Twentytwelve2

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I graduated 2 years ago. My original plan was to stay on IDR and wait for the tax bomb but I misread the way it worked. It was actually -25- years of repayments for graduate loans, and 20 years is for undergraduate. An extra 5 years is too much and the amount of interest would be ridiculous even when it is not being capitalized on IDR. I decided to make drastic changes going forward and want to aggressively pay the 300k loan off. I make about 8-8,8500 after tax monthly + I am already matching 5% to my 401k. I have 5,000 emergency fund. I know by doing this, I will not have funds to do anything for the next 4-5 years and my life will be of just work and food.

Has anyone been in this same situation believe this is the smartest thing to do? There is one thing I am so scared of experiencing, and that is DEPRESSION. I never had money in my life and doing this would put me back at that. My sadness stemming from seeing my bank account stagger at the same amount month after month even though I am working hard, with OT each month.

I worry this will affect my work, seeing as how my work is not translating into anything except debt payments.

I worry... but I feel if I dont do this, my loans will never go away during the time when I may not be in a stable career.
 
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KimChiSlap

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Yes, what makes ours loans even worse is that we have to use after tax dollars to pay off a loan that we cannot tax deduct because we make too much.
I totally agree with you on that point. :(

Continue to live like a student and you'll pay it back. It'll just take many years. Thats all.
 

quickpic007

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I graduated 2 years ago. My original plan was to stay on IDR and wait for the tax bomb but I misread the way it worked. It was actually -25- years of repayments for graduate loans, and 20 years is for undergraduate. An extra 5 years is too much and the amount of interest would be ridiculous even when it is not being capitalized on IDR. I decided to make drastic changes going forward and want to aggressively pay the 300k loan off. I make about 8-8,8500 after tax monthly + I am already matching 5% to my 401k. I have 5,000 emergency fund. I know by doing this, I will not have funds to do anything for the next 4-5 years and my life will be of just work and food.

Has anyone been in this same situation believe this is the smartest thing to do? There is one thing I am so scared of experiencing, and that is DEPRESSION. I never had money in my life and doing this would put me back at that. My sadness stemming from seeing my bank account stagger at the same amount month after month even though I am working hard, with OT each month.

I worry this will affect my work, seeing as how my work is not translating into anything except debt payments.

I worry... but I feel if I dont do this, my loans will never go away during the time when I may not be in a stable career.
I would just counsel you that your situation beats living in most third world countries. You still have all the amenities USA has to offer, but just have to work really hard for them
How in the world did you rack 300K debt??
 

Dred Pirate

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I would just counsel you that your situation beats living in most third world countries. You still have all the amenities USA has to offer, but just have to work really hard for them
How in the world did you rack 300K debt??
I have seen this from multiple new grads - especially when someone does a duel degree program and simply doesn't comprehend how dang much money they are borrowing. And then they relay on the PSFL - not understanding that it could change any day. 6 years private school at 40k a year - 240k - then add on 20 a year for living expenses (either high cost area/not living like a college student - and boom 360k before interest.
 

Wickett

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I graduated 2 years ago. My original plan was to stay on IDR and wait for the tax bomb but I misread the way it worked. It was actually -25- years of repayments for graduate loans, and 20 years is for undergraduate. An extra 5 years is too much and the amount of interest would be ridiculous even when it is not being capitalized on IDR. I decided to make drastic changes going forward and want to aggressively pay the 300k loan off. I make about 8-8,8500 after tax monthly + I am already matching 5% to my 401k. I have 5,000 emergency fund. I know by doing this, I will not have funds to do anything for the next 4-5 years and my life will be of just work and food.

Has anyone been in this same situation believe this is the smartest thing to do? There is one thing I am so scared of experiencing, and that is DEPRESSION. I never had money in my life and doing this would put me back at that. My sadness stemming from seeing my bank account stagger at the same amount month after month even though I am working hard, with OT each month.

I worry this will affect my work, seeing as how my work is not translating into anything except debt payments.

