Muse600

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Anyone have suggestions or know of any better ways to pay off student loans?

Here's my situation:
-6 month "oh no!" emergency fund already setup
-401k auto deducted from paycheck & maxed out
-RPh School Loans: $77,187 left over (started with ~$115,000, 20 months ago)
-motorcycle & truck paid off (& truck is cheap - old, runs on CNG, $2/gallon to drive, insurance $600/year)
-no medical needs/bills
-selfish no compromise wants: won't move from my apt (or retail job) in SoCal - because of friend nearby, won't live w' parents because they live in *freezing* central MA (no Rph jobs there anyways), and I love my $1,000 motorcycle.

Rent (includes water): $975 in SoCal - 1br/1ba, month-to-month
Cell phone: $34/month - 1200 mins, unlimited text/web
Home internet: $30/month
Electricity: ~$50/month - might go down, because I stopped using a 1,500W space heater & got a 75W electric blanket - yes SoCal @ night is in the 40's...apt gets into the 50's & I'm skinny.
Gas/Trash bill: ~$40/month
-----------------------------------------
$1,129/month - fixed

So my goal is:
My Monthly Takehome Pay (variable...but roughly ~$6,000)
-$1,129 fixed expenses
-$1,300student loan auto payment
-$100 (estimated average monthly car insurance/registration costs)
-$572/month (for food, gas, & hopefully everything else including car maintenance, clothes, interacting with other people etc.)
---------------------------------------------------------------------
Balance = goes towards my loans every 2-weeks when I get paid....so I should be able to do ~$2,800/month

Loans: two at 6.55%, one at 6.05% - start with the higher interest loans

I sold as much excess stuff from my apartment (car tools, motorcycle parts, cosmetic furniture), try to pick up extra shifts whenever possible (but it's rare...I heard we have a lot of floaters now), & 100% of my tax return & any little bonus I receive will go straight to greatlakes.

any further suggestions?

 
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xiphoid2010

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Good job. You are doing good. I see nothing major that could be saved. In fact you can afford to spend on few fun things as long as they are not too expensive.

One thing though, I recommend doing the back door Roth-IRA if you haven't already.
 

BMBiology

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Good job. You are doing good. I see nothing major that could be saved. In fact you can afford to spend on few fun things as long as they are not too expensive.

One thing though, I recommend doing the back door Roth-IRA if you haven't already.
I also recommend this. You can put up to 5500 k this year toward your roth-ira via backdoor. The gain is tax free but you can't withdraw the gain until you are 59 I believe.

Also think about buying your company stocks via employee stock puchasing plan. Typically you would get 10-15% off but the catch is that you would need to hold it for at least 1.5 years from the date you start putting money into it.

Also look for discounts that your company give. Some give discounts toward your phone, gym, etc.

Good job so far. Once you have freed your money from your student loan debt, you can start to have money work for you.
 
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Muse600

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good point - I thought about the Roth...then remembered my 55% takehome from paycheck...then got lazy & didn't research backdoor Roth

but if I max out $5,500/year - won't that mean that over 2 years (my current goal finishes loans in 22 months depending on my tax return)...I'll have paid off $11,000 less towards my student loans?

so I feel like the middle ground is - contribute to 401k because of company match...wait 22 months to knock out student loans, then start backdoor roth aftewards...that $458/month hurts when I'm trying to really knock out those loans

I don't know the exact amount for 2k13...we're not done yet...I also work hourly (with variable hours/week)...and I can't seem to access my company's paycheck info from my home computer...I'm guessing around $110-$120k?
 

BMBiology

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Your priority is your student loans and 6-6.5% interest rate is high in today's standards. So don't worry about the roth IRA....just concentrate on your student loans. You have already maxed your 401 k contribution.

Since your principle is 77 k and your interest rate is > 6%, you are paying almost 5 k in interest this year. I also hate to say this but you should consider asking your parents for a no interest loan if they can afford it.
 

xiphoid2010

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The thing with skipping backdoor Roth in favor of faster repayment is you can't put more in after the loans are paid off to make up for it (annual contribution is capped). So use it or lose it.

