Why o WHY AM I SO DAMN FIRSTY?!!!

1:33 - Scholarship? Or did your parents pay?

Oh, darn it. I'll be a 1L in the fall and I took out 25k in Stafford/Perkins and additional thousands in the form of GradPLUS. All of the latter are at a 8.6% interest rate that accrues at disbursement, while the former is at a more reasonable 6.8% interest rate with a grace period until I graduate.

This would be easier if I would have been born a few years ago. I'm also wondering whether I'll regret UVa with $$ or not.

This is very helpful, by the way. Thanks, Lat! I know I'm not the lone pre-law reader; all of my 0L friends love ATL as well.

Isn't there something to be said for paying off loans over the course of 30 years bit by bit by bit @ 4.25% because it's an absurdly low interest rate??

In essence, you are paying somewhat for your increased liquidity, but isn't that worth it in the long run (like a mortgage, for example)?

(I'm trying to justify NOT paying off my loans quickly, but instead paying them off bit by bit for as long as I can. Is that wise?)

Law school debt = indentured servitude.

Oh, well. Maybe I'll work for a few years, get elected to the U.S. Senate, write a couple of books, and then payoff my loans. Maybe run for President or something nice like that.

I'm paying my government loans off over 30 years. I graduated in '03 and consolidated at a 1.25% interest rate. I see no need to rush with that interest rate-I just make the minimum payment every month.

One of the greatest things about law school, in addition to the necessity of working in Biglaw, is being able to hang my undergrad and law school diplomas on a wall and instantly make that wall worth around $200K.

Girls in my school worked their way through school. Guys went into debt twice over.

What's a student loan? They sound terrible.

1:46: you should have gone:

1. State School with a scholarship (e.g., Kansas)
2. Great GPA, 172+ LSAT
3. Lower T14 with a scholarship
4. Profit!

Does anyone know if I can consolidate just my variable federal loans and not my fixed one? If possible, I would like to lock in the variables at 4.25% and then aggressively pay down the fixed loan which is at 6.8%

$100k loans + TTT School = Screwed

I graduated in '06 with +100k in debt, which is now sitting at ~4% interest after consolidation. Considering my mortgage is +300k at 5.25% and I can get over 4% return on most long-term investments, I will not be paying off my student loans any time in the future. The minimum payment is no problem. (of course, if I lose my job, my outlook may change...)

Damnit. I was feeling happy about my 2.5% rate until 1:44 chimed in with his 1.25%.

1) "Isn't there something to be said for paying off loans over the course of 30 years bit by bit by bit @ 4.25% because it's an absurdly low interest rate??"

It's still better (unless you have something more productive to do with your money; see below) to pay them off fast--while keeping in mind the tax issues.

For example (I used http://www.calcamo.net/loancalculator/simulation/fixed-rate-loan.php5 for calculations), if you pay off your $100k loan at 4.25% in 15 years, you pay $752 a month. You'd only pay $491 a month if it takes you 30 years to pay it off.

But you pay $35,410 in interest under the 15-year plan, and $77,098 under the 30-year plan. Since you're also making twice as many payments in 30 years as you would in 15, it actually works out to a lot more money: total cost is almost $254,000 in 30 years and almost $171,000 in 15.

2) "In essence, you are paying somewhat for your increased liquidity, but isn't that worth it in the long run (like a mortgage, for example)? "

It's only worth paying the extra $83,000 to your student lender if you do something else that can recoup it. Maybe you can invest that extra $261 a month in something that pays more than 4.25%, or pay off credit card debt, or take a smaller mortgage. But it's worth running the numbers.

My plan is to pay off the student loans as fast as possible--it seems like the tax advantages of mortgages are better, so I'd rather have my debt there.

Co-sign 1:54.

If you're a pre-law / 0L like 1:40(1), only go to law school if you get into a very good one (or don't have to take out loans to go).

anyone know what is available, if anything, for the consolidation of private law access loans? i was hoping there would be the ability to consolidate those loans under a federal program to get them to qualify for the 10yr public service repayment plan, but I haven't found anything.

I, like many other law school grads, have a six-figure student debt. About 95% of this amount is from law school loans. I don't want to bitch about it – we knew what we were getting into, and knew the terms and conditions of the pay back, including, inter alia, being stuck in a big law job, a job we may not like very much but are trapped because this is the only way to pay back the student debt.

