to get a quote though.  There is no application fee.

TXScout - interesting that your did 2 refi's with SoFi.  The interest rates seem to have gone down since I refinanced.  I could do it again I guess. 

I went w/ the fixed interest rate because I'm risk averse.  I also feel like rates are at historic lows which means at some point they will start going back up.  I'm potentially still looking at 4 more years until they are paid off so I wanted a guaranteed reduction in rate.  When I get my snowball really going and I foresee a faster payoff I might refi to variable now that I know I can.

Thanks for the info.

I also totally agree about the tax liability.

Say you put the money you've been saving in a traditional brokerage account. Then your loan is $250k when it's forgiven, so you have to pay $95k in taxes that year (assuming 38% tax bracket). Now you have to pull 16% more than this to cover your capital gains, so now you're looking at pulling $110,000 to over the tax burden.

And all that is AFTER you've lost hundreds of thousands in deductions (literally), paid $150k on the principal anyway, and dicked around with the tax code for 25 years.

It's just not worth it to me and, maybe more importantly, it's way too risky and built on too many assumptions.

mozar

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Re: In $150,000 of Student Loan Debt and Need Some Advice/Encouragement
« Reply #49 on: February 26, 2015, 09:01:54 PM »
I am the self appointed expert of stupid student loan decisions. I took out 100k for undergrad and 35k for accounting grad degree. So 135k. I got a job making 54k out of grad school. My rent was 550. I paid 2000 a month for 5 years. Then I bought a house for about 150k. I have about 15k in loans left at a super low rate. I preferred to grind it out because it was such a weight lifted off my back.

My concern is all these promises going around. You'll save for a downpayment if your gf promises to pay your loans? Your gfs parents promise to help pay her loans when the other daughter goes to school? At which point I guess the parents will promise the other daughter that they will pay for her loans once they paid off your gfs loans? My parents promised they would help me pay for my loans too and I am still waiting. I would prefer to keep things clean. You pay off your loans and she buys the house and you pay rent. You can always put your name on the deed later.

I think you should propose asap. Most women I know would prefer a smaller ring and get it sooner, so they can carry on with their life already and stop wondering. Then you can promise to get her a nicer ring in 10 years...