Student Loans: Payment Options and Numbers

[ballinoutacontro]

Ahem FRB* could get you down to under 3% but not if you don't live in the right area.

Realistically you'd be looking at like 4.5-5% with the other banks (Darien Rowayton, SoFi, etc.) so up to you whether that's worth it or not for losing the protections of federal student loans.

I would never pay my loans before absolutely necessary if I was considering entrepreneurship. One particular reason is that the loan forgiveness tax bomb is pegged to your total liabilities so if you have outstanding business debt in a partnership that should all flow through and count to minimize your tax bomb.

Thx guys. And thx for the rate info, appreciated.

I totally appreciate the advantages of repaye. I've been a champion of it since it was created to pretty much anyone that wants to know. If the best I could get is really around the 4-5% range, that's def not enough savings to give up the massive repaye benefits.

[ballinoutacontro]

Noticed this post below mine..

..

Hard to follow all that knowing nothing about LRAPs and such, and I'm sure the above advice is great.. Only posting to add that, seriously, just from a straight up pure numbers perspective....that is soooooo absolutely nothing to worry about, especially if you can honestly live off $20k.

if I'm understanding right, you're gonna finish with $20k debt? Debt might be scary, but frfrfr....

Even aside from any of the special plans like REPAYE and you school's LRAP.......On the standard 10-year repayment plan, that's payments of like $280/month. If you went to the 20 year payment plan, that's like $190/month. Plus, at that income level, if you enrolled in REPAYE (if there aren't even better options for you), your minimum payments should be $0 - literally. Currently, if you're single in the US, if your AGI is under $18,090, you have literally no minimum payment on REPAYE, and on top of that the govt pays half your unpaid interest. Under current tax laws you can probably hit an $18k AGI with literally like double that in gross income. The standard deduction alone under the new Trump tax plan is $12k. Plus all the other random deductions and credits you'll get. Gives you plenty of room to still pay very little to nothing, if you so choose, even if your income about doubles to $40k.

And that's all basically worst case scenario in which you you didn't have $20k already banked. In reality, if you did invest your $20k, it should roughly keep pace with your $20k debt, at worst. Historically, your $20k will be around double your student loan debt balance in 8-10 years or so.

[Nony]

(It’s not clear here, but in another thread she makes clear it’s not $20k total debt - it’s $100k+ - the idea is that making the $20k payment now would increase the amount her school will cover under its LRAP, and so will lower the amount that she’s going to be personally required to pay, which isn’t actually her entire loan payment bc LRAP will still cover most but not all of it.)

[Nebby]

Plz ignore if covered, but I thought that AOT's law school's required all LRAP participants (with rare exception) to be on PAYE and based LRAP payments PAYE.

PAYE on $40k is $183/month. With the school covering 80%, that's $36/month out of pocket.

[AOT]

(It’s not clear here, but in another thread she makes clear it’s not $20k total debt - it’s $100k+ - the idea is that making the $20k payment now would increase the amount her school will cover under its LRAP, and so will lower the amount that she’s going to be personally required to pay, which isn’t actually her entire loan payment bc LRAP will still cover most but not all of it.)

Yeah this is correct.

Nebby I'm not on the normal LRAP, so I was just going to be on a 10 year schedule. BUT after double checking I'm pretty sure now that I can go on PAYE. I have a call scheduled with my school tomorrow to figure out the details.

[riot]

As a PSLF truther I wonder if it makes more sense to stay in ten year plan and take the law school for all the money it will give you and actually have your loan balance decline

[Slytherpuff]

As a PSLF truther I wonder if it makes more sense to stay in ten year plan and take the law school for all the money it will give you and actually have your loan balance decline

Don't tell Nebby this or he won't let us get married so that CLS will keep paying off his loans for him!!!

[JenDarby]

As a PSLF truther I wonder if it makes more sense to stay in ten year plan and take the law school for all the money it will give you and actually have your loan balance decline

these schools with excellent lrap programs seem to pay the 10 year amount even if you are on PAYE (at least CLS)

[Johannes]

Yeah my understanding of lrap was you sign up for PAYE but then over pay according to your lrap received monthly allowance which is equivalent/pegged to the 10 year repayment.

No difference in that case but you get some government benefits under PAYE. So I think it’s actually slightly beneficial to go the re/PAYE route

In other words you’re making the 10 year repayment amount but on the PAYE/pslf plan still.

Also, I know nothing about lrap but that’s how it’s read to me based on what others have done.