But the big insult comes when the law school sends you, from the month after graduation, solicitations for contribution. This always made me wonder, isn't my $125k tuition contribution high enough to last a life time? A even bigger slap in the face is a line near the bottom of the said contribution letters: that if we wish to contribute equity, there is a special number we can call.

Not long ago the Dean from my law school announced that he or she was going to have an event at a particular place, and that we are all encouraged to go (and to contribute, of course). I didn't go because I don't think I can withhold from calling him or her a "fat greedy money-wh%#e!"

This is my thought: next time they send me a letter asking for contribution, I'm going to send back my student loan statements, and circle the total amount (still six-figure) with bright red pen. If I'm feeling charitable then, I'll write a check for a dollar.

1:33 here--scholarship.

i may not be at some top 20 firm, but i still make $150k a year and i don't stay at work until midnight every night either. in fact, i don't think i've EVER stayed past 8:30pm.

wow, I totally screwed up those numbers above by double-counting the interest. The total payments are only $41,400 apart. But the 30-year plan is still more expensive overall.

"It's only worth paying the extra $83,000 to your student lender if you do something else that can recoup it. "

You will almost always have something better to recoup it if your rate is less than 4%. I think you can even get a CD for 4% now. DO NOT PAY BACK THE LOW INTEREST STUDENT LOANS - INVEST THE MONEY INSTEAD.

wow, I totally screwed up those numbers above by double-counting the interest. The total payments are only $41,400 apart. But the 30-year plan is still more expensive overall.

What about private loans? I have all my federal loans consolidated at 2.25% (yeah, I know, barely over the inflation rate; '03 grad) for 30 years (will take my sweet ass time with those). But my private loans are another matter. I thought about taking out a home equity to pay off the private loans, so I cna then deduct the mortgage interest. Any other thoughts?

And I work in midlaw, not biglaw (or else I would not be asking that question and would have already paid it off).

2:06 - yes, there are - and CDs are no-brainers:

http://cdrates.bankaholic.com/

law school loans are TTT.

Does anyone know whether you can consolidate part of your federal loans without incorporating another portion? More specifically, I want to consolidate my new lower variable rate loans from 2000-06 and not include the 6.8% fixed loans. Reason being: I will pay the minimum on my consolidated loans, while paying my extra disposable income on paying off the 6.8% fixed loans. Thank you in advance.

I'll have over 100k in student loans at about 7% when I graduate next year. When I think about the nap I took during the reading section of the LSAT (forcing me to guess on the last couple of questions) and the full ride scholarship I could have gotten had my score had those couple of points I want to stab myself. Big Law here I come. My goal is to pay at least $3000 a month until I get those things paid off.

one thing anyone with loans to remember is that many times if you make 48 consecutive ontime payments, the interest rate, even if locked in, drops another 1% (which is how my locked in loans went from 2.6% to 1.6% a little while ago).

2:03 - you can't consolidate private loans w/ federal loans. some private lenders (banks, state agencies, etc) will allow you to consolidate the various loans you have with them, if they count each disbursement as a separate loan.

2:06, interest earned on CDs are taxed. Since student loans are not tax deductible for most people if they're making six-digits, you need to compare the after-tax rates of return.

To do better than 4% student loans, you need an investment that pays about 6%.

This is why I never understood prospective law students chasing top schools. I got into HLS, but also got into Virginia with a full ride. Guess where I went and how much loan I have? Oh, and I work at a V5 firm btw...

My advice to ALL would be law students: try and go to the law school that offers you a substantial scholarship instead of the very best school you can get into (assuming that the school offering you a scholarship is T14). Other advantages of going to a lower ranked school is that you are likelier to graduate near the top of your class, make law review etc..

What if the global economy stagnates--or even shrinks?

I used Graduate Leverage to consolidate my federal loans and my private loans (separately b/c the federal consolidation is a stand-alone program). They cater to professionals - doctors, lawyers, etc.

I'm an '05 grad an consolidated my federal loans at a 1.25% rate.

I'm a real person and don't work for GL - just a very happy, low-interest paying customer!

Recent law school matriculants have it tough. High interest rates, shitty job prospects, etc. It seems like '03-'06 was the time to graduate.

