Financial plans, girlfriend just out of grad school

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rasputin
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Financial plans, girlfriend just out of grad school

Post by rasputin »

My girlfriend graduated from grad school in May and is currently in negotiations for a new job. (yay!)

She has very large student loans ($135k!) which will be made manageable through Income Based Repayment. She'll be making approximately $75k/yr. Otherwise she has no savings or retirement. She's 35.

I'm offering to cover our living costs through the end of the year so she can max out her 401k, hopefully the full 17k. (as you can tell its a serious relationship...yes, we've been talking about financial planning lately)

I have 1+ year emergency fund which could cover both of us and high job security.

Do you think this is a wise move?
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runner9
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Re: Financial plans, girlfriend just out of grad school

Post by runner9 »

What are the interest rates on the student loans? Private or public?
Bob's not my name
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Re: Financial plans, girlfriend just out of grad school

Post by Bob's not my name »

Hopefully she did not pay her last tuition bill before Jan 1, so she gets the $2,000 Lifetime Learning Credit.

$74k x 4 months = about $25k 2012 income. She's probably ineligible for the Saver's Credit due to her being a full time student for five months. Putting $17k in her 401k will knock her AGI down to about $8k and her taxable income below zero. That may be overkill.
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Toons
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Re: Financial plans, girlfriend just out of grad school

Post by Toons »

I would change the offer. Pay living expenses if she aggressively works at paying down debt to the tune of 17k or more :happy
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rasputin
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Re: Financial plans, girlfriend just out of grad school

Post by rasputin »

she has some older private student loans at 4%. ($9k?) The newer loans for grad school are at 6-7% BUT with income based repayment (IBR) she'll pay approximately $120k for her 135k loans.

In other words, paying off her private loans may make sense but certainly not her grad school loans. We could also consider paying them off early next year instead of in 2012.
runner9 wrote:What are the interest rates on the student loans? Private or public?
Carl53
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Re: Financial plans, girlfriend just out of grad school

Post by Carl53 »

rasputin wrote:she has some older private student loans at 4%. ($9k?) The newer loans for grad school are at 6-7% BUT with income based repayment (IBR) she'll pay approximately $120k for her 135k loans.

In other words, paying off her private loans may make sense but certainly not her grad school loans. We could also consider paying them off early next year instead of in 2012.
runner9 wrote:What are the interest rates on the student loans? Private or public?
The IBR may not work out quite as well as you think if her income increases from year to year (I suspect that she hopes that it would). If she were to marry and file jointly, the combined income would be used to determine the payment. Filing married separate would help this but hurt in other ways.

Regarding the big 401k contribution this year, she will not save much in taxes due to her having such a low income this year. Unless she had significant income earlier this year she likely would be better off seeing if the 401k offers a Roth version. If not put 5k in a Roth IRA, set aside 5k for emergencies and start attacking the debt. Help her give some careful consideration to my comments above to decide which loan would be best to attack first.

Next year, she needs to be on top of the tax rule changes. Specifically the student loan interest deductibility rules are set to change at the end of the year if not extended. If the rules stay the same and if she can get her adjusted gross income down below $60k (before taking the student loan deduction $75k-17k401k-FSA- pretax insurance- HSA - whatever allowed), like by placing the whole 17k in a regular 401k (not Roth IRA) she will be eligible to deduct $2500 in interest. This phases out if she is over 60k. If the rules change then, well then they change.
Muchtolearn
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Re: Financial plans, girlfriend just out of grad school

Post by Muchtolearn »

OP, I think its a terrible idea. Horrible. You are not married. Even if you were, a good case can be made for delaying the merging of finances for a few years because of the high divorce rate. You are in essence paying off her loan. It is a gift. If you want to do that, just be aware that these are gifts you will not get back in any way, either morally, ethically, or legally. You are going to neglect your savings to pay off the debt of a girlfriend??? I wouldn't.
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rasputin
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Re: Financial plans, girlfriend just out of grad school

Post by rasputin »

