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Author Topic: payback time  (Read 4051 times)

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Re: payback time
« Reply #20 on: April 16, 2007, 03:18:04 AM »
Why are people so concerned with paying off their loans so early? With good consolidation, it may not be so bad to pay them off in 35 years. Yes, you will pay more interest over the life of the repayment, but with rates around 5% (or lower,) why not pay the minimum and keep the difference in other investments? There is much discussion on financial websites about paying off low-rate student loans as slowly as possible. There can be advantages.

jacy85

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Re: payback time
« Reply #21 on: April 16, 2007, 07:11:35 AM »
Why are people so concerned with paying off their loans so early? With good consolidation, it may not be so bad to pay them off in 35 years. Yes, you will pay more interest over the life of the repayment, but with rates around 5% (or lower,) why not pay the minimum and keep the difference in other investments? There is much discussion on financial websites about paying off low-rate student loans as slowly as possible. There can be advantages.

Because a lot of money, even at low interest, still = huge payments.  I'm looking at $1k+/month in payments.  If I consolidate, it won't help all that much.  I'd rather throw money at those loans, and be able to put more money into a nicer house or something while still having the freedom to leave a firm and pursue other options (like gov't work or something)

yanno

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Re: payback time
« Reply #22 on: April 16, 2007, 01:09:06 PM »
NYC Monthly Expenses:

$2k apt with utilities if you share with one person.  $4k will be enough for a decent place in 2010 if you live a little away from work and share a small place.

$1k for everything else.  Live decently, without splurging, eat on the company, no car, etc.  This is not a pauper's lifestyle.

$3k total.  This is doable.

Salary:

$190k with bonus at least in 2010.
-6% 401k (this is a minimum)
--------
$179k

$115k after tax - $36k living expenses.  $80k.

No problems paying this off in 2 3/4 yrs or less even if you take the full amount and including interest accrual on it (3rd yr bonus comes in 4th year).  Throw in $15k saved from 2L summer and you're in great shape to pay everything off within 2 yrs + stub if you had some cash lying around to cover living expenses for a year or two going in (and didn't do stupid sh*t like take $135/mo in extra loans to pay for clothes like UCLA suggests).


What tax rate are you using to calculate the after tax income - are you including nys and nyc taxes on this?

Drew P. Bottom

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Re: payback time
« Reply #23 on: April 17, 2007, 07:51:34 PM »
Why are people so concerned with paying off their loans so early? With good consolidation, it may not be so bad to pay them off in 35 years. Yes, you will pay more interest over the life of the repayment, but with rates around 5% (or lower,) why not pay the minimum and keep the difference in other investments? There is much discussion on financial websites about paying off low-rate student loans as slowly as possible. There can be advantages.

You find me a 5% interest rate and I will be interested in getting loans there in this day and age.
"If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy." -- James Madison

Drew P. Bottom

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Re: payback time
« Reply #24 on: April 17, 2007, 07:55:38 PM »
Oh and I just did a calculation using the helpful calculator at Finaid.org

If you repaid a 150,000 5% interest loan in 10 years, you would end up paying  $190,918.03
If you repaid the same loan at 5% interest in 35 years, you would end up paying      $317,954.32
"If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy." -- James Madison

Drew P. Bottom

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Re: payback time
« Reply #25 on: April 17, 2007, 08:04:26 PM »
Oh and I just did a calculation using the helpful calculator at Finaid.org

If you repaid a 150,000 5% interest loan in 10 years, you would end up paying  $190,918.03
If you repaid the same loan at 5% interest in 35 years, you would end up paying      $317,954.32

According to my Dad, this isn't so bad, because the money becomes less valuable over time due to inflation. I don't buy it, and the thought of that debt hanging over my head is not good. So my plan remains to pay it back as quickly as possible, and then whatever money I earn will be mine to invest or buy a house or something. I think you can still save a decent amount while paying it back quickly.

The only 5% interest loan I'm getting is Perkins. It's crazy that 5% would have been considered a lot a couple of years ago! But maybe when we graduate the rates will be low and we can consolidate for a nice rate.

Inflation does make it less but then you have to have it A) hanging over your head for 35 years and B) HAVE TO keep a high enough paying job at all times to afford it, meaning you can't jump into Public Interest or something after a few years.
"If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy." -- James Madison

yanno

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Re: payback time
« Reply #26 on: April 17, 2007, 09:11:26 PM »
Ok, suppose I pay off my student loans in 3 or 4 years working in Biglaw. What would be the next logical, sane step? Is it just me, or doesn't it seem like a steep cliff to jump off from from Biglaw, salary wise?

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Re: payback time
« Reply #27 on: April 17, 2007, 09:35:30 PM »
Why are people so concerned with paying off their loans so early? With good consolidation, it may not be so bad to pay them off in 35 years. Yes, you will pay more interest over the life of the repayment, but with rates around 5% (or lower,) why not pay the minimum and keep the difference in other investments? There is much discussion on financial websites about paying off low-rate student loans as slowly as possible. There can be advantages.

You find me a 5% interest rate and I will be interested in getting loans there in this day and age.

Well, my state offers pretty decent loan consolidation programs for students with low rates and rate-reduction bonuses. I was talking about post-consolidation rates.

Ender Wiggin

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Re: payback time
« Reply #28 on: May 03, 2007, 11:44:06 PM »
Would paying your loans back in even 5 years be all that much of a hardship?  My wife and I make around 60k a year combined now.  If I get a job for 125k, plus her 30k, and pay 50k a year for 5 years, we still are ending up with much more than what we am making now--around 80k (figuring the 50k as a bigger chunk before taxes).  I don't think that would be so bad for a few years. 

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Re: payback time
« Reply #29 on: May 17, 2007, 09:54:32 PM »
We will all manage.