For those that have consolidated or are thinking about consolidating or want to push out the full payment date to 30 years, besides looking at lost investment opportunities that your money could go toward, you also need to look at inflation. In the near term, inflation looks like it is going to run somewhere in the 4-5% range Thus, if you have a consolidated rate of less than inflation (particularly the guy with the 1.25 which PO b/c I thought I was low at 2.5) it is getting cheaper to pay off the debt so there is less of a need to pay it off b/c the loan amount is actually getting cheaper.

2:17, investing in tax free municipal bonds is another way to go.

2:13, why would you voluntarily keep an interest rate higher than you need to? why not consolidate the entire amount, and put your extra money towards that? it might be less satisfying to throw money into a bigger pit, but it will cost you less in the long run.

How about an open thread on Barbri??

2008 grads get totally screwed for government loans for the 06-07 and 07-08 school years. our options were stafford loans fixed at 6.8% (these loans are not eligible for consolidation), PLUS loans fixed at 8.5%, and variable private loans, which have fluctuated between 6.0 and 9.5% in the past couple of years.

all these new changes don't help us one bit for our 06-07 and 07-08 loans. in addition, most of us were encouraged to consolidate our stafford loans after the 05-06 school year, so those loans are now locked in around 4.7%, which is ok, but still well in excess of 4.25% or 3.61%.

we can all thank george w. bush's education department, run by student loan providers, for screwing us for the past 3 years..

2:23, you're an idiot if you can't understand these students. They're dazzled by prestige. It's a pretty obvious motivation. You (and I) might think it's a silly choice, but to claim you don't understand them makes me think you're an Aspy.

2:23, the tuition you saved ($120k) amortized over one's lifetime is about $2000 a year. $200 a month is a small price for most people to pay to have a Harvard law degree instead of a state school degree.

another happy Grad Leverage user here. i graduated in '06, and my federal loans (UG and LS) are consolidated at 3.1%, which will drop to 2.1% after 48 months. no hurry to pay those back.

i didn't use them for my private loan consolidation b/c i got a much better deal through the lender itself.

The real question is what to do about these damn private loans. They are the killers.

2:13- I consolidated in '06 my Stafford loans without inculding my Perkins loan. If I had consolidated together, I would have ended up with an overall higher interest rate for the whole lot, making my lifetime payments even more. Since the Perkins was smallish and had a 9 month deferrment, I just paid it off in one lump sum when it came due.

As far as the Staffords go, locked them in at 3.375% with a rate reduction of 1% after 36 months of on time payments. The payment works out to $317 a month. I'm not in any rush to repay, and certainly won't be at all when they reset in Oct. '09.

2:43 - the rates on private loans right now (for most people) are actually below the 6.8% bs fixed rate on federal loans made 2006 and beyond....

Federal Student Loan Forgiveness Law of 2007

Ditch biglaw and work for public interest or the government for 10 years making capped payments. Then the debt ii forgiven completely.

http://www.equaljusticeworks.org/files/ejw_ccraa.pdf

When I think about my student loans, I think about the mediocrity they bought me, and then I get deeply and silently angry.

My Grad Leverage federal consolidation loan interest rate dropped by 1% after repaying for 20 months - not 48. They must have changed the program since I consolidated - glad I got in when I did. I consolidated at 2.25%, but now I'm paying 1.25% Yipee!! I will be paying it off for the full 30 years because I can get a better yield investing in a savings account at a bank (other than BofA because they suck a$$).

People who don't donate to their law schools are greedy, selfish, ungrateful bastards.

As an incoming 1L paying sticker price at a T6 school, I look with envy on all of you who graduated before '06. After the Stafford loans, the only options are federal GradPLUS loans set by law at a ridiculous 8.5% fixed rate, or giving up the federal protections and consolidation options to take a private loan at a variable rate, which might screw me down the road. Not sure which I'll do, and I'm terrified about taking out a mountain of debt on bad terms.

2:32 - Unless you are in the highest tax bracket you should not invest in tax-free munis. Here's a simplified reason why: Suppose there are two tax brackets - 20% and 40%. Also assume that an entity is issuing taxable bonds at a 10% interest rate ($10 for every $100 of principal). That leaves an after tax profit of $6 for the 40% bracket and $8 for the 20% bracket. If the same issuer (or another issuer with equal credit risk) was offering tax-free bonds the inetrest rate would be adjusted to about 6.5% - 7%. Why that interest rate? To entice the 40% bracket to invest by giving them a slightly better after- tax return. That screws the 20% bracket who would do better getting $10 and paying tax then getting $7 and not paying tax.

