How should I pay off $300k in student loans?

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP here - HHI is $220k. I’m on the PAYE program. I do not work in public service or government.

PP that paid off $100k in 4 years here.

I’m usually the biggest proponent of delevering and paying off your debt, but $300k is a lot. In your case, you may need to ride out PAYE. I’ll assume your salary is upwardly mobile.

Option 1. If no kids and aren’t planning on having kids in near future, move your lifestyle down to as if your household income was $100k and the balance of your pay needs to go to the loans. Everything extra goes towards the loans. You’ll make serious progress against the balance in 5 years. Note, even if you pay it off, it’ll feel good, but in 5 years you’ll feel like you’re just now reaching square 1 when your peers will be much further ahead.

Option 2. If planning on having kids in near future, just ride out PAYE. Accept that it will be hard to buy a house and this will hang over your finances until it is done. Live frugally so that you can save up for the type of home purchase you would really want after you’re done.

Regardless of what you do:

a. Keep making your payments even if government is allowing a holiday. PAYE requires 20 years worth of payments. Not just 20 years in program. So you need to make a total of 240 PAYE conforming payments to qualify for forgiveness. Taking advantage of payment holidays like during Covid when you don’t otherwise have to is only setting your final payment further out into the future.

b. You and your partner have to chase higher salaries and lower cost of living. Even if your PAYE amount goes up, you need to get ahead of the debt to create additional breathing room in your budget.

Actually you’re wrong about point (a.). The pandemic months count toward your 20 years.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I would pay the minimum for at least the next year and be extremely frugal with the rest of your money - max out retirement, IRAs, save for a down payment if you're not homeowners yet, build up your emergency fund. If a student loan forgiveness bill gets passed reevaluate - if $50k is forgiven for each of you, pay the rest off aggressively. If it's $10k/each, you might stick with PAYE. But spend this year making sure that you use the discretionary income you're not directing at your loans to improve your bottom line, and get a feel for what your life looks like directing all of your discretionary income at a financial goal instead of having cushion.

Op here - thanks. We already max out our 401k, and back door ira, we are homeowners and pay mortgage, we have 529s for both kids which we fund each month, and otherwise we put some in a brokerage account. Any thing else I should be doing that I’m not?

In that case I'd send every discretionary dollar to the brokerage for the time being. When loan forgiveness gets figured out, you might be able to knock out your loans all at once with what you have invested - or you might look at your balance sheet and decide that you'd rather invest and pay the minimum and build your net worth, even if it means another 15-18 years of $1600/month payments.

Your professions matter here too - if one of you is BigLaw and might be getting $40k-$100k bonuses in the next few years, you can just knock out your loans with the bonuses. If one is a doctor you can count on a high and increasing income and it might make sense to knock out the loans first, knowing you can quickly rebuild. But if you're both feds or something, nearing the top of your earning ability, you should probably get comfortable on your income minus 1600 and make plans with those figures.

I paid off $175k in ~6 years, with 2 years of unemployment, by always paying double/triple the minimum when I had a job, snowballing the little ones out of the way, not putting the loans into deferment when I was unemployed, and using all bonuses and tax refunds. It sucked, but when the loans were gone I had this giant chunk of money I was accustomed to not spending, and it all went to savings/investment.

Op here - you are right on the money. One of us is biglaw, has been for 4 yrs but only made no use the first year which is long gone. I appreciate your tips and insight!

[Anonymous]

Anonymous wrote:Start listening to Dave Ramsey podcast and read his books.
Downsize life style and live with one income.
Start eating rice and beans and beans and rice.

Dave Ramsey is the worst advice possible for almost every financial situation

[Anonymous]

Anonymous wrote:

Anonymous wrote:Start listening to Dave Ramsey podcast and read his books.
Downsize life style and live with one income.
Start eating rice and beans and beans and rice.

Dave Ramsey is the worst advice possible for almost every financial situation

What part of his advice do you dislike?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Start listening to Dave Ramsey podcast and read his books.
Downsize life style and live with one income.
Start eating rice and beans and beans and rice.

Dave Ramsey is the worst advice possible for almost every financial situation

What part of his advice do you dislike?

He's right about debt being a prison. All of his investment advice is garbage.

[Anonymous]

Anonymous wrote:I'd be very skeptical of the debt forgiveness based on past programs.

https://www.google.com/amp/s/www.cnbc.com/amp/2021/03/23/the-us-already-has-student-debt-forgivenessbut-barely-anyone-gets-it.html

"The National Consumer Law Center estimates that while approximately two million student loan borrowers have been in repayment for more than 20 years, just 32 borrowers have ever qualified for loan cancellation through the federal government's income-driven repayment program."

I agree. I would like pay it off aggressively.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Start listening to Dave Ramsey podcast and read his books.
Downsize life style and live with one income.
Start eating rice and beans and beans and rice.

Dave Ramsey is the worst advice possible for almost every financial situation

What part of his advice do you dislike?

Firing pregnant women if they aren’t married