Do calculltion to see is what is the difference $11000 compunded over 30 years vs $11000 compounded over 28 years minus capital gains tax upon withdrawal (assume 6-7% annual return). Compared that difference (discounted to present value) vs student loan interest you saved by paying $11000 extra. Let me how much is the difference. I'm curious.
 
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All4MyDaughter

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The thing with skipping backdoor Roth in favor of faster repayment is you can't put more in after the loans are paid off to make up for it (annual contribution is capped). So use it or lose it.

Do calculltion to see is what is the difference $11000 compunded over 30 years vs $11000 compounded over 28 years minus capital gains tax upon withdrawal (assume 6-7% annual return). Compared that difference (discounted to present value) vs student loan interest you saved by paying $11000 extra. Let me how much is the difference. I'm curious.
Most qualified withdrawals from a Roth IRA are tax free.
 
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Muse600

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bmbbio - my parents are wiped...they paid off my sister's loans & her big fat indian wedding...but dang, that $5k/year of interest really hurts. I gotta kill these loans!

xiphoid - I'm honestly not even sure how to do this...do I just use this calculator?

http://investor.gov/tools/calculators/compound-interest-calculator#.UrxK5fRDtzU

if so, $458/month, compounded monthly @ 7% for 30 years = $558,746
and $458/month, comounded monthly @ 7% for 28 years = $475,719

difference = $83,027...but the way I see it, I'm not losing it, just delaying it...so instead of getting the full $558,746 at age 60, I'll have it at 62. It's not that I'm forgoing those last 2 years of payments, I'm just delaying when I contribute by just 2 years...and it's not like I'm waiting until I'm 50 to start...
 

BMBiology

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bmbbio - my parents are wiped...they paid off my sister's loans & her big fat indian wedding...but dang, that $5k/year of interest really hurts. I gotta kill these loans!

xiphoid - I'm honestly not even sure how to do this...do I just use this calculator?

http://investor.gov/tools/calculators/compound-interest-calculator#.UrxK5fRDtzU

if so, $458/month, compounded monthly @ 7% for 30 years = $558,746
and $458/month, comounded monthly @ 7% for 28 years = $475,719

difference = $83,027...but the way I see it, I'm not losing it, just delaying it...so instead of getting the full $558,746 at age 60, I'll have it at 62. It's not that I'm forgoing those last 2 years of payments, I'm just delaying when I contribute by just 2 years...and it's not like I'm waiting until I'm 50 to start...
The worst part is that you are using your after taxed money to pay for the interest. That money could have been invested.

I worked crazy OT hours last year but I am making a lot more this year even though I didn't do much OT because my investment did well. The best part is that I did nothing. I didn't have to work crazy hours.
 
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Muse600

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don't just show us the tip...give us the whole thing

which "investments" are you talking about?

I have a zecco account...spent 30 mins every morning "researching" stocks on forums to pick ones that I thought would go up...setup a diversified portfolio with stocks in different sectors...tried to long as much as I could, and consistently posted a capital gains loss every year. Investing on my own sucked...I was right 5% of the time, and wrong 95% of the time.

tell me which stocks you bought
 

msweph

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What uote="BMBiology, post: 14739194, member: 22817"]Yeah but you can do a "backdoor" Roth IRA. Pretty easy to do. It took me just 30 mins[/quote]
What is a backdoor roth?
 

BMBiology

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I have never invested in individual stock except my company's stock because I get a discount. How are you going to beat people who do this professionally?

I recommend putting your money in index stocks.

You are in a tough spot. Your interest rate is 6% so for you to take money away from your student loan and put it in the stock market, your return rate must be better than 6% every year. That is not easy to do every single year.

I also do not recommend putting money you need into the stock market. I only put my "extra" money because even if it drops, I don't need to sell them because I don't need that money to pay for my mortgage, gas, food, etc.

Keep on clipping away at your student loans. You would be in a much better position 2 years from now and you can start to invest.

You are still way better off than most people. You don't have 200 k in student loans. You don't have to be a CVS slave.
 

confettiflyer

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For once, nothing I can add to this thread. You're doing everything right and the above replies are spot on. Keep up the good work!