(Credit to Professor Alan Feld of BU Law for explaing this to me a few years back).

Wow. Lots of bad financial advice in this thread. You people have been listening to too much Dave Ramsey.

When you're trying to figure out whether to prepay debt (any debt, not just student loan debt), you need to figure out which option is going to generate the greatest return on your money. Figure out what types of debt you have outstanding (credit card, student loan, mortgage, etc.), whether the debt is taxed advantaged (credit card debt is not, student loans are up to the relatively low income limit, mortgages generally are, but keep in mind you may be subject to AMT, etc.) and what your marginal tax rate is. Once you've done that, compare those rates to what you could earn on an investment. Investing in CDs is stupid. Not only are CD rates generally lower than 4.25% now (except for very long term CDs), all that interest is taxable at ordinary income rates. Municipal bonds are fine, but you need to price in risk. Keep in mind that paying off a student loan guarantees you won't be paying that interest in the future. There's no such guarantee of a return on your municipal bonds.

Don't worry about the absolute numbers. What matters is making the investment that saves or makes you the most money.

is GW truly TTT or are people just bashing?

2008 grad here. is 2:34 right about us getting screwed?

it seemed that way from reading the facts above, but i wanted to be sure s/he and i put it together right.

like 2:34, i consolidated my 05-06 debt in summer '06 (i think most '08 grads probably did that b/c it was widely suggested we do so). i took out a lot of debt in 06-07 and 07-08, both gov't and private. is all my law school gov't debt now ineligible for consolidation?

-class of 2008

2:55, whatever you do, do NOT take out private loans with Sallie Mae. I took some out at 6%. By the time I graduated from law school, they had gone up to 10.5%. Variable private loans can and will kill you. (I opened up credit cards and moved as much as I good to fixed low interest balance transfers. It's not "good" debt, and I will be screwed if I ever pay late, but since I can't deduct interest payment on my taxes, I gladly took the 6% interest savings.)

2:55: hear hear. I'm in the same situation.

We are generation debt.

(also an 08 grad) he's right on everything but probably could have gotten a much better rate than that in summer 06

I think the above poster @ 2:34 is correct. I am an '08 grad, and these new rates do nothing with regard to my ridiculous federal loans from 06 and 07.

Does anyone know of a lender willing to consolidate private loans at these rates? Does anyone know of a lender offering fixed-rate consolidation loans? I don't want anything adjustible in this environment...

2:55

Way to use T6 to show everyone where you go to school.

- T4

"That right there would be Dooster Hall, the financial aid building...Wow, I've never actually met anyone that had to go there..."

1:53 - the answer is yes.

2:55, 3:12,

Are we allowed to use Vault's rankings? Or is it only USNWR for the T#?

Thanks,

T(?)

Using the Cooley rankings, my school is T16.

See for yourself:
http://www.cooley.edu/rankings/overall2007.htm

3:22 - HAHAHAAA....so funny

Loans are for poor people. My parents paid for law school.

From Cooley's ranking criteria:

"Imagine that college football teams are ranked each year by the quality of the freshman recruits and the pre-season polls of the press and the coaches. Games don't count, only what people expect, based upon the potential of the high school players and the pre-season assessment of two groups with some involvement in football. Imagine as well that the rankings for the year are determined just once, before the season begins and those players are tested by competition."

Oh...college football. Now I understand!

- T9

3:29, T9 means UMichigan, right?
That's what Cooley says.

And now we know that T14 means all schools up to American University.

3:22 so suffolk is better than emory?

3:37

Yea - I am going to start using Vault's rankings like 3:17 suggests (I actually just had to look them up).

- T2 (formerly T9)

3:00 - Of course it's not, haven't you seen the rankings? It's even better than UPennState.

How about the this guy in Texas, Joe Horn, who shot and killed two illegal immigrants who were running from his neighbor's house after robbing it? The grand jury didn't indict him.

He was on the phone with a 911 operator who told him that he might get shot if he tried to interfere. "You want to make a bet?" he said. "I'm going to kill them."

I think tuitions should be progressive. The more money your parents earn, the higher the tuition. Additionally, if you graduate and make more than 150% of the median income, then anything over the 150% should be taxed at an appropriate rate to help fund poor and disadvantaged students. This is the only just way of correcting decades of racism, classism, and bigotry.