[riot]

Oh my law school only pays your PAYE payment

[Guest]

Wife is a teacher on PSLF, IBR - 4th year in, and I'm a 1st year in biglaw with market pay doing REPAYE. We got married in August 2018, do we have to file as married filing separately to allow her to continue on PSLF?

[Nony]

No. PSLF is determined by being on a qualifying plan and having qualifying employment. If you file jointly, your income will count against her payment, so her payment will be higher, but she won't be kicked out of PSLF.

[Nebby]

Wife is a teacher on PSLF, IBR - 4th year in, and I'm a 1st year in biglaw with market pay doing REPAYE. We got married in August 2018, do we have to file as married filing separately to allow her to continue on PSLF?

As Nony said, no, it doesn't matter for PSLF. However, you should file separately because filing jointly will cause her IBR payment to increase significantly.

[riot]

Wife is a teacher on PSLF, IBR - 4th year in, and I'm a 1st year in biglaw with market pay doing REPAYE. We got married in August 2018, do we have to file as married filing separately to allow her to continue on PSLF?

As Nony said, no, it doesn't matter for PSLF. However, you should file separately because filing jointly will cause her IBR payment to increase significantly.

Probably you should run the numbers before you do this. It might end up costing you more in taxes to file separately than you would save in loan payments

[Nony]

I was going to say this - psychologically it feels easier to pay less each month, but you may get slammed all at once at tax time.

[Nebby]

Good call

[Johannes]

For REPAYE, you have to file jointly.

Which IBR payment is she on? Are you PAYE eligible? What’s her salary and your debt loads?

There are times where it’s better to file jointly if you both have large debt numbers.

For example, if her debt to income ratio is pretty significant, it will be beneficial to you to have that debt load not matched to a significant income if that makes sense.

[Anonquestioninglife]

I realized I paid student loan interest two years during law school on my SO’s loans and never claimed the deduction. Is it worth amending a tax return for <1k interest payments each year when joint income was <60k?

[ymmv]

For REPAYE, you have to file jointly.

AFAIK this is wrong. You can file separately but your REPAYE payments are based on adjusted gross income (combined) regardless.
Filing jointly is probably going to make more sense for most couples but it’s not a requirement.

[necho2]

I realized I paid student loan interest two years during law school on my SO’s loans and never claimed the deduction. Is it worth amending a tax return for <1k interest payments each year when joint income was <60k?

What was your marginal rate at the time? If you paid bc you had an SA and you're in like the 15%, that could be less than a hundred bucks per year, but if you were in like the 25% it might be up to $500.

[Taxo]

In for the misery

ok!

[shredlife]

I realized I paid student loan interest two years during law school on my SO’s loans and never claimed the deduction. Is it worth amending a tax return for <1k interest payments each year when joint income was <60k?

What was your marginal rate at the time? If you paid bc you had an SA and you're in like the 15%, that could be less than a hundred bucks per year, but if you were in like the 25% it might be up to $500.

also its only 3 tax yrs back u can get an old refund. if you're within that.. 2yrs*$1000/yr*15% (for mfj making 60k)=$300.. need to file 1040x via snail mail for every year amended.. if you had carryovers and stuff like that you'll probably need to amend any years since, too. eeehhhhh.....

also, that's assuming married, but wasn't totally sure since you say "SO's" loan, but then "joint income"... if you meant joint just as in combined and you weren't married, I'm *pretty sure* on this, but someone plz correct me if I'm wrong, but I believe that a student loan payment made for someone else counts as a payment from the borrower, and not from the actual payor. B/c the payment basically flows through that person to their loan. Unless the payor is also a borrower on the loan (married or wtv). So if like you had an SA and he/she didn't that year, and you're not married, ya it's gonna be tinyyyyyy

[necho2]

Yeah I assumed married b/c of joint income, but somehow missed their actual bracket... So yeah it'll be somewhere south of $300 total, assuming you're still in the 3 year window.

[LRAPTax]

If I'm in a LRAP program that pays my loans for me, can I still take the student loan interest deduction?

[Johannes]

For REPAYE, you have to file jointly.

AFAIK this is wrong. You can file separately but your REPAYE payments are based on adjusted gross income (combined) regardless.
Filing jointly is probably going to make more sense for most couples but it’s not a requirement.

Correct thanks. I don’t think it will generally make sense to file separately under repaye (ie PAYE would be preferred) but yes it’s possible.