PS I also endorse the backdoor Roth option
 
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Quite an extensive accounting of your monthly income and expenditures. As disconcerting or depressing, as it was to peruse through. For me, the most important piece of data was missing, your age. I applaud your desire to pay down your student loans, but at what cost to your quality of life? Really space heaters, electric blankets and $572/month ($19.07/day for food, friends and fun). Your head down, straight forward attack is the problem here. Other than in prison, that methodology is always poorly efficient.

$975/month ($11,700/year) rent on a 1B/1b apartment. That must be a real panty dropper for you. Chicks (do we call girls chicks still?) lined up around the block? Such a sinful WASTE of money. Buy something. Tax benefits, property appreciation, low interest rate loans, rental income, roommates - I couldn't, but you probably could.
Are you skinny because you don't allow for food? (don't get defensive, I already know)
Your a working adult, why would you even consider living with your parents? (that's disturbing, work on why you would even consider that)
Oh son (that's why your age is important here), your using your income as the only direct source for paying for your immediate life and debt. And you'll want to argue why the plan your following is best. It's not. It's like trying to put out a fire, a glass of water at a time. It will work, eventually. And at what costs?

Your in full frontal mode. Nothing I or anyone could say, to warrant your consideration of alternatives. Life goes fast. Your thinking once you overcome the hurdle of students loans, life will start. You'll just replace it with another hurdle and delay life further. You asked and I answered in a direct and caring way. Nothing was meant to be mean.
Is that you riding the motorcycle? If so, that looks like a person enjoying life. Your dreary financial statement doesn't match, and it should.
You asked for stock tips. Buy Google (I got in at $119/share) or MasterCard (I got in at $86/share). These 2 companies will make money until the cows come home.
 

xiphoid2010

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Most qualified withdrawals from a Roth IRA are tax free.
That's why I'm trying to have him calculate the difference between Roth IRA (tax free) vs non-tax advantaged account (pay capital gains), this will show the superiority of not skipping Roth IRA vs trying to make up for it with non-tax advantaged investment vehicle later.
 
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Muse600

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bmb x right on..i really don't have extra money to invest...I'll start in 2 years...loans now

opinion [email protected] 29, property requires big down payment b closing costs, and yesn that bike is my daily driver
 

xiphoid2010

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bmbbio - my parents are wiped...they paid off my sister's loans & her big fat indian wedding...but dang, that $5k/year of interest really hurts. I gotta kill these loans!

xiphoid - I'm honestly not even sure how to do this...do I just use this calculator?

http://investor.gov/tools/calculators/compound-interest-calculator#.UrxK5fRDtzU

if so, $458/month, compounded monthly @ 7% for 30 years = $558,746
and $458/month, comounded monthly @ 7% for 28 years = $475,719

difference = $83,027...but the way I see it, I'm not losing it, just delaying it...so instead of getting the full $558,746 at age 60, I'll have it at 62. It's not that I'm forgoing those last 2 years of payments, I'm just delaying when I contribute by just 2 years...and it's not like I'm waiting until I'm 50 to start...
The analysis involves comparing the 2 possible approaches:
(1) skip roth IRA, pay more towards student loan, compensate with non-tax advantaged investment when loan is paid off
(2) put in Roth now, pay less towards student loans

To simplify calculation.

You pay $4200 a month towards $77K student loans at 6.5%: pay off =21 months. Total interest paid $4426.
You pay $3740 a month towards loans (putting $458/mo towards Roth): pay off = 24 months. Total interest paid $5002.
Interest saving: $576

If you put $5500 x2 into Roth, compounded 7% annually over 29.5 years, discount 3% annual inflation: it turns into $35K
If you put $11000 into non-Roth, compounded/discounted over 28 years (after you paid off the loans), then pay 15% capital gains: it turns into $28K
advantage of roth: $7K

So the net cost of paying more towards student loan now, passing up 2 years of roth IRA contribution, then try to make up for those 2 years using non-roth investment is ~$6425 loss in current dollars when you are 59-60.
 
