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Student Loan Help!

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  • Avatar QVballin 
    Participant
    Status: Physician
    Posts: 1
    Joined: 06/12/2019

    Financial gurus of WCI,

    I need some help with my student loans and looking for some insight. Im 2 years into a 10 yr repayment plan with about 370K in debt @ 4.9%; this puts me at $4600 in monthly payments. I made the mistake of looking at my current principal balance the other day and freaked out at the huge amount and started thinking I should be working towards paying it off much quicker. I feel like Im at a spot financially that I could swing a higher monthly payment but Im a little hesitant because my wife and I just bought a house and are expecting our first kid in the next month or so. It looks like I could refinance with a 5 yr plan @4% putting my payment at around 7k a month. I guess my question is, would you all be putting everything you had into paying down such a large amount of debt? Should I refinance for a shorter payment period/rate? Is my current rate of 4.9% low enough that I should just focus on saving and/or investing my cash in other ventures? Hope this makes some sense, any help/advice appreciated. Thanks!

    #221162 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 944
    Joined: 02/11/2019

    Welcome to the forum!

    Hard to give specific advice without specifics.

    Make sure you are saving for retirement in your tax advantaged accounts.

    I personally would want the loans gone by 5 years out of training if you can swing the payments.

    You do not need to refinance to pay extra.  You can just pay more each month and then if you get into trouble you can always go back to your lower payments.

    Best of luck.

    “Never let your sense of morals prevent you from doing what is right.”

    #221193 Reply
    Avatar FamilyFirst 
    Participant
    Status: Student
    Posts: 20
    Joined: 05/19/2017

    I guess my question is, would you all be putting everything you had into paying down such a large amount of debt? Should I refinance for a shorter payment period/rate? Is my current rate of 4.9% low enough that I should just focus on saving and/or investing my cash in other ventures? Hope this makes some sense, any help/advice appreciated. Thanks!

    Click to expand…

    I would try to pay down that debt as quick as possible. A guaranteed 4.9% return isn’t too shabby. Additionally, there is the psychological benefit of paying down loans and being free of debt. I think that gets discredited a little too often for the sake of the slightly higher financial return you can get by otherwise investing instead of making bigger debt payments.

    As Lordosis said, you don’t really need to refinance, but I don’t think it usually costs much to refinance student debt. I haven’t done it myself, so I only have blog posts to go off of.

    What’s more important to you? Crushing the debt or getting a 5-6% return after taxes by passively investing?

    #221203 Reply
    Avatar hightower 
    Participant
    Status: Physician
    Posts: 1421
    Joined: 12/07/2016

     I made the mistake of looking at my current principal balance the other day and freaked out at the huge amount

    Click to expand…

    This wasn’t a mistake.  This is what everyone should do with the debt they are carrying.  Too often people pay attention only to their required monthly payment amounts and ignore what their actual balance is.  Now you are aware of the fact that you are $370,000 in debt!  Have you ever calculated your net worth?  That’s another very important exercise that everyone should do from time to time.

    What is your income? What other debt do you have?  Car loans? How expensive was your house for instance?  How much do you have in your 401k? Roth? HSA? Savings?

    $4,600 in monthly payments for student loans is insane. I would want that gone like yesterday.  How long do you want to be dealing with that?  That’s the question you should be asking yourself.  You’re a slave to your job until you get rid of those payments.

    #221231 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2253
    Joined: 01/03/2017

    I would make sure my other spending is about as low as I can get it (hope you didn’t buy too much house) and I would throw as much money as I could at the loan. It’s still important that you take advantage of any pre-tax retirement space and a Roth. I would certainly look around and see if I could get a better rate through refinancing. I’m glad you’re freaking out about your student loan debt because you should be. If you buckle down, you can get it paid off quickly and you’ll feel much, much better.

     

     

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #221236 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2253
    Joined: 01/03/2017

    What’s more important to you? Crushing the debt or getting a 5-6% return after taxes by passively investing?

    Click to expand…

    Where do you get that kind of return guaranteed?

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #221239 Reply
    Avatar mapplebum 
    Participant
    Status: Spouse
    Posts: 236
    Joined: 04/17/2018

    I agree you’ll receive better advice if you break down spending/saving/debt. Personally, if I were you I would run the numbers, see if the 5 year term is feasible. If it is, do it.

