Erasing 100K in 2 years

[henohenoman]

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I just want to get some general opinions on whether it is possible to erase a ~100K student loan (75K tuition + 25K COL) in 2 years in my situation. Here are some determining factors:

- Planning to make no less than 75K (bring home ~60K after tax)
- Jobs that offer 5k-20k repayment benefit would be even sweeter
- No other financial obligations
- Willing to relocate pretty much anywhere
- Live on 15K per year (used to the frugal college life) or <5K if move back w/ my folks
- Never had any major health prob
- Hope my 99 Maxima still runs

So that leaves ~45K/yr toward repayment. I'm not from the US so I'm not used to the lifestyle constantly burdened by debt. Are there any other factors that I'm not aware of? Any encouragement or lectures would be appreciated. Thanks in advance!

 

[Eforma]

This is....an optimistic view.

Here are my initial impressions of your plan:

First -- it's safer to assume that you are making 2/3 of your salary in gross income....so let's say that $75K translates to more like $50-55K in the pocket after taxes. (Depending on your situation, what tax breaks you can get, etc. this number may vary, but let's err on the small side).

Second -- jobs offering repayment benefits seem few and far between in the PT world - don't get me wrong, you can find them, but it also seems like you are looking at more than just a 2-year commitment to them.

Third -- what do you mean by no other financial obligations? Sure, you may not have any other debt (no car loans/undergrad loans/credit card debt) but you still have a car, and with that comes insurance. So let's call that...oh $800/year seems a very middle road estimate. If you are planning on living on $5K/year, there goes almost 1/5 of your annual living budget.

Fourth -- That's great that you are willing to relocate anywhere, however in doing so, you may be putting yourself in a situation where A) you cannot live with your parents or B) cost of living is going to run you more than $15K/year.

Fifth -- Depending on what type of loans you get, you will be accruing interest on those totals. Which means that you may only borrow $100K, but you may be looking at $120K when you go to pay it off (I pulled that number out of the air.)

And finally, you have to ask yourself, are you really willing to live so frugally? I understand that going into debt is not a promising situation, nor a desirable one. However, it is somewhat a "way of life" of most graduate students - you learn to accept it. There may be benefits to NOT paying off your grad loans so quickly -- if it has a lower interest rate, than using your earned money to invest in something with a higher return may be of more benefit than paying off the loan.

There are many things that need to be considered when paying off loans. I'm not trying t discourage you or convince you to not attempt to pay off loans as fast as possible -- I'm just attempting to shed some light on potential holes in your plan.

I hope I've given you something to think about! I know it has me thinking more on how I'm going to pay things off.

 

[henohenoman]

Thanks Efroma! These are definitely things that I need to consider n I have been from looking at other threads.

For tax deduction I used this calculator(http://www.moneychimp.com/features/tax_brackets.htm) which give me ~15K in tax.

Loan forgiveness is nice but not relying on it too much.

The car is actually a family car that I'm borrowing from my dad so I guess I lucked out on that one. Also I don't really need a car as long as I can find a convenient & cheap location.

With the freedom to relocate I definitely wouldn't go anywhere that increases my COL (unless the increase in income compensate for that). I'm thinking more of a underserved or rural area.

Yea I'm not too clear on what loans are available to me yet but I'm just hoping that I can pay it off before significant interest accumulate. (interest would be ~7k for 100K on 6.8% interest payed over 2 years, adding a few thousand for loans that accumulate while in school)

& finally this is just me but I honestly don't care about living a frugal life. I was happy in college & for all my life I've lived in a family of 3 on <50k income (prob <30k while my father was doing his PhD).

yea i've heard the pros associated w/ investing one's money on other things while pay off loans slowly. I just don't know how low the interest rate can be or what I can invest the money on that would provide a return > the interest that I'll be paying. I guess i need more pointers on that.

I hope to hear more opinions on how to handle student loans.

 

[Eforma]

I have to say, props to you! While I can live frugally, I'm not sure I could rock $15K a year and enjoy it. That said, though, I'm still going to try and pay off my loans as fast as possible, maybe not in 2 years, but hopefully in the 4-5 year range - so I'll live somewhat frugally ;-)

 

[henohenoman]

haha tks Efroma. I think I have really diff sense of value than most people here (I was born in China actually & we didn't even own a fridge or phone until I was in elementary school lol) I hope u'll find the best way to manage your loans too.

I'm now actually reading about mutual fund, which looks worth investing into but we'll see 🙂 GN!

 

[hefe]

Save and max out your roth each of those years and take your drastic plan to 3 years and you might have something.

 

[One More Rep]

For tax deduction I used this calculator(http://www.moneychimp.com/features/tax_brackets.htm) which give me ~15K in tax.

That is just for federal tax. You are forgetting state tax, social security and Medicare deductions. Your take home, assuming you are single with no dependents and no deductions, will be more like ~$48,000/yr, depending on what state you live in. Some states do not have income tax, so your take home would be more like ~$50,000 in those states. Also, you need to factor in deductions for things like health insurance, dental and life insurance. I am assuming you will need these things?

I think you can pay it off quickly, but not in 2 years. Don't forget sudent loan interest accrual as well. You should start a mutual fund Roth IRA as soon as possible and max out your contributions every year. You can see 8-10% returns and don't forget the beauty of compounding interest! Much better long-term investment than paying off student loans (~6.8%) quickly.

 

[henohenoman]

Thanks for the numerous suggestions. My initial post was definitely on the optimistic side. I found a more comprehensive calculator (http://www.dinkytown.net/java/Payroll.html) and after all the deductions while contributing 5% to retirement plan the take home income (of 75k) turned out to be 5~5.5k depending on whether there is a state tax or not. I can see that 2 yrs is stretching it unless 1) find a good paying job near my parent's home, 2) employer offer loan forgiveness, 3) work >50 hrs/wk. Otherwise I'll stretch it out a little & aim for 3 or 4.

Alright now I'm tired of crunching numbers...needs to go back & focus on work! Thanks for all the reply 🙂

 

[blepo26]

I know this thread is kinda old, but your goal is possible if you are single with

no kids.

I have a friend who paid off almost 100 thou within 2 years of graduation.

The key is living frugally.She has traveling job that pays her a close to a 6

figure salary plus 1800(tax free of which she spent at most 500) per month for living expenses.What she did

was get her a reliable used car(fully paid for), rented a room in house with

basic amenites(no cable, only internet), and saved and saved like crazy. She

made max payments towards her loans and also lumpsum payments from the

money she saved. Now she's completely debt free and about to switch to an

outpatient job and buy a house. Her only complaint about her travel job was

that she didn't get much hands on time with patients as this was done by

ptas. She mainly did evals.

 

[rangardrum]

It's an aggressive goal, but maybe think of it this way... Even if you don't end up paying it all off in two years, striving to do that should at least leave you very close! Just being very mindful of expenses and planning like you're doing now should help you combat your debt.