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confettiflyer

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$975/month ($11,700/year) rent on a 1B/1b apartment. That must be a real panty dropper for you. Chicks (do we call girls chicks still?) lined up around the block? Such a sinful WASTE of money. Buy something. .
I'd advise against a property acquisition, his housing costs would quadruple overnight (assuming a median home price in a non ghetto neighborhood) with some minimal tax and appreciation benefit. I'd wait until there's an obvious need (wife, kids, school district).

Need to get away from this "rent is waste" mentality especially in lopsided markets like southern calif.
 
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Muse600

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wow...I don't think I even followed that...but $6,425 is a lot of money...what are the non-roth investments? I think I'm going to do the backdoor roth method regardless starting this January.

and to answer more of opinionfree's questions...

-$19.07/day is plenty...the most I'll spend on gas (if I ride my motorcycle) is ~$7/day...so I have to live on $12/day for food. For comparison, when my family came to America, my mom was given $40/week for food to feed a family and she did it. I've also lived the opposite where I made $5,080 one month and spent $8,800...wtf?? When I did the math I found that every little thing adds up...the only way for me to keep those hidden expenses from eating up my savings is to know where each penny goes, set a budget, know how much everything costs, and fight the temptation to break the budget for things you "want" vs. things you "need".

-I'm skinny by genetics...over 6' tall, and 138lbs since I was 14...at one point in time I spent about 2-1/2 months "trying" to body build as much as I could...eating 6 meals a day, on a strict training program, dropped $300/month on a personal trainer and $120/month on supplements...I made it to about 144

It was f'n expensive...$420/month = $5,040/year towards my student loans...plus I spending over $400/month with my increased appetite. I'm not saying don't be healthy...I can go for a jog 3-4 times/week for 25 mins and be "healthy". You don't need to body build...and personally, my build will pretty much only be 138-145lbs anyways.

-I'm a 2nd generation Indian (my parents grew up in India, I grew up here) - with their mentality, you stay at home until you're married. It's perfectly acceptable to do it in Indian society, and frankly if you're trying to knock out loans...it's pretty smart too.

-This is not an absolute plan - if I want to spend $500 at a strip club tomorrow, it just means I do it, and spend $500 less on my loans that month.

I'm also sick of people saying "you should go out and see the world! YOLO!"

well I have...

I lived in a city for 4 years (Boston), I've been to a lot of the major US cities to explore/party (NYC, LA, Nashville, Washington DC, New Orleans, Tempe, Chicago, Vegas etc.), I've been to India, Jamaica, Thailand, Cambodia, Singapore, Malaysia, Koh Samui, Italy, Holland, Spain, Ibiza, France. I've done a motorcycle race and I've been engaged...I'd say I've done more than most people...and in retrospect, it was fun, but I didn't *need* to do it. If I skipped out on all of it, I wouldn't feel a yearning to put money second and "life" first.

 
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BMBiology

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You are absolutely right. You can make some changes and still have a "life". Keep your debt low and invest your money.

You know who doesn't have a life? Those who are heavily in debt and need to work 2-3 jobs just to pay off their debt + interest.
 

streetpreacher

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Looks fantastic, you will look back some day and be glad you spent money wisely. You have obviously done quite a bit in your life too, so don't listen to people who tell you to live it up carelessly... They will be paying for it for the rest of their lives.
 
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Sparda29

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wow...I don't think I even followed that...but $6,425 is a lot of money...what are the non-roth investments? I think I'm going to do the backdoor roth method regardless starting this January.

-I'm a 2nd generation Indian (my parents grew up in India, I grew up here) - with their mentality, you stay at home until you're married. It's perfectly acceptable to do it in Indian society, and frankly if you're trying to knock out loans...it's pretty smart too.

-This is not an absolute plan - if I want to spend $500 at a strip club tomorrow, it just means I do it, and spend $500 less on my loans that month.

/quote]
Know how that feels. I've been trying to move out forever.
 

B Wong

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I'm in the exact same situation as you. When I was in my mid 20's I went from 180k in debt down to about 80k in 2-3 years. I poured everything I had to spare into the loans. I saved up for a BMW M3 twice and was about it buy it the second time but I said "F this stupid sexy chick magnet" each time and killed one more section of my loans instead (Thank God I made that choice, a BMW in my situation at that time would have been a huge regret). I lived semi frugally, but nothing too extreme. I went out and met people, drank way too much, and traveled a lot. I have no regrets from living my life that way. I maxed out my 401k and got into the company pension plan.