I worry... but I feel if I dont do this, my loans will never go away during the time when I may not be in a stable career.
I make similar and I'm paying off about 150k in loans in 30-36 months. Be strong and if you commit to 5k a month or so like I'm doing, you can do it within 6 years. It sucks, but if you're young it's doable. Just keep plugging.
 

iggles

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I'm assuming you're currently in REPAYE where you would get your grad loans forgiven after 25 years but on the PAYE program they're forgiven after 20. Stay in REPAYE and take advantage of the extremely generous interest subsidies it has the offer. Max out your 401k which lowers your adjusted gross income which in turn lowers your monthly student loan payments. This also means the feds are paying more towards your student loan interest since 50% of the interest accrual is covered by them. Also realize that there is no interest capitalization while you remain in REPAYE. This is a great advantage for you since any money you put into your investment accounts is gaining compounding interest whereas your student loans will not. Take all the money you would be putting towards your student loans and stick it in a low cost vanguard ETF like VTSAX. After your account grows to 300-400k you can decide if you want to liquidate it and pay off your loan (remember to save for taxes as this will trigger capital gains) or you can just keep your money there and realize you're already 5-7 years into your 20 year loan forgiveness period (you can switch from REPAYE to PAYE after 19.9 years and get your loans forgiven at the 20 year mark). Switching payment plans will trigger your loan amount to capitalize all the interest for the past 20 years but this won't really matter if you're aiming forgiveness. When you get your loan forgiven you will get hit with a tax bomb that year but you can look into hiring a CPA and finding creative ways to file for insolvency to at least minimize the tax burden.

This way you're not living like a broke college kid for the next 7 years and even though you're up to your eyeballs in loans at last you'll get the psychological benefit of watching your retirement accounts grow.

Whatever you do just don't refinance loans that large through a private lender. You're assuming a lot more risk for minimal interest rate reduction.
 

ExpressMaiL

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I graduated 2 years ago. My original plan was to stay on IDR and wait for the tax bomb but I misread the way it worked. It was actually -25- years of repayments for graduate loans, and 20 years is for undergraduate. An extra 5 years is too much and the amount of interest would be ridiculous even when it is not being capitalized on IDR. I decided to make drastic changes going forward and want to aggressively pay the 300k loan off. I make about 8-8,8500 after tax monthly + I am already matching 5% to my 401k. I have 5,000 emergency fund. I know by doing this, I will not have funds to do anything for the next 4-5 years and my life will be of just work and food.

Has anyone been in this same situation believe this is the smartest thing to do? There is one thing I am so scared of experiencing, and that is DEPRESSION. I never had money in my life and doing this would put me back at that. My sadness stemming from seeing my bank account stagger at the same amount month after month even though I am working hard, with OT each month.

I worry this will affect my work, seeing as how my work is not translating into anything except debt payments.

I worry... but I feel if I dont do this, my loans will never go away during the time when I may not be in a stable career.
I never thought of it this way but the real investment for pharmacy school is no longer 4 years undergrad + 3/4 year pharmacy program. It's actually this:
4 years undergrad + 3/4 year pharmacy program+ [5-10 years of slave labor and throwing away your remaining youth].

For those who have finished paying off high loan amounts (250k+), was it worth it? How old are/were you after achieving $0 loan balance?
 

aqb

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Whatever you do just don't refinance loans that large through a private lender. You're assuming a lot more risk for minimal interest rate reduction.
I wonder if it would be a good approach to refinance a % of loans (refinance the highest interest rates; 20-30k at a time) while keeping the rest through REPAYE for the time being.
 

iggles

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I wonder if it would be a good approach to refinance a % of loans (refinance the highest interest rates; 20-30k at a time) while keeping the rest through REPAYE for the time being.
That's way more of a hassle than its worth if even possible to do. When you go into a federal payment plan the best way to do it is consolidate all your loans into one large federal loan. That way re-certification for your income driven repayment plans can be done at one time for each 12 month period, all your loans will be forgiven at the same time to simplify your taxes, and you don't have constant credit inquiries on your history when trying to shop around for lenders.

And then you have to try to figure out how much you would even save from trying to refinance through private lenders. You have to remember that on REPAYE your effective interest rate is lower than the interest late listed on your loans when you factor in the interest subsidies provided by the program. In my case my 6.375% interest is actually only 4.7% when accounting for how much I actually pay towards my interest each month vs how much the government chips in. I doubt I would be able to find interest rates that could lower my interest enough to make me ever want to leave REPAYE.
 