Carl53 wrote: The IBR may not work out quite as well as you think if her income increases from year to year (I suspect that she hopes that it would). If she were to marry and file jointly, the combined income would be used to determine the payment. Filing married separate would help this but hurt in other ways.
There is no reason for us to believe that she will have particularly significant changes in income from year to year. Further, she wants to work for the city. If she does, then her loans are forgiven in 10 years and she's likely to pay approximately $60k before its forgiven. We will never file jointly. It would cost me (us!) approximately $10k/year.
Carl53 wrote:Regarding the big 401k contribution this year, she will not save much in taxes due to her having such a low income this year. Unless she had significant income earlier this year she likely would be better off seeing if the 401k offers a Roth version. If not put 5k in a Roth IRA, set aside 5k for emergencies and start attacking the debt. Help her give some careful consideration to my comments above to decide which loan would be best to attack first.
The Roth accounts are a good idea.
Carl53 wrote:Next year, she needs to be on top of the tax rule changes. Specifically the student loan interest deductibility rules are set to change at the end of the year if not extended. If the rules stay the same and if she can get her adjusted gross income down below $60k (before taking the student loan deduction $75k-17k401k-FSA- pretax insurance- HSA - whatever allowed), like by placing the whole 17k in a regular 401k (not Roth IRA) she will be eligible to deduct $2500 in interest. This phases out if she is over 60k. If the rules change then, well then they change.
Good point!

---

Overall, I'm surprised that posters have had little concern for her retirement savings. Further, I can't help but think that aggressively paying down a debt that has a decent likelihood of being forgiven is a little bit foolish.
Carl53
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Re: Financial plans, girlfriend just out of grad school

Post by Carl53 »

rasputin wrote:There is no reason for us to believe that she will have particularly significant changes in income from year to year. Further, she wants to work for the city. If she does, then her loans are forgiven in 10 years and she's likely to pay approximately $60k before its forgiven. We will never file jointly. It would cost me (us!) approximately $10k/year.
Oh, so she has a possibility of getting a government job. Ok so she would be eligible for the 10 year forgiveness program. I believe that the 10 year period does not begin until she starts that job. Otherwise she is on tap for the 25 year plan.

According to the IBR calculator, http://studentaid.ed.gov/node/128 , assuming her loans at the default 6.8%, 75k AGI would limit her payment to $728 ($218400 over 25 years) while $60k after 401k and other pretax writeoffs, would limit her payment to $541 or $162300 over 25 years. Neither one of these two options would even cover the ongoing interest of about $765/month to start let alone the principal.

So whether or not she gets a government/health or other preferred job she will be escaping the payment of the principal amount as long as her income does not go up. That certainly is good for her. Bear in mind that should her income go up to perhaps 100k, the payment would climb to $1041, with a cap at $1553.
rasputin wrote:Overall, I'm surprised that posters have had little concern for her retirement savings. Further, I can't help but think that aggressively paying down a debt that has a decent likelihood of being forgiven is a little bit foolish.
This potential payment level and apparently missing what you thought you had said about a government job is why the Bogleheads were most interested in the loan paydown. If she does well at all over 25 years of nongoverment work she would likely have paid the entire principal back plus a lot of interest.
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rasputin
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Re: Financial plans, girlfriend just out of grad school

Post by rasputin »

That IBR calculator is rather pessimistic. She is likely to be responsible to pay 10% of her income over the poverty line rather than 10%. Its also likely her loans would be forgiven in 20 years rather than 25. Unfortunately we won't be certain for a month or two - http://www.bogleheads.org/forum/viewtop ... 3#p1454563

>>If she does well at all over 25 years of nongoverment work she would likely have paid the entire principal back plus a lot of interest.

That is true but I think its an acceptable risk. Unlike a lot of americans, I don't think its worth worrying about suddenly joining the 1%.
Muchtolearn
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Re: Financial plans, girlfriend just out of grad school

Post by Muchtolearn »

I didn't know about this loan forgiveness. Who gave the loan and who pays the forgiven part??
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rasputin
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Re: Financial plans, girlfriend just out of grad school

Post by rasputin »

Muchtolearn wrote:I didn't know about this loan forgiveness. Who gave the loan and who pays the forgiven part??
This is a program for federal student loans. The feds pay the forgiven part. More info here - http://www.finaid.org/loans/ibr.phtml
CordMcNally
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Re: Financial plans, girlfriend just out of grad school

Post by CordMcNally »

I think the dangerous part about these loan repayment programs is that they haven't come close to fruition yet. Call me a pessimist but I just don't see the government forgiving all this money from people earning $75k. I do think some low income earners will likely get some loans forgiven but not those that make decent wages. Also keep in mind that I do believe that you have to pay taxes on one of those forgiveness plans, however, I can't remember if it's the 10 year or 25 year plan.
Bob's not my name
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Re: Financial plans, girlfriend just out of grad school