4:00, may I introduce you to something called "need-based financial aid" and the income tax?

You're welcome.

4:00 = the harvard law avenger

4:00 = the harvard law avenger

4:05 Apparently it's not working since there are people graduating with six figure debt.

4:08, maybe not everyone gets money from their parents, even if their parents make a decent salary.

4:00 = Communist. The cold war ended. You lost. Get over it.

I called Graduate Leverage to see about consolidating my Federal loans and they said they, like most other places, are no longer doing consolidations because it is no longer profitable for them.

4:12 Progressive Politics is taking over the world. One only needs to look at Obama and the Congressional trend. People are not fooled... the rich get richer while everyone else is forced to live in poverty.

"maybe not everyone gets money from their parents" Come on... who are you trying to bamboozle. Poor parents can't even give money to their kids if they wanted to.

4:17

Ok? What about the rich parents that don't give money because they don't want to? Punish the child?

"The lenders came and took everything: my stereo, my car, an unusually red plum, my rare albino kangaroo collection, an indeterminate piece of string, the woman I . . . . "

To the other 2008 grads: I don't think consolidation is even an option for us. When I called my lender a month ago, they said they have stopped consolidating loans altogether because of the bad economy. So in essence, we're totally screwed.

Umm, 4:17, the whole point was that people with poor parents get need-based financial aid and don't have six-figure debt.

The people with six-figure debt have parents whose salaries and assets could have paid for their law school tuition, but the parents chose not to.

And if I am not a "rich" person getting "richer", then I'm living in "poverty"? Wow, so Progressives have gutted the middle class.

4:18 Rich kids had more opportunities than poor kids. If they can't figure it out, then Darwin's theory should apply.

4:21

I can't even begin to imagine your views on the estate tax.

Thank you, Democrats, for f-ing with the student loan system to "save me money" and "make college affordable" by locking in my interest rate.

So now I get to pay 6.8% forever instead of 4% and change, which I would have locked in through consolidation.

Thanks, Ted Kennedy and Barry O'Bama

4:20 There is no middle class in the city. You are either poor or you are rich. The middle class lives in the suburbs.

4:24, and when 4:17 is talking about "People" he obviously only meant people who live in cities.

Those who live in the suburbs are not really people, and don't count in the rich getting richer and everyone else is in poverty calculus.

Liberal apologists are so funny.

I hate those animals in the 'burbs

4:28 the fact remains that 90% of biglaw at the partnership level are white and come from wealthy backgrounds. Why shouldn't we tax them? Brown v. Board of Education was decades ago and there still is no equality. The only way to solve the problem is to put poor minority students on the same footing as rich white kids.

4:21 You shouldn't punish the kids of privilege because you came from parents with lower income. People shouldn't be punished because they have worked hard and made something of themselves.

4:33, 80% of the NBA are minorities. Why shouldn't we tax those black athletes and impose affirmative action in favor of white athletes? Brown v. Board of Education was decades ago and there still is no equality. The only way to solve the problem is to put white kids on the same footing as minorities.

4 years of law school (part-time; top-50-ranked state-school) just a few years ago cost about $32,000 total, including books. Paid off half of that as I went in cash from my salary, and paid off the loans I took out to ease the cash-flow pain with the bar stipend my firm gave me when I started work. HAH!

If you're working at a Big Law firm making 160,000 plus bonuses, you'll pay off 100k in debt in no time. I work as a contract attorney making $150,000 a year. I've paid off over 100k of debt in five years (my first two years, I was only making $50,000). During this time I drank a ton regularly spending up to $250 on a night of heavy boozing. I quit the booze this year. My point is this: if a loser like me who was in the bottom of my class at a third tier school and admittedly is financially inept can pay off his loans then why are you guys who graduated with honors at tier 1 schools having such a hard time.

4:33

So tax the wealthy into poverty? You're right! That'll be the same footing.

When will the madness end? Tuition can't keep rising, can it?

4:40

Because we're not all guys that graduated with honors from T14 schools. That's my guess.

- T16 (Cooley's rankings)

4:40 I said those making 150% median should be taxed. That is not unreasonable and it's not taxing them into poverty. If you can't live off of 150% of median, then there is something wrong with you. Everyday, you hear about the wealth gap getting larger and larger. This solution is fair and just.