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Modest_anteater

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I graduated 2 years ago. My original plan was to stay on IDR and wait for the tax bomb but I misread the way it worked. It was actually -25- years of repayments for graduate loans, and 20 years is for undergraduate. An extra 5 years is too much and the amount of interest would be ridiculous even when it is not being capitalized on IDR. I decided to make drastic changes going forward and want to aggressively pay the 300k loan off. I make about 8-8,8500 after tax monthly + I am already matching 5% to my 401k. I have 5,000 emergency fund. I know by doing this, I will not have funds to do anything for the next 4-5 years and my life will be of just work and food.

Has anyone been in this same situation believe this is the smartest thing to do? There is one thing I am so scared of experiencing, and that is DEPRESSION. I never had money in my life and doing this would put me back at that. My sadness stemming from seeing my bank account stagger at the same amount month after month even though I am working hard, with OT each month.

I worry this will affect my work, seeing as how my work is not translating into anything except debt payments.

I worry... but I feel if I dont do this, my loans will never go away during the time when I may not be in a stable career.
How is it possible to get 300,000 USD in loans? You must have went to a severely over priced school PLUS lived in excess for years.... The most I have head of so far was 150,000 USD and even that is bad.
 

Dr. Galazkiewicz

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I never thought of it this way but the real investment for pharmacy school is no longer 4 years undergrad + 3/4 year pharmacy program. It's actually this:
4 years undergrad + 3/4 year pharmacy program+ [5-10 years of slave labor and throwing away your remaining youth].

For those who have finished paying off high loan amounts (250k+), was it worth it? How old are/were you after achieving $0 loan balance?
They don't tell these kids when they sign the loan docs that the system will milk them for all they're worth and then some.
 

Modest_anteater

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I would just counsel you that your situation beats living in most third world countries. You still have all the amenities USA has to offer, but just have to work really hard for them
How in the world did you rack 300K debt??
>all the amenities USA has to offer
check the news
massive school shootings tens of children killed
mail bombings in Austin
highest imprisonment rate in the world
extremely high homicide rate
Literally trillions in debt with no clear way how to pay it back
 

Modest_anteater

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I have seen this from multiple new grads - especially when someone does a duel degree program and simply doesn't comprehend how dang much money they are borrowing. And then they relay on the PSFL - not understanding that it could change any day. 6 years private school at 40k a year - 240k - then add on 20 a year for living expenses (either high cost area/not living like a college student - and boom 360k before interest.
honestly if you have 360k before interest you should just move back home, become a NEET and play video games. You would be lucky to break even before you die working till 70 years old with debt like that with 6 % interest... I'm honestly amazed at the lack of financial literally in new grads. A 6 year state should should be around 6*20 = 120K. CoL should be low living at home or at worse living far out from the city with rent around 300 USD a month. I know more than one student that has a full ride and many that work during school to not have to take out loans (they don't believe in loans for religious reasons). There is absolute/y zero reason you should have above 150,000 USD in loans unless you lived in excess or made very poor decisions.
 

owlegrad

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How is it possible to get 300,000 USD in loans? You must have went to a severely over priced school PLUS lived in excess for years.... The most I have head of so far was 150,000 USD and even that is bad.
Dude look at COL and tuition at any CA school.
 
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a student

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I’ve been doing this for a year and a half now. Food + work everyday. Seeing the loan amount go down is my source of happiness so I don’t get depressed.
 
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ExpressMaiL

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I’ve been doing this for a year and a half now. Food + work everyday. Seeing the loan amount go down is my source of happiness so I don’t get depressed.
Is this the reason for your existence? I guess for some it is but that statement is disturbing. (I'm not mocking you or anything.)
 