My conclusion on the backdoor Roth was to forgo it and put my money toward the loans instead. Although in the long run you will end up with a bit more money, I feel like taking the guaranteed 6.xx% is much less stressful mentally than hoping to beat that every year on the market (The past few years have been outstanding, so I may have made the wrong choice here). They say compounding income is the most powerful force in the universe, and the exact opposite is true when talking about negatively compounding income.

At 29 realize that you are going to have to save for the big 3 soon (ring, wedding, house and eventually kids if those are in your plans). While these things can be done on the cheap (I know, I'm trying to squeeze every penny out of them but houses in CA are stupid expensive) they do cost money and you will have to save for them. Less money being thrown toward student loan interest=more money for me to put toward those things.

Most importantly to me though is that while saving for retirement is very important, not being a locked into financial slavery is MUCH more important to me. I LOATHE debt. I hate, hate, hate it! I hate the fact that if I wanted to wake up and become a gardener/teacher/professional gamer(haha) for a living I couldn't. I'm handcuffed to this job, and while I enjoy my work I can't guarantee that I will still enjoy it in 10, 15, or 20 years down the road.

Good luck!
 
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Muse600

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haha, cool...I'm not alone

that's a great testimony...any other advice on the live cheap front?

I'm also thinking about forgoing the roth for now...I'm not 100% sure about how well it'll beat the market...plus I also share a hatred of debt..."The rich rules over the poor, and the borrower is the slave of the lender."

it really was smart that you didn't buy the M3...it's not just the initial purchase price & depreciation, but maintenance is more expensive than it needs to be to get from A->B

this was my big mistake money pit...sold it after 21 months, $6,000 in depreciation, $2,600 in maintenance, $1,400 in taxes/registration...I would've been $10,000 less in debt right now!



the big 3 is just in God's hands now...I already bought a custom made ring in cash:



Just praying on God to carry out his will on the rest

You know who doesn't have a life? Those who are heavily in debt and need to work 2-3 jobs just to pay off their debt + interest.
it's sad, but I've seen this...I know a guy who tried to start a couple businesses (and some in real estate), took out a huge loan, then watched the business slowly fail over a few months. Now he has a huge loan to pay off, which he does working as the desk staff at a couple hotels and selling a product (sort of like Amway) through word of mouth/friends. He has way more debt than me...and makes less...and has a family...and somehow ended up with CHF. I pray for him...and I'm blessed!
 
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confettiflyer

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On the flip side you have me, >200k of debt and happily paying my artificially deflated $190/mo IBR payment.

Hats off to you, though. I'm taking a completely different tack on the financial front.

But I do agree with BMB, pity the people who work and pour all their money into debt. That's true modern slavery.
 

Jibby321

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What's the quickest somebody with 115,000 +intrest after pharmacy school has paid off his/her loan? Anyone care to chime in?
 
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BMBiology

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On the flip side you have me, >200k of debt and happily paying my artificially deflated $190/mo IBR payment.

Hats off to you, though. I'm taking a completely different tack on the financial front.

But I do agree with BMB, pity the people who work and pour all their money into debt. That's true modern slavery.
It would be a gift from God if your monthly payment stays at $190 for the next 25 years.
 
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confettiflyer

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It would be a gift from God if your monthly payment stays at $190 for the next 25 years.
Haha...but that would mean I would be virtually unemployed. My $190/mo payment is derived from my 2012 return (1/2 intern, 1/2 resident)....as 2013 wraps up I'm guesstimating my payment rises to ~$1100 on January 1, 2015 based on my income (2013 = 1/2 resident + 1/2 full salary).

By the time I rise to full payment
 

confettiflyer

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oops, dropped my phone and it hit post.


By the time I rise to full payment (~$1820/mo based on this IBR calculator) it'll be on January 1, 2016. I'll be entering year 4 of 10 of the PSLF program (year 1 = January 2013).