Post by Bob's not my name »

A new public service loan forgiveness program will discharge the remaining debt after 10 years of full-time employment in public service. Unlike the 25-year forgiveness, the 10-year forgiveness is tax-free due to a 2008 IRS ruling.
DualIncomeNoDebt
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Re: Financial plans, girlfriend just out of grad school

Post by DualIncomeNoDebt »

rasputin wrote:She has very large student loans ($135k!) which will be made manageable through Income Based Repayment. She'll be making approximately $75k/yr. Otherwise she has no savings or retirement. She's 35.
That is a lot of school loans for a 35 year old. Negotiating for a job does not equal having one.
I'm offering to cover our living costs through the end of the year so she can max out her 401k, hopefully the full 17k. . . .

Do you think this is a wise move?
Answer: no.

Look at this objectively. In approximately 18 years she couldn't put at least something aside for retirement? Even just a few grand a year, in a Vanguard fund or interest-bearing account, would have done her a world of good for retirement. This is piss poor money management.

Listen to me mate, this is a horrible idea. Save your money and be very careful about getting sucked into the debt vortex swirling around this significant other. If something goes wrong, either with her job negotiation or in the relationship, stamp the letters "A," "T" and "M" on your forehead, because you're it. I wouldn't put myself in that position. May sound harsh, but it's the truth.
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rasputin
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Re: Financial plans, girlfriend just out of grad school

Post by rasputin »

ug, its nearly impossible to ask advice around here without getting a life decision critique instead.

sure, the financial picture would be rosier if she already had retirement savings, didn't have student loan debt, and had a high paying job but i forgot to run a credit check before we started dating and now its too late.
Bob's not my name
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Re: Financial plans, girlfriend just out of grad school

Post by Bob's not my name »

The ideal bogleheads girlfriend looks like Vinny Jones in drag, is prone to manic fits of knife-wielding and sobbing, sniffs glue, and hates your mother, but she has no debt and buys a lot of I bonds.
Muchtolearn
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Re: Financial plans, girlfriend just out of grad school

Post by Muchtolearn »

rasputin wrote:ug, its nearly impossible to ask advice around here without getting a life decision critique instead.

sure, the financial picture would be rosier if she already had retirement savings, didn't have student loan debt, and had a high paying job but i forgot to run a credit check before we started dating and now its too late.
Rasputin, I don't think the posters trying to help are making life recommendations, just financial ones. After I graduated I had a whole bunch of loans. My significant other at the time (no longer) had none. I would never of thought of she paying my loans directly or indirectly. That was good for her as we eventually broke up. I think all everybody is saying is that you should both contribute to the living and you not pay off her loans. If you get married, things change at that point.
Last edited by Muchtolearn on Sun Aug 19, 2012 2:42 pm, edited 1 time in total.
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SnapShots
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Re: Financial plans, girlfriend just out of grad school

Post by SnapShots »

Muchtolearn wrote:OP, I think its a terrible idea. Horrible. You are not married. Even if you were, a good case can be made for delaying the merging of finances for a few years because of the high divorce rate. You are in essence paying off her loan. It is a gift. If you want to do that, just be aware that these are gifts you will not get back in any way, either morally, ethically, or legally. You are going to neglect your savings to pay off the debt of a girlfriend??? I wouldn't.
Ditto!! Ditto!! Ditto!! Same goes for paying off bills or commingling anything with a boyfriend or girlfriend. Either way, very bad idea.
the best decision many times is the hardest to do
shantster
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Re: Financial plans, girlfriend just out of grad school

Post by shantster »

rasputin wrote:ug, its nearly impossible to ask advice around here without getting a life decision critique instead.

sure, the financial picture would be rosier if she already had retirement savings, didn't have student loan debt, and had a high paying job but i forgot to run a credit check before we started dating and now its too late.
For what it's worth, I'm in a similar situation (from the other side). I moved in with my boyfriend soon after graduation from medical school this year. He has a stable job and had no student loans from graduate school and has money in a retirement account. I, on the other hand, have loans from school, minimal in retirement, and living on a resident salary. I would never think about having him pay more than half our living expenses so that I could put more into the loans or into retirement. It's MY debt, not his.