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Modest_anteater

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Dude look at COL and tuition at any CA school.
"
The average indebtedness for the WesternU Doctor of Pharmacy program for the last 4 years:

2014 Graduates $208,721
2015 Graduates $232,611
2016 Graduates $240,878
2017 Graduates $226,843"

Oh my. What did the 2016 grads do to get into so much more debt? :scared::scared::scared::scared::scared::scared::scared:
 

Modest_anteater

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For now yes, I will enjoy life after my student loan balance says 0.
After your loans get to zero you should loan money to a new pharmacy school. Then you will be the one collecting interest. :)
 

Dred Pirate

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I'm honestly amazed at the lack of financial literally in new grads. A 6 year state should should be around 6*20 =
agree x1000 - I have said for years financial literacy should be a requirement to graduate high school. Just basic things like retirement advice (401k), how loans work, calculate load to income percentages, how much house you can afford, etc.
 

Mad Jack

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>all the amenities USA has to offer
check the news
massive school shootings tens of children killed
mail bombings in Austin
highest imprisonment rate in the world
extremely high homicide rate
Literally trillions in debt with no clear way how to pay it back
But like, you can drink the water and we don't have malaria, so there's that
 

DrVader

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I graduated 2 years ago. My original plan was to stay on IDR and wait for the tax bomb but I misread the way it worked. It was actually -25- years of repayments for graduate loans, and 20 years is for undergraduate. An extra 5 years is too much and the amount of interest would be ridiculous even when it is not being capitalized on IDR. I decided to make drastic changes going forward and want to aggressively pay the 300k loan off. I make about 8-8,8500 after tax monthly + I am already matching 5% to my 401k. I have 5,000 emergency fund. I know by doing this, I will not have funds to do anything for the next 4-5 years and my life will be of just work and food.

Has anyone been in this same situation believe this is the smartest thing to do? There is one thing I am so scared of experiencing, and that is DEPRESSION. I never had money in my life and doing this would put me back at that. My sadness stemming from seeing my bank account stagger at the same amount month after month even though I am working hard, with OT each month.

I worry this will affect my work, seeing as how my work is not translating into anything except debt payments.

I worry... but I feel if I don't do this, my loans will never go away during the time when I may not be in a stable career.
I wouldn't count on forgiveness after 20 years, remember that can change at any time. The whole 20-year promise is just kicking the can down the road, no politician has had to deliver on it. My advice is to live cheaply as you can. If your take-home pay is 70k to 80k, live off 2k a month and use the rest to pay down the loan. Pay down at least 30k a year.
 
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gwarm01

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I wouldn't count on forgiveness after 20 years, remember that can change at any time. The whole 20-year promise is just kicking the can down the road, no politician has had to deliver on it. My advice is to live cheaply as you can. If your take-home pay is 70k to 80k, live off 2k a month and use the rest to pay down the loan. Pay down at least 30k a year.
The same can be said for the 10 year PSLF plan. Now that we are finally at the point to start forgiving loans we are seeing attempts to get rid of or heavily modify this plan. I'm about halfway to the forgiveness point and haven't paid down my loans as aggressively as I could since I was on the payment plans. Not to mention having a lower salary due to working in non-profit hospitals my entire career. I'll be pretty upset if I can't utilize the forgiveness on whatever small amount remains after 10 years.
 

Dred Pirate

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The same can be said for the 10 year PSLF plan. Now that we are finally at the point to start forgiving loans we are seeing attempts to get rid of or heavily modify this plan. I'm about halfway to the forgiveness point and haven't paid down my loans as aggressively as I could since I was on the payment plans. Not to mention having a lower salary due to working in non-profit hospitals my entire career. I'll be pretty upset if I can't utilize the forgiveness on whatever small amount remains after 10 years.
the problem is with many people their minimum payments often don't even cover principle - so when (not if) this program is heavily modified - they will end up owing more than they started with.
 
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gwarm01

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the problem is with many people their minimum payments often don't even cover principle - so when (not if) this program is heavily modified - they will end up owing more than they started with.
That's the real fear. I've often complained that the amount forgiven for me will be, maybe, 5% of the total loan at the end of the 10 years. Now I'm just glad that I will still have most of my loans paid off even if this program goes away.

I have what I consider to be a very high amount of loans, but it seems students this day even have me beat.
 

Dred Pirate

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That's the real fear. I've often complained that the amount forgiven for me will be, maybe, 5% of the total loan at the end of the 10 years. Now I'm just glad that I will still have most of my loans paid off even if this program goes away.