6 years x 12 months x $1820 = $131,040 + $10k previously paid in 4 lean years = $141k.
 

confettiflyer

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In theory - I can work one day a week as a pharmacist (call it 10hrs, just to keep my skills up), then spend 22hrs a week working minimum wage ($7/hr) for a non-profit for 10yrs and come up with the following:

Income = $8k min wage year + $39k as rph ($75/hr made up number) = $47k/yr
IBR payment = $370/mo x 10yrs = 44k
Total forgiven = 230k-44k = $186k

That's like making $18k/yr.


Orrrr let's say you offer to work at some community clinic for minimum wage 32hrs a week

Income = $11,600/yr
IBR payment = $0
Full $230k forgiven
Equivalent $23k/yr

And the best part, you can call yourself a 10 year experienced ambulatory care pharmacist and you probably got free obamacare or something.


I think more unemployed pharmacists should go this route instead of just languishing for months and months.
 
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xiphoid2010

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LOL, that's some desperation play there. But good mental entertainment nonetheless. :)

P.S
(1) fulltime qualification is 30 hours/wk, not 32.
(2) you don't have to work minimum wage, just make 1x federal poverty limit, for IBR payment to = $0, so that's ~$15K/yr

As long as we are doing thought experiments, I can think of a theoretical way to further game the system while making almost unlimited income. It's totally unethical, not usually practical, but legal.

Here's my thoughts: IBR usually uses previous year's tax filing for payment calculation. BUT to allow for situation such as people suddenly lose their job, maternity, whatever the reason, the government provides another way available for updating the latest income. It involves using the "Alternative Documentation of Income form".

So theoretically, you can alternate between $15K/yr, and go all out fulltime+overtime+2nd/3rd job the next. Use the minimum income year's tax return to make max income year's IBR payment to equal 0. Then use Alternative Documentation of Income form on minimum income years to set those payment to $0 as well. Do that for 10 years, you can theoretically have paid nothing on an unlimited student loan amount, and still have a high average income.
 

BMBiology

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Here's a better idea! Just start a non-profit and hire yourself! LOL
 
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Muse600

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hahaha, go on...

imho - the whole IBR thing only seems to work if you really have a lot of loans (maybe $200k-300k +)...and ample opportunity to use a lower-income record (ie. 1st year after graduation) to take advantage of those low payments to minimize the amount of debt you actually pay off...but here's a question - won't it be difficult to get a mortgage on a house if you're "lower income" is what you use to keep your ibr low?

also for someone like me that started with $115k from pharmacy school, I wouldn't qualify for IBR and wouldn't save much of anything even if I did use my intern year to start off with lower payments...the 25 year plan through greatlakes was ~$873/month, and 10 year plan ~$1,200/month...plus having that debt hang over my head until I was 52? no way...debt free by month twenty

can we do anything about taxes?

I heard that having your real estate license allows you to deduct stuff...or having a rental property...or starting an LLC

edit: this guy has me totally beat - he hid/lived in a van throughout his duke gradschool education to graduate debt-free

http://finance.yahoo.com/news/duke-grad-student-secretly-lived-in-a-van-to-escape-loan-debt-194021112.html

but what's ******ed is that his tuition was only $2,500/semester - even on a $30k/year job he could've paid that in cash every year
 
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confettiflyer

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LOL, that's some desperation play there. But good mental entertainment nonetheless. :)

P.S
(1) fulltime qualification is 30 hours/wk, not 32.
(2) you don't have to work minimum wage, just make 1x federal poverty limit, for IBR payment to = $0, so that's ~$15K/yr

As long as we are doing thought experiments, I can think of a theoretical way to further game the system while making almost unlimited income. It's totally unethical, not usually practical, but legal.

Here's my thoughts: IBR usually uses previous year's tax filing for payment calculation. BUT to allow for situation such as people suddenly lose their job, maternity, whatever the reason, the government provides another way available for updating the latest income. It involves using the "Alternative Documentation of Income form".