2:34, you're an idiot. The student loan reforms were part of the Dems' "100 days" "successes" spearheaded by Reps Miller and Pelosi and Sen Kennedy.

It's called the CCRA - College Cost Reduction Access Act (or something like that). The bill also trimmed lender profit margins so much that they won't offer consolidation loans. I'd say you should Google their many press releases on it but they probably pulled them since they just had to go back and authorize a huge bailout of the industry because the blew it up so bad.

Are there really no options for those 6.8% fixed interest loans we '08 grads are saddled with?

4:40, because the pathetic strivers aspire to a certain lifestyle as seen on TV that they think they should have, such as paying $2500 for an apartment and $500 for shoes, and then they wonder why they have student loans and no savings when they're 35.

My interest rate is 1.625%. I stare at the statement when I get it every month to make sure it isn't a mistake (I had to call once just to make sure they didn't transpose the 6 and the 1) and then I laugh because it is such a joke.

And I went to a public law school (and before any of you trolls chime in, it was in fact a "Tier 1", not a "TTT" thank you very much) so the bill wasn't that high to begin with.

So, life is great. Now if I could only get rid of these crabs.

4:49,

Just curious. What's median?

4:53 Median Income.

4:50, pay them off as soon as possible, and vote out the Democrats in office who imposed that fixed above-market interest rate on you in the first place.

Deterrence is the best punishment.

4:49,

I'm too lazy to scroll up and find your original idea. Once one hits 150% then you load on the taxes? Or are you saying that anything after 150% should go to the gov't?

Can't we avoid the whole taxing issue? We lose so much money in government bureaucracy. Why don't we just make the rich families sponsor a poor family?

4:49 said "If you can't live off of 150% of median, then there is something wrong with you." so his proposal seems to be a 100% tax on all income above 150% of median, to be redistributed to idiots who can't make that amount.

"fair and just" indeed.

4:49(1), you're just one of those trolls like Hof 1L or Frat Stud, right?

There's been a bomb-throwing marxist on ATL for a few days now but I can't believe that any law professors have time to comment, so you must be a troll. Have I outed you?

4:57 Anything over 150% median should have an additional tax intended for education subsidies for students that have parents or themselves live below median. I think an additional 5-10% tax is reasonable and should bring in enough money to solve the problems.

This is not the place to discuss social policy.

Great question, 4:50.

IS THERE ANYTHING '08 GRADS CAN DO WITH 6.8% STAFFORDS TAKEN OUT IN 2006-07 AND 2007-08?

WHAT ABOUT 2005-06 LOANS CONSOLIDATED IN SUMMER '06?

-2008 grad

5:00 Seriously? I'm trying to solve problems here and you are making ad hominen attacks. Student debt is at a critical level, preventing students from taking non-BigLaw jobs. This is a solution.

Thank you 5:01. I too would love to know if there are any options for us 2008 grads who apparently are getting screwed.

I am basically a communist myself and would love to talk about taxing the super rich, but I can't go for this 150% of median. According to Wikipedia (which is always right) in 2006, the median annual household income was $48,201.00 according to the Census Bureau. The median income per household member (including all working and non-working members above the age of 14) was $26,036 in 2006.

4:49,

you're the idiot.

i'm not knocking the new reforms, i am knocking the system that was in place for 2 school years (06-07 and 07-08) where stafford loans were fixed at 6.8% and PLUS loans were fixed at 8.5%; consolidation of stafford loans also was eliminated for those 2 years.

it was president bush's education department which was responsible for those 2 years of awful policy.

btw, the new reforms went into effect on 10/1/07, thus they had nothing to do with loans dispensed for the 06-07 and 07-08 school years.

http://www.nasfaa.org/publications/2007/G2669Summary091007.html

love, 2:34

5:12 apparently didn't take bankruptcy law. See the state numbers for median, usually under the State's Department of State or similar organization. I guess people aren't into thinking about solutions here.

Well, I am an idiot, but at least I'm not the commie troll of the day. I'l take your word for it.

Hugs & Kisses,
4:49

4:49,

agreed. the commie troll part of the thread went way off topic.

cheers,

2:34.

Hey 5:19 - I went to wikipedia you douchebag and cut and paste that stuff. I was purposely being glib you fucking idiot.