I have what I consider to be a very high amount of loans, but it seems students this day even have me beat.
you can't have much compared to what I see if that is the case (or you make a hell of a lot more than the people here). you around 100k?
 

gwarm01

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you can't have much compared to what I see if that is the case (or you make a hell of a lot more than the people here). you around 100k?
A little bit more than that. My monthly payments are higher because it includes my wife's income, and her loans are pretty much nothing.
 

maria1oh

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Is it just me or does 5,000 emergency fund seem awfully small? Health insurance has out of pocket max set around 5,000 so one major health issue would clear out the 5k even with health insurance.
 

ldiot

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For me it will be 4 years undergrad, 4 years pharmacy school, ~5 years paying debt (and that's if I spend no money on anything else).... I'll be 32 when I can finally "start my life", and even then I will have nothing in my pocket...

That's a lot of opportunity cost. If pharmacy school was still 100k or less it wouldn't be so bad but I'll be at around 200k
 

lord999

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agree x1000 - I have said for years financial literacy should be a requirement to graduate high school. Just basic things like retirement advice (401k), how loans work, calculate load to income percentages, how much house you can afford, etc.
It used to be, like shop, auto, and home economics. This used to be taught in microeconomics. But the corporate interests that be got those practical classes thrown out of the curriculum to make you a consumer, and parents are notoriously bad about communicating that information. I still think the best class I ever took in high school was shop where the only actual lesson is that nothing is too complicated for some modern person to accomplish, even power tools if you are willing to be careful and pay attention.

The other thing that's instructive is high school jobs, the ones that no one does anymore. I absolutely know the value of $41, because that was my takehome pay for 8 hours of work at $7 an hour. That's why taking loans that are more than 2X annual income are baffling to me.
 

Modest_anteater

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For me it will be 4 years undergrad, 4 years pharmacy school, ~5 years paying debt (and that's if I spend no money on anything else).... I'll be 32 when I can finally "start my life", and even then I will have nothing in my pocket...

That's a lot of opportunity cost. If pharmacy school was still 100k or less it wouldn't be so bad but I'll be at around 200k
Yeah man there might not be a lot of pharmacy jobs by the time you are 32 but at least you will be back to zero which will be a good thing. A lot of new pharmacy students will die still in debt. You shouldn't be doing a 8 years for pharmacy... You should be doing 1-2 years at community college which is around 4,000 USD total then doing a 3 year program which is around 75,000 USD total so 4-5 years max. OR go the state school route where you go to school for 6 years either getting a full ride so free or paying 10,000 USD to 15,000 USD a year.
 

Dr. Galazkiewicz

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The other thing that's instructive is high school jobs, the ones that no one does anymore. I absolutely know the value of $41, because that was my takehome pay for 8 hours of work at $7 an hour. .
1985?
 

DrVader

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Is it just me or does 5,000 emergency fund seem awfully small? Health insurance has out of pocket max set around 5,000 so one major health issue would clear out the 5k even with health insurance.
2/3 of American don't have $2,000 in there checking account, 1/3 can't come up with $400.
 
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jpromeo

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I graduated 2 years ago. My original plan was to stay on IDR and wait for the tax bomb but I misread the way it worked. It was actually -25- years of repayments for graduate loans, and 20 years is for undergraduate. An extra 5 years is too much and the amount of interest would be ridiculous even when it is not being capitalized on IDR. I decided to make drastic changes going forward and want to aggressively pay the 300k loan off. I make about 8-8,8500 after tax monthly + I am already matching 5% to my 401k. I have 5,000 emergency fund. I know by doing this, I will not have funds to do anything for the next 4-5 years and my life will be of just work and food.

Has anyone been in this same situation believe this is the smartest thing to do? There is one thing I am so scared of experiencing, and that is DEPRESSION. I never had money in my life and doing this would put me back at that. My sadness stemming from seeing my bank account stagger at the same amount month after month even though I am working hard, with OT each month.

I worry this will affect my work, seeing as how my work is not translating into anything except debt payments.