The more prudent thing (as others are saying here) is to make sure that you fund your retirement accounts fully and any extra money you have should be put into investments for you since it is your money, not hers. If you do get married at some point down the road, then you can focus on combining the retirement accounts and eliminating the debts together. You'll still have the money that you saved for you now for your joint finances. If something happens and you don't stay together, all that money is lost, but if you do, you'll still have it jointly.
Buckeye
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Re: Financial plans, girlfriend just out of grad school

Post by Buckeye »

Muchtolearn wrote:OP, I think its a terrible idea. Horrible. You are not married. Even if you were, a good case can be made for delaying the merging of finances for a few years because of the high divorce rate. You are in essence paying off her loan. It is a gift. If you want to do that, just be aware that these are gifts you will not get back in any way, either morally, ethically, or legally. You are going to neglect your savings to pay off the debt of a girlfriend??? I wouldn't.
I agree that caution might be advised here.

I know someone who financially helped out his long time girlfriend (then fiancee) through graduate school and afterwards for a year even after she found a great job. Then things fell apart quickly in the following year and she was married about year after that to someone else she met through work.
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rasputin
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Re: Financial plans, girlfriend just out of grad school

Post by rasputin »

There is a growing theme in this thread - can't trust 'em until you get 'em to the altar!
DualIncomeNoDebt
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Re: Financial plans, girlfriend just out of grad school

Post by DualIncomeNoDebt »

rasputin wrote:but i forgot to run a credit check before we started dating and now its too late.
I know some women who will run credit checks on men they are dating. Background and criminal history too. Not saying anyone should do this, I don't do it, but unquestionably, it happens.

Also, I understand you may not like the stark responses. But we are providing you with open, honest advice, based on personal experience, and from a financial point of view. Given the medium, I bet the responses are more open and honest than you would receive face-to-face. From a financial point of view, serious caution is warranted. No one has commented on the personal or relationship side, only you know how this should impact your decision.
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rasputin
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Re: Financial plans, girlfriend just out of grad school

Post by rasputin »

DualIncomeNoDebt wrote:Also, I understand you may not like the stark responses.
They're not really stark but unsolicited. I did not come here asking approval for the situation but how best to execute within it. It is reasonable to gently voice these concerns but once pushed aside simply relent.

I'm not a financial automaton and occasionally have some living to do in between working toward financial goals. What is the point of financial goals if they don't further our life goals?

Yes, I am financially supporting my girlfriend so we can plan a life together. I can do this with minimal impact to my personal finances while improving OUR financial future. True, if she runs away from me tomorrow I will be out a couple grand but that wouldn't be the largest loss. Nor do I understand how marriage would improve the situation as its become an increasingly unreliable method of cementing household bonds.

---

Anyway, useful points I've taken away from the thread -

1) Consider a Roth 401(k) (and/or Roth IRA)
2) Forgiven loan amount is taxable if she doesn't work for the city.
Mudpuppy
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Re: Financial plans, girlfriend just out of grad school

Post by Mudpuppy »

I see no issue with you covering the living expenses while she establishes her career. I'm not sure why people assumed that meant you'd be paying off her loans, which seems to have sparked the lion's share of criticism. If you are living together and you want to pay the rent/mortgage, utilities, groceries, so she can focus on paying off her private student loans and maxing out her retirement plans, it really won't be that big of a fiscal impact for you. You still have to live somewhere and eat, so I'm assuming she only adds a small delta to those costs. If you have no issue assuming those costs in the short term, then go for it.

Planning on the 10 year public student loan forgiveness program for the federal loans and paying off the private loans is a good move. There's no need to pay more than the minimum on the federal loans unless they decide to cancel the forgiveness program, particularly since the IBR plan will prevent interest compounding while one is on the IBR plan and the first three years of unpaid interest are forgiven for subsidized loans. If the forgiveness program does go away at some nebulous point in the future or she switches to a job that is no longer qualified for it, she can just change her approach and pay more (but stay on the IBR plan to avoid interest compounding). No need to cross that bridge until you come to it, as long as you keep it on the map.