    One thing I’ve learned from this forum that I don’t think is discussed directly is learning how to set up parameters to hold yourself accountable. You start with financial goals first, investigate different scenarios (2, 5, 7 year repayment schedules) and then commit to whatever you decide. If changing loan terms to 5 years is reasonable, do so in order to ensure you will continue acting in your highest self. Keeping the loan at 10 years I’m sure you’d be able to kick back extra payments, and maybe double up every month until it’s paid off twice as fast. But see, you can’t predict you or your wife’s future needs and desires. What if you end up having 2 more kids in the next 5 years? Suddenly your house feels cramped and then now that you see how brilliant your kiddos are you think, man, they really need to go to that private school. This kind of thing happens. If you stick to the 10 year loan term then I can’t imagine anyone who wouldn’t begin strategizing to afford these new decisions. It’s amazing the things we can rationalize. So that’s why right now if you can swing that 5 year term I would say lock it in, if for nothing else than to hold future you accountable.

     

    Good luck!

    #221256 Reply
    Avatar hightower 
    Participant
    Status: Physician
    Posts: 1421
    Joined: 12/07/2016

    I agree you’ll receive better advice if you break down spending/saving/debt. Personally, if I were you I would run the numbers, see if the 5 year term is feasible. If it is, do it.

    One thing I’ve learned from this forum that I don’t think is discussed directly is learning how to set up parameters to hold yourself accountable. You start with financial goals first, investigate different scenarios (2, 5, 7 year repayment schedules) and then commit to whatever you decide. If changing loan terms to 5 years is reasonable, do so in order to ensure you will continue acting in your highest self. Keeping the loan at 10 years I’m sure you’d be able to kick back extra payments, and maybe double up every month until it’s paid off twice as fast. But see, you can’t predict you or your wife’s future needs and desires. What if you end up having 2 more kids in the next 5 years? Suddenly your house feels cramped and then now that you see how brilliant your kiddos are you think, man, they really need to go to that private school. This kind of thing happens. If you stick to the 10 year loan term then I can’t imagine anyone who wouldn’t begin strategizing to afford these new decisions. It’s amazing the things we can rationalize. So that’s why right now if you can swing that 5 year term I would say lock it in, if for nothing else than to hold future you accountable.

     

    Good luck!

    Click to expand…

    I have to disagree with you a little here.  A 5 year aggressive loan term like that could be dangerous.  The medical world is changing rapidly and there’s no guarantee that any of us will have the same income every year.  I would just keep the terms as is and pay extra towards the principle each month when you can.  Keep a healthy emergency fund too, since you have the kid on the way. There are lot’s of “what ifs?” that can come up over the course of 5 years.  There won’t be any sympathy from a loan company if you need to take a break from big payments for a few months here and there.

    #221327 Reply
    Avatar mapplebum 
    Participant
    Status: Spouse
    Posts: 236
    Joined: 04/17/2018

    I agree you’ll receive better advice if you break down spending/saving/debt. Personally, if I were you I would run the numbers, see if the 5 year term is feasible. If it is, do it.

    One thing I’ve learned from this forum that I don’t think is discussed directly is learning how to set up parameters to hold yourself accountable. You start with financial goals first, investigate different scenarios (2, 5, 7 year repayment schedules) and then commit to whatever you decide. If changing loan terms to 5 years is reasonable, do so in order to ensure you will continue acting in your highest self. Keeping the loan at 10 years I’m sure you’d be able to kick back extra payments, and maybe double up every month until it’s paid off twice as fast. But see, you can’t predict you or your wife’s future needs and desires. What if you end up having 2 more kids in the next 5 years? Suddenly your house feels cramped and then now that you see how brilliant your kiddos are you think, man, they really need to go to that private school. This kind of thing happens. If you stick to the 10 year loan term then I can’t imagine anyone who wouldn’t begin strategizing to afford these new decisions. It’s amazing the things we can rationalize. So that’s why right now if you can swing that 5 year term I would say lock it in, if for nothing else than to hold future you accountable.

     

    Good luck!

    Click to expand…

    I have to disagree with you a little here.  A 5 year aggressive loan term like that could be dangerous.  The medical world is changing rapidly and there’s no guarantee that any of us will have the same income every year.  I would just keep the terms as is and pay extra towards the principle each month when you can.  Keep a healthy emergency fund too, since you have the kid on the way. There are lot’s of “what ifs?” that can come up over the course of 5 years.  There won’t be any sympathy from a loan company if you need to take a break from big payments for a few months here and there.

    Click to expand…

    yea it really depends on the particulars of his finances. Good thought.

    #221358 Reply
    Avatar FamilyFirst 
    Participant
    Status: Student
    Posts: 20
    Joined: 05/19/2017

    What’s more important to you? Crushing the debt or getting a 5-6% return after taxes by passively investing?

    Click to expand…

    Where do you get that kind of return guaranteed?

    Click to expand…

    You’re right. I should have said possible average yearly return of 5-6%. The paying off debt was the only guaranteed return.

    #221464 Reply

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