So theoretically, you can alternate between $15K/yr, and go all out fulltime+overtime+2nd/3rd job the next. Use the minimum income year's tax return to make max income year's IBR payment to equal 0. Then use Alternative Documentation of Income form on minimum income years to set those payment to $0 as well. Do that for 10 years, you can theoretically have paid nothing on an unlimited student loan amount, and still have a high average income.
Excellent. I pass my crown as the king of "how to game the system" to you, sir.

Can someone try this please?
 

Beacon

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oops, dropped my phone and it hit post.


By the time I rise to full payment (~$1820/mo based on this IBR calculator) it'll be on January 1, 2016. I'll be entering year 4 of 10 of the PSLF program (year 1 = January 2013).

6 years x 12 months x $1820 = $131,040 + $10k previously paid in 4 lean years = $141k.
Why would you rise to full payment if you are over 200k in debt? Wouldn't you continue paying 15% of your income for the ten years? Unless you are making 200k per year that seems a bit high for IBR payments.
 

Beacon

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LOL, that's some desperation play there. But good mental entertainment nonetheless. :)

P.S
(1) fulltime qualification is 30 hours/wk, not 32.
(2) you don't have to work minimum wage, just make 1x federal poverty limit, for IBR payment to = $0, so that's ~$15K/yr

As long as we are doing thought experiments, I can think of a theoretical way to further game the system while making almost unlimited income. It's totally unethical, not usually practical, but legal.

Here's my thoughts: IBR usually uses previous year's tax filing for payment calculation. BUT to allow for situation such as people suddenly lose their job, maternity, whatever the reason, the government provides another way available for updating the latest income. It involves using the "Alternative Documentation of Income form".

So theoretically, you can alternate between $15K/yr, and go all out fulltime+overtime+2nd/3rd job the next. Use the minimum income year's tax return to make max income year's IBR payment to equal 0. Then use Alternative Documentation of Income form on minimum income years to set those payment to $0 as well. Do that for 10 years, you can theoretically have paid nothing on an unlimited student loan amount, and still have a high average income.
Im not sure I'm following... You're saying to switch jobs yearly from a low pay one to very high paying and use the documentation from the low pay job to file your proof of income then after working for high pay? It would work but I think it might be tough to find a new job every year. Great in theory though if you could pull it off.
 
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BMBiology

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Why would you rise to full payment if you are over 200k in debt? Wouldn't you continue paying 15% of your income for the ten years? Unless you are making 200k per year that seems a bit high for IBR payments.
Because the 15% is based on adjusted gross income (for most people it is pretaxed salary substrate 401 k) minus poverty line. For most people it is 17-20% of their take home salary (after taxed).

If your salary goes up so does your IBR payment. If you married to someone who makes a good salary and doesn't have student loans then your IBR payment would also go up.
 

Beacon

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Because the 15% is based on adjusted gross income (for most people it is pretaxed salary substrate 401 k) minus poverty line. For most people it is 17-20% of their take home salary (after taxed).

If your salary goes up so does your IBR payment. If you married to someone who makes a good salary and doesn't have student loans then your IBR payment would also go up.
I know, 15% of 150k over 12 months would be equal to a $1,875 per month payment. The payment just seems really high for IBR I wasn't aware that RPhs were pulling over $150k salaries. But the poster is from sanfran so I suppose its possible. They dont pay remotely close to that where I am from.

And if you were going to take a hit by being married then itd be wise to not file jointly which Im sure those with heavy loan debt on IBR would do, though I haven't looked into it much so I can't say for sure.
 

All4MyDaughter

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I know, 15% of 150k over 12 months would be equal to a $1,875 per month payment. The payment just seems really high for IBR I wasn't aware that RPhs were pulling over $150k salaries. But the poster is from sanfran so I suppose its possible. They dont pay remotely close to that where I am from.

And if you were going to take a hit by being married then itd be wise to not file jointly which Im sure those with heavy loan debt on IBR would do, though I haven't looked into it much so I can't say for sure.
Remember it's 15% of AGI. And it's capped at whatever your payment would be under standard repayment.
 

BMBiology

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I know, 15% of 150k over 12 months would be equal to a $1,875 per month payment. The payment just seems really high for IBR I wasn't aware that RPhs were pulling over $150k salaries. But the poster is from sanfran so I suppose its possible. They dont pay remotely close to that where I am from.