As an aside, I think it's completely unrealistic of some people to think a partner has "poor money management" skills simply because they have student loan debt after graduate school. Unless you come from money, you are going to accumulate student loan debt when obtaining an advanced degree. You can't just work your way through graduate school because you need time to study, do research, write papers, attend conferences, and eventually write (and defend) a dissertation for a Ph.D. program, with a similar amount of time needed for a professional program (doctor, veterinarian, etc) as well. What matters more than her student loan debt is her mindset towards money. I'd only advise caution if she spends like there's no tomorrow, but if she's naturally a saver, then the debt is not really going to be a problem now that she's starting her career.
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SnapShots
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Re: Financial plans, girlfriend just out of grad school

Post by SnapShots »

rasputin wrote:
DualIncomeNoDebt wrote:Also, I understand you may not like the stark responses.
They're not really stark but unsolicited. I did not come here asking approval for the situation but how best to execute within it. It is reasonable to gently voice these concerns but once pushed aside simply relent.

I'm not a financial automaton and occasionally have some living to do in between working toward financial goals. What is the point of financial goals if they don't further our life goals?

Yes, I am financially supporting my girlfriend so we can plan a life together. I can do this with minimal impact to my personal finances while improving OUR financial future. True, if she runs away from me tomorrow I will be out a couple grand but that wouldn't be the largest loss. Nor do I understand how marriage would improve the situation as its become an increasingly unreliable method of cementing household bonds.
rasputin wrote ending his questions with:
Do you think this is a wise move?
OP, your last comment is the reason you got advice you didn't like hearing. Either way, marriage or not tread carefully when co-mingling assets. :greedy
the best decision many times is the hardest to do
MrMiyagi
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Re: Financial plans, girlfriend just out of grad school

Post by MrMiyagi »

I would not unless you were married. I've seen far too many "I'll cover your living expenses while you work your way through medical/dental/law/business school" plans fall through. Seems that a lot of people dump their SO for whatever reason as soon as they get that degree or shortly after.
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Re: Financial plans, girlfriend just out of grad school

Post by MrMiyagi »

Mudpuppy wrote:I see no issue with you covering the living expenses while she establishes her career. I'm not sure why people assumed that meant you'd be paying off her loans, which seems to have sparked the lion's share of criticism. If you are living together and you want to pay the rent/mortgage, utilities, groceries, so she can focus on paying off her private student loans and maxing out her retirement plans, it really won't be that big of a fiscal impact for you. You still have to live somewhere and eat, so I'm assuming she only adds a small delta to those costs. If you have no issue assuming those costs in the short term, then go for it.
Because paying for all her living expenses so that she has "more money to pay off those loans" is essentially the same as helping her pay off those loans.

It's like when people give food/clothes to the homeless and delude themselves into thinking "Oh I'm not contributing to that homeless guy's smoking/alcohol/drug habit because I'm just giving him food and essentials." HELLO - that frees up money that he otherwise would have had to spend on essentials, money that can now be spent on their vice!
MrMiyagi
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Re: Financial plans, girlfriend just out of grad school

Post by MrMiyagi »

rasputin wrote:ug, its nearly impossible to ask advice around here without getting a life decision critique instead.

sure, the financial picture would be rosier if she already had retirement savings, didn't have student loan debt, and had a high paying job but i forgot to run a credit check before we started dating and now its too late.
It's probably because the people here are older and wiser than us (I'm 31) - they've seen far more than we have. People tend to think with their hearts and not their brains. When you lay it out to strangers who have nothing to lose (don't fear offending you), their logical opinion is usually right. I've found the people on this forum pretty helpful in general and probably right 90%+ of the time on financial matters.

Besides, what difference does it make if you save more in your name now. If you get married and live happily ever after together, she can spend your savings just the same. Saving that few extra % in HER debt repayment, while taking the huge risk that you two may break up is not worth it.
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Re: Financial plans, girlfriend just out of grad school

Post by beachplum »

Mudpuppy wrote:I see no issue with you covering the living expenses while she establishes her career. I'm not sure why people assumed that meant you'd be paying off her loans, which seems to have sparked the lion's share of criticism. If you are living together and you want to pay the rent/mortgage, utilities, groceries, so she can focus on paying off her private student loans and maxing out her retirement plans, it really won't be that big of a fiscal impact for you. You still have to live somewhere and eat, so I'm assuming she only adds a small delta to those costs. If you have no issue assuming those costs in the short term, then go for it.

Planning on the 10 year public student loan forgiveness program for the federal loans and paying off the private loans is a good move. There's no need to pay more than the minimum on the federal loans unless they decide to cancel the forgiveness program, particularly since the IBR plan will prevent interest compounding while one is on the IBR plan and the first three years of unpaid interest are forgiven for subsidized loans. If the forgiveness program does go away at some nebulous point in the future or she switches to a job that is no longer qualified for it, she can just change her approach and pay more (but stay on the IBR plan to avoid interest compounding). No need to cross that bridge until you come to it, as long as you keep it on the map.