I worry... but I feel if I dont do this, my loans will never go away during the time when I may not be in a stable career.
Have you looked into the pay as you earn option? Apparently, for someone who has high amount of loans, paying 10% of your salary for 20 years will help you end up paying much less at the end. You just have to pay the tax on the interest which shouldnt be all that much compared to how much you actually owe.
 

mentos

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Is it just me or does 5,000 emergency fund seem awfully small? Health insurance has out of pocket max set around 5,000 so one major health issue would clear out the 5k even with health insurance.
Depends on your risk tolerance, monthly bills, if you have a family to support, etc. It's hard to think of a situation where one truly needs $5k cash on hand immediately. Health bills can be paid months later without penalty, they'll even work with you to set up a payment plan.

Maybe if your furnace broke in the middle of a blizzard and you need a new one... You can always charge to a credit card which gives at least a month of float, then you could balance transfer that to a 0% card for a year. You can withdraw Roth IRA contributions without penalty, withdraw from HSA, etc. Not recommended to touch tax advantaged accounts but it you're in a rut it's there.
 

Swishers

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Is it just me or does 5,000 emergency fund seem awfully small? Health insurance has out of pocket max set around 5,000 so one major health issue would clear out the 5k even with health insurance.
Emergency fund should be at least 6 months of expenses. So $10k-15k.

Yeah man there might not be a lot of pharmacy jobs by the time you are 32 but at least you will be back to zero which will be a good thing. A lot of new pharmacy students will die still in debt. You shouldn't be doing a 8 years for pharmacy... You should be doing 1-2 years at community college which is around 4,000 USD total then doing a 3 year program which is around 75,000 USD total so 4-5 years max. OR go the state school route where you go to school for 6 years either getting a full ride so free or paying 10,000 USD to 15,000 USD a year.
Which 3-year school is $75k by the end? Double that is the norm.
 

The Ilusive Man

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Why not just pay it off over a course of 30 years, it will end up costing you only 2k a month. Not the best but you won't have to live like a student. You can pay more than the minimum requirement as well. If you get married and have kids you will end up having an effective tax rate of roughly 15% because of the deductibles and the 2k will hurt less.

Edit it will be 1300 if you interest rate is 3.3 percent.
 
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Twentytwelve2

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I'm assuming you're currently in REPAYE where you would get your grad loans forgiven after 25 years but on the PAYE program they're forgiven after 20. Stay in REPAYE and take advantage of the extremely generous interest subsidies it has the offer. Max out your 401k which lowers your adjusted gross income which in turn lowers your monthly student loan payments. This also means the feds are paying more towards your student loan interest since 50% of the interest accrual is covered by them. Also realize that there is no interest capitalization while you remain in REPAYE. This is a great advantage for you since any money you put into your investment accounts is gaining compounding interest whereas your student loans will not. Take all the money you would be putting towards your student loans and stick it in a low cost vanguard ETF like VTSAX. After your account grows to 300-400k you can decide if you want to liquidate it and pay off your loan (remember to save for taxes as this will trigger capital gains) or you can just keep your money there and realize you're already 5-7 years into your 20 year loan forgiveness period (you can switch from REPAYE to PAYE after 19.9 years and get your loans forgiven at the 20 year mark). Switching payment plans will trigger your loan amount to capitalize all the interest for the past 20 years but this won't really matter if you're aiming forgiveness. When you get your loan forgiven you will get hit with a tax bomb that year but you can look into hiring a CPA and finding creative ways to file for insolvency to at least minimize the tax burden.

This way you're not living like a broke college kid for the next 7 years and even though you're up to your eyeballs in loans at last you'll get the psychological benefit of watching your retirement accounts grow.

Whatever you do just don't refinance loans that large through a private lender. You're assuming a lot more risk for minimal interest rate reduction.
I think the feds paying the interest only apply to subsidized loan (the stafford loan- but that has a limit to how much you can borrow). Half my loan is unsub from the GradPlus loan to pay off the tuition and CoL.
 

iggles

7+ Year Member
May 11, 2011
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I think the feds paying the interest only apply to subsidized loan (the stafford loan- but that has a limit to how much you can borrow). Half my loan is unsub from the GradPlus loan to pay off the tuition and CoL.
REPAYE pays 100% of unpaid interest for the first 3 years then 50% after that on subsidized loans while also paying 50% of the unpaid interest on your unsubsidized loans starting when you enter the program.