5:12

My variable private loans are sitting at 4%

Omg you people need to take this to a blog or post devoted to social policy.

What can people who graduated in 2008 do to lessen their Stafford and PLUS loan burden?

2008 grads:

1) If you consolidated your loans after your 1L year, there is no re-consolidation. They're already consolidated and locked in at that rate. Locking in that rate is a benefit you get, and the risk coupled with it is that the rate will be lower at some point.

2) The stafford loans for the past two years can be consolidated, but since the rate isn't variable, you won't get a new rate. 6.8% it is.

Any takers on the topic of whether it's better to take the conventional route and pay off private loans first, or focus on gov't loans since right now my stafford loans are at 6.8% and my private loans are at 5% (and falling?)

OK 7:13 has us going in the right direction. I had the same question recently. Contrary to the conventional route, it seems obvious that '08 grads should focus on paying off our Fed loans (6.8%) instead of the private loans (5%)

But here is what I find to be the harder question, with rates this high, does it still make sense to "pay yourself first"? From my limited knowledge, I imagine that you have to take on some pretty risky investments to get a rate of return over 6.8. So again, should '08 grads (fortunate enough to have market jobs) focus on eliminating this debt in 2-5 years rather than paying the minimums and investing the money?

Been struggling with this for awhile now, any help anyone can give would be appreciated.

7:34, this is 7:13.

It all depends on your goals. If you plan on staying in biglaw or taking another other well-paying job, then 6.8% isn't an unacceptably high rate to try to achieve. If you have some failed investments, you should still be able to recover.

On the other hand, if you need lots of cash (ex. to make high mortgage payments), or you want to pay down loans to reduce your monthly loan payments, you'll want to pay down as fast as possible.

Personally I fit into the latter category, but for people in the former category, it's not exactly cut and dry either. Let's say you can make 10% on investments, and for the life of the loan, your average interest rate is 6.8%. 3% is not insignificant, but in real dollars may be worth the relief of debt burden. This is particularly true if you're on the (far) wrong side of $100K in debt. Many people dismiss the fear of debt as irrational and inefficient, but there are definite advantages to be debt free, particularly from private loans.

Those Cooley rankings are balls-on. I always knew that GULC was #2, but it's so hard to get everyone from Yale, Columbia and Stanford to admit it.

Student loan - is that some sort of exotic animal?!

Higher education should be reserved for the wealthy and privileged - if you, your parents or your trust fund cant fork up $30k a semester for 3 years you shouldn't be going to law school.

If you ever took out a student loan and defaulted thanks for contributing to the credit crunch a$$hat! If you ever loaned anyone under 25 more than $5,000 on an unsecured basis without income verification your an absolute moron!

/s/
Wealthy & Smart Blueblood

Re which loans to pay off first:

1) set up automatic debits from your bank account so you can take advantage of whatever payment incentives are offered

2) make the minimum payment each month

3) each month, direct any additional amount you want to pay towards the loan with the highest interest rate. it doesn't matter whether the loan is private or government, just attack the high rate ones first.

7:13, thanks for your help.

A general question to everyone:

Does anyone know the specifics of the tax benefits of holding Fed Student Loans? Is there any simple calculation that can be done to factor that in when comparing the federal loans to the private loans?

Thanks again.

8:08: I'm not saying you're wrong, but if private loans are not likely to stay this low and are likely to go even with or above the 6.8%, how does it make sense to pay off federal first?

8:24: the tax benefits are available for any student loans, not just federal. You can deduct the interest you pay on loans up to $2500, and if you're single, your adjusted gross income must be less than $70,000 (and less than $55,000 to receive the full deduction).

Best case scenario: you can deduct $2500, but this means you're probably in a 20-25% tax bracket, so it saves you about $500-600 a year + anything your state gives you.

http://www.irs.gov/taxtopics/tc456.html
http://www.irs.gov/publications/p970/ch04.html#d0e4370

A few things: note that investment income will be *taxed*. So returns would have to be a few % in excess of loan rates in order to justify investment rater than loan reduction.

Second, keep in mind that the private rates may rebound upward quickly. This nation is also facing a debt crisis, and those that hold our debt are going to be more apt to liquidate (and call payment due, causing serious payments problems) if our nation keeps rates low. As our rates drop, other investments look more attractive to those holding our debt.