As an aside, I think it's completely unrealistic of some people to think a partner has "poor money management" skills simply because they have student loan debt after graduate school. Unless you come from money, you are going to accumulate student loan debt when obtaining an advanced degree. You can't just work your way through graduate school because you need time to study, do research, write papers, attend conferences, and eventually write (and defend) a dissertation for a Ph.D. program, with a similar amount of time needed for a professional program (doctor, veterinarian, etc) as well. What matters more than her student loan debt is her mindset towards money. I'd only advise caution if she spends like there's no tomorrow, but if she's naturally a saver, then the debt is not really going to be a problem now that she's starting her career.
Agree with you completely, and believe it or not I'm one of those older/wiser people on here (55).
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Re: Financial plans, girlfriend just out of grad school

Post by Mudpuppy »

MrMiyagi wrote:It's like when people give food/clothes to the homeless and delude themselves into thinking "Oh I'm not contributing to that homeless guy's smoking/alcohol/drug habit because I'm just giving him food and essentials." HELLO - that frees up money that he otherwise would have had to spend on essentials, money that can now be spent on their vice!
I hardly think helping support his girlfriend while she pays off her student loans is equivalent to helping an addict spend on their vices. Such hyperbole adds no real value to the discussion.
bogleenigma
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Re: Financial plans, girlfriend just out of grad school

Post by bogleenigma »

Rasputin:

First I would like to comment upon your statement: "Nor do I understand how marriage would improve the situation as its become an increasingly unreliable method of cementing household bonds." The term "marriage" is inadequate and inappropriate, at least in the context of its legally binding properties. We won't get into politics here but "marriage" is something that is done in a church, a "civil union/marriage contract" is a legally binding piece of paper entailing certain financial and legal obligations between two individuals of the same or opposite genders that the government makes the choice to enforce. As a healthcare professional I cannot let a long time partner make medical decisions for one of my patients if said patient is incapacitated unless they have signed a medical power of attorney form. It matters not one tittle that they've cohabited for the last two decades, unless their state has common law marriage and they are recognized as married. Their first of kin is their POA, period, no discussions, no whining, no pouting, no painting me as a bad healthcare professional, no telling me I'm going to rot in hades, shove it. My response is to give them a copy of the law and ask them to consult an attorney. Unless, of course, they have a signed medical power of attorney and have designated that long time partner. It doesn't matter if my patient is on the point of death and said next of kin did unspeakable things to them in their childhood. There are options of recourse in these situations, of course, in the form of ethics committees and courts, but those processes are meaningless in emergent situations. Similarly as an unmarried person has no rights to the assets of another individual with whom they have co-habitated (unless those assets are held in accounts held jointly). Should you choose to co-mingle your assets with your girlfriend prior to signing on the dotted line then you are giving her a gift that you have no hope of retrieving whatsoever. No recourse. You also place her in the unfortunate situation of her "owing" you something. Should the two of you part ways this could create resentments (particularly if she decides to hook up with some deadbeat after you) and she may never talk to you again. This is not forgetting the resentments that you would likely feel towards her. Perhaps you would propose to me that you would never feel this way, but let me assure you, given my line of work, my experience dictates otherwise.

My point is this -- perhaps the folks on this forum seem to be a bit jaded and "untrusting." Those feelings are born of the wisdom of experience -- their own mistakes and those of those whom they love. You came here asking for impartial financial advice and you received it. Their advice is not to criticize you or your decisions or in any way make you feel judged. Obviously you found a nice, beautiful, highly intelligent woman (she is among the 8.9% of Americans who get a graduate degree), and you want nothing more than to live with her in bliss and harmony for the rest of your days on earth. Perhaps you even want to have children with her. All of these things are laudable goals. You've simply received advice that will provide you with the best means of achieving those goals. This is the best advice, at least, in a general sense, because we don't know you personally.