And if you were going to take a hit by being married then itd be wise to not file jointly which Im sure those with heavy loan debt on IBR would do, though I haven't looked into it much so I can't say for sure.
Yeah but if you do not file your taxes together then you would loss some tax break (same amount btw)
 

BMBiology

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He probably works at kaiser. They pay the best but you need connection. It is who you know that matters
 

Beacon

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Remember it's 15% of AGI. And it's capped at whatever your payment would be under standard repayment.
Right so in the case of a 15% AGI, the borrower would have a salary closer to $160,000 assuming they dont have any pretax deductions to warrant monthly payments of $1800. Basically was questioning how the hell a new pharmacist had that much income. If so max out the 403b pretax and lower your payment even more.
 

xiphoid2010

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Im not sure I'm following... You're saying to switch jobs yearly from a low pay one to very high paying and use the documentation from the low pay job to file your proof of income then after working for high pay? It would work but I think it might be tough to find a new job every year. Great in theory though if you could pull it off.
This was just mental exercise for the fun of it. For it to work you would have to do some fancy footwork. Maybe one can switch postion within the company yearly (be a valet one year and pharmacist another), or have the company defer/advance pay to create the min/max years.
 

All4MyDaughter

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Right so in the case of a 15% AGI, the borrower would have a salary closer to $160,000 assuming they dont have any pretax deductions to warrant monthly payments of $1800. Basically was questioning how the hell a new pharmacist had that much income. If so max out the 403b pretax and lower your payment even more.
Spousal income could increase it as well.
 

Beacon

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Yeah but if you do not file your taxes together then you would loss some tax break (same amount btw)
For sure, but say only one spouse has heavy loan debt, then it would likely still be beneficial in most cases to file taxes separately so you dont have to add the spouse's income to your own AGI resulting in much higher monthly payments with IBR.

You'd have to weigh whether filing jointly and adding the spouses income into the repayment calculation and another few hundred a month to your IBR repayment would be worth the other tax benefits to filing jointly. In my situation filing separately makes the most sense as the money saved via using only my sole AGI to calculate payments is more then the tax breaks given by filing jointly would be.
 

Mur7ay

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Anyone have suggestions or know of any better ways to pay off student loans?

Here's my situation:
-6 month "oh no!" emergency fund already setup
-401k auto deducted from paycheck & maxed out
-RPh School Loans: $77,187 left over (started with ~$115,000, 20 months ago)
-motorcycle & truck paid off (& truck is cheap - old, runs on CNG, $2/gallon to drive, insurance $600/year)
-no medical needs/bills
-selfish no compromise wants: won't move from my apt (or retail job) in SoCal - because of friend nearby, won't live w' parents because they live in *freezing* central MA (no Rph jobs there anyways), and I love my $1,000 motorcycle.

Rent (includes water): $975 in SoCal - 1br/1ba, month-to-month
Cell phone: $34/month - 1200 mins, unlimited text/web
Home internet: $30/month
Electricity: ~$50/month - might go down, because I stopped using a 1,500W space heater & got a 75W electric blanket - yes SoCal @ night is in the 40's...apt gets into the 50's & I'm skinny.
Gas/Trash bill: ~$40/month
-----------------------------------------
$1,129/month - fixed

So my goal is:
My Monthly Takehome Pay (variable...but roughly ~$6,000)
-$1,129 fixed expenses
-$1,300student loan auto payment
-$100 (estimated average monthly car insurance/registration costs)
-$572/month (for food, gas, & hopefully everything else including car maintenance, clothes, interacting with other people etc.)
---------------------------------------------------------------------
Balance = goes towards my loans every 2-weeks when I get paid....so I should be able to do ~$2,800/month

Loans: two at 6.55%, one at 6.05% - start with the higher interest loans

I sold as much excess stuff from my apartment (car tools, motorcycle parts, cosmetic furniture), try to pick up extra shifts whenever possible (but it's rare...I heard we have a lot of floaters now), & 100% of my tax return & any little bonus I receive will go straight to greatlakes.

any further suggestions?

you're only making $6,000 a month in SoCal.. something isn't right there