So the fed is in a very difficult situation. The rate will probably stay the same at the next meeting, but if I were a betting man (and I am), I would look for rates to rise over the next few years. Although I am simply making predictions, I will say that paying down adjustible rate private loans may be a sound policy.

8:24 - Check the income limits. I forget exactly what they are, but most people I know from law school (and myself included) get no benefit from paying interest on student loans because they are well over the income limit at which the deduction is maxed out. I suppose if you are doing public interest/government or working at a small firm it could be relevant.

8:24 -

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1014622

The upshot is: Think long and hard before taking out Private Loans. They don't qualify for loan forgiveness and you can't consolidate them to take advantage of income based repayment.

I'm graduating in 2009. Funded three years at a NYC area private school almost entirely with loans. 1L I took max Stafford loans and the rest private loans (I thought that the 7% interest rate would be better than 8.5% fixed). 2L and 3L took max Stafford loans and the rest Grad PLUS loans.

Turns out, I'm almost certainly going into public service at about $45K/yr. Under Income Based Repayment, your loan payment is 15% of whatever you make above 150% of the Federal Poverty Line (~ $15K/yr for single person). So, when I consolidate my Federal Loans (all $120K of them) at graduation, my loan payment on them will be about $375/month. If I stay in public service for ten years (paying 15% of whatever I make above ~$15K/yr), then my federal loans will be forgiven.

Is it $160K/yr to start in Manhattan? No. Would I make the same choices about where I went to law school? Maybe, maybe not; I'm going to end up paying the same amount for my education as the kids who went to the public school across town, but the Administration at my school at least pretends to care. If I do go into private practice, to pay off my loans in ten years would take about $1,350/month. So, make $160K/yr with $16,200/yr in loan payments at Big Law in Manhattan vs. make $45K/yr with $4,500/yr in loan payments where ever I end up in public service. I’d still rather be making $160K/yr, but I won’t feel like a complete slave to my student loans.

And that Private Loan I naively took out 1L to make up the difference? Under the current law, you can’t consolidate private loans. Turns out that to pay it off in ten years, it's going to cost me about another $350/mo. If I had taken a Grad PLUS loan instead, my total loan payment would be that same $375 (instead of $350 + $375 = $725), and the outstanding balance would still be forgiven after ten years of public service.

Now, I haven't run the numbers on how much I would have saved if I had gotten to that $160K/yr job in Manhattan, and had a loan with a 7% variable rate instead of a 8.5% fixed rate, like the Grad PLUS loan. But I certainly wish I knew then what I know now.

Only one person has mentioned taking out a home equity loan to pay off student loan debt--has anyone done this or have any thoughts on it? It seems like a good idea to take out the home equity loan and throw that money at 8.5% and 6.8% student loans...right??

2:34 a.m., using a home equity loan to pay off high interest student loans "might" be a could idea. Depends on your situation.

Upside: the interest on the equity loan is tax deductible (which represents perhaps the ONLY way for a biglaw attorney to deduct interest payments on student loans, albeit indirectly).

Downside: the interest rate on many equity loans is high (often as high or higher than student loans, at least the 6.8 Staffords); if you haven't already, you may expose yourself to the AMT (by itemizing deductions); depending on how much equity you actually have in your home, you might have to purchase personal mortgage insurance (i.e., if your LTV goes below 80/20); and, of course, when you want to sell your place, the equity loan must either have been paid off or will be paid upon closing (though if you did so in many cities right now, you may well be upside down, i.e., you'll owe money at closing).

Useful thread!

'07 grad here - My suggestion/strategy is save up enough emergency money (3-6months living expenses) and pay off all private loans, unless you have an aggressive investment strategy. Please share if you do :-)

Thanks 7:36, good points! I think I'll spend some cash on a good financial advisor... surely worth the cost in the long run!

You may still consolidate your private loans--there is no law preventing this. The problem is finding a consolidator. I think Sallie Mae's private loan consolidation program lasted less than two years, and they had a good one. There weren't many places that would consolidate private loans, but they did exist. The question is whether they still exist. Also, just a reminder that when you consolidate, you still end up with two loans: one for your subsidized federal loans, and one for your unsubsidized federal loans. Since you just make one payment for both (true for most consolidators), it seems like one loan, but it's not.

11:42 - yes. i consolidated my private loans w/ sallie mae in 2006 i believe.

CDs don't offer much of a return these days

http://www.monitorbankrates.com