I suspect the two of us are remotely in the same age bracket. I'm 30 and my wife is 34 and we've been together seven years and married four years. When we met my wife was a well established professional with a house and retirement savings. I was working on my second bachelor's degree at the time and was in 80k of student loan debt, about 10k of credit card debt, and minimal retirement savings. She had no debt other than her mortgage payment and her remaining mortgage debt was only 1.5x her salary. I was the irresponsible one. It was only after the day that we married that we co-mingled any assets. This wasn't my decision but hers. She simply told me that she wanted to be married to me for the rest of her life and co-mingling assets prior to that would set us up for a divorce. I wasn't financially savvy enough at the time to even comprehend this -- I simply knew I was in financial "doo-doo" and I wanted her to rescue me (please hear that I'm NOT saying that your girlfriend is doing this to you). When we married we moved in together and she put me through graduate school (though I was working part-time the whole way). I did some growing up along the way and learned some financial management skills from her (including tearing up the credit cards). After graduation my salary began at 3x her salary and the tables changed. I became very financially responsible and began paying down the student loan debt in a rapid fashion and started investing. I lost a lot of money in fees to investment brokers during those days before my new birth as a Boglehead, unfortunately, coupled with my idiotic attempts at stock-picking. A windfall following the death of grandparents and parents, while emotionally devastating (it's never fun to lose most of the people in your life whom you love in a matter of three years), improved our financial situation considerably. Now we have no student loan debt, a beautiful house that we own outright with no mortgage, and are putting 50% of our salary away in retirement savings (maxing out both 403b's, her 457, Roth's, and taxable). We will continue this until she becomes pregnant and gives birth to our first child and then she will stay home until our future progeny are through kindergarden. During that time we'll have to significantly dial down our retirement savings rate and/or I will have to start moonlighting on the side until she returns to the workforce.

Anyway, in conclusion I would echo the general consensus of the group. Putting most of any excess income this year towards the student loan debt is the best financial decision. I think most of us would trade a guaranteed 4-7% return for the unpredictable returns of the market. The tax benefit of the 17k in a traditional 401k for this year is going to be minimal for her, any savings should be in a Roth 401k. Perhaps the easiest solution to make you both feel comfortable is to put s small amount of money in a Roth 401k and put everything else possible towards the student loan debt. As for you taking some responsibility for some of her living expenses -- I think you're right that this is probably generally OK, to a point. The financial impact on you is minimal, so long as it does not keep you from maxing out your own retirement contributions.

Incidentally -- 135k in student loans and wanting to work for the government, she is an attorney, no? Rough market out there these days.

Best of luck to you.
Last edited by bogleenigma on Thu Aug 30, 2012 11:20 am, edited 1 time in total.
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emp2b3
Posts: 51
Joined: Sun Jan 30, 2011 1:55 pm

Re: Financial plans, girlfriend just out of grad school

Post by emp2b3 »

As you probably already know, if you do get married and decide to file separately there are some downsides such as not being able to contribute to a Roth IRA and not being able to deduct traditional IRA contributions. I am guessing you could do a "back-door" Roth, but I am not sure on that point.
nonnie
Posts: 3014
Joined: Thu Mar 13, 2008 8:05 pm

Re: Financial plans, girlfriend just out of grad school

Post by nonnie »

mdpsychcrnp wrote: As a healthcare professional I cannot let a long time partner make medical decisions for one of my patients if said patient is incapacitated unless they have signed a medical power of attorney form.
Everyone --including single folks and those in a relationship whether it be a legal domestic partnership, long term cohabitation, marriage or some other form SHOULD have a medical power of attorney form to protect them and make sure their wishes are carried out. That said-- I've been in a long-term domestic partnership for the last half-dozen years. When my partner (male) and I (female) accompany each other to a doctor's appointment in each and every case, probably because we're in our 60s, the docs assume we're man and wife. I'm curious-- have you ever asked the person making medical decisions for a marriage certificate? We've found that one of the first things most docs and hospitals request is a medical power of attorney form.

Nonnie
bogleenigma
Posts: 241
Joined: Sun Jul 29, 2012 11:19 pm

Re: Financial plans, girlfriend just out of grad school

Post by bogleenigma »

Nonnie:
I'll confess that I've really only had the aforementioned situation happen twice, but yes, most folks do seem to have medical power of attorney forms in the chart. It helps that most folks are conscious when they are admitted and the clerical staff have them and their appointed person sign them. These arn't situations I really I have to deal with much anymore in the outpatient setting, particularly now that I do psychiatry. Even then it's only relevant with my geriatric patients. I readily admit that everyone should have a medical POA signed though. In fact I think it should be a pre-requisite to obtaining one's driver's license at 16.
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