Aggressive SL Debt Pay down v. Not meeting other goals

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Topic Author
Surfinfan
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Aggressive SL Debt Pay down v. Not meeting other goals

Post by Surfinfan »

Hi all,

I’ve read some great posts here and the wiki about paying down debt vs investing and think I am doing the right thing by aggressively paying down my law school debt. I am worried that I might be paying down my student loans too aggressively at the expense of not achieving my life goals. This might be where the personal starts to outweigh the finance in personal finance but I’m interested to hear what you folks think. Without boring you with too much with the history, I broke up with my finance last year and decided to relocate from the east coast to CA for a lifestyle change. I’m 30 years old, living in Boston since moving here for law school, and completely over the New England weather. Here are my numbers

Income: $80k
Assets
401K: $6.5k
Roth: $2k
Savings: $4.5k

Liabilities
Student Loans in order of paydown
Federal Student Loan: $2,000 @ 6.5% $1,250/mon (ineligible for Covid-Forebearance)
Federal Student Loan: $10,000 @ 6.05% in Covid-Forebearance
Private Student Loan: $98,000 @ 3.25% (variable) $1,000/month
Federal Student Loans: $100,000 @ 6.5 IBR/Covid Forbearance
Car Loan: $17k @ 2.99% 48 months $390/month
Total: $222k

Cash Flow
401K Contribution: $300/mo (100% match)
Roth IRA: $50/month
Savings; $150/month
Debt: $2,250
Rent: $850 (Boston)
Food: $350/month

For what it’s worth over the last two years, I have paid down $16,000 in student loans and credit card debt, became eligible for my company’s 401k plan, and started building my emergency fund. Over the past year I’ve really been able to attack the debt—primarily by reducing expense, especially rent.

I’m using the avalanche method to pay down my debts, with the exception of the huge federal loan which will be last. I’m projected to pay off everything but the federal loans by 12/1/2024. The Federal loans will take an additional two years.

With the interest rate at 3.25% on the private loans, and the Federal Loans in forbearance for the near future, I’m wondering if it makes sense to extend the pay-off over 7-10 years instead of 5. I am a little bit worried that it’s a variable interest rate but with the Fed’s guidance and the ability to continue to refinance maybe I shouldn’t be? If I were to extend the payoff I’d use the additional cash-flow to build a stronger cash reserve for the inevitable higher cost of living in CA. I’m currently still in Boston studying for the CA bar exam which is in Oct. So realistically the absolute earliest I’d make this move is February of next year.

Thoughts?
fyre4ce
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by fyre4ce »

Any estimate on your future income? I don’t know much about lawyer income, but I know there’s a huge income difference between doing mostly pro-bono immigration law vs. a partner track position at a big firm.
Olemiss540
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by Olemiss540 »

You have a mortgage in student loans! You already put lifestyle ahead of personal finance when deciding to take out a quarter million in loans to work a position paying $80k per year and need to clean that up ASAP before you get comfortable living with a huge monthly payment for next 20 years.

Focus on the debt and worry about retirement once you are out of the hole dug for yourself. You are making good progress but need to put your head down for the next couple of years and then see where you are at then. Good luck!
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
soxfan10
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by soxfan10 »

As others have said - what your future income is a huge variable.

My finances were very similar to yours when I graduated from law school, but 6 years out I make in then $175-200k range depending on exact bonus numbers (this was the reasonable expected path).

Only you know what your reasonable compensation growth will look like - JD graduates have very wide ranges out outcomes depending on their exact career path.
tashnewbie
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by tashnewbie »

I agree with others that you should probably aggressively pay off the SL. It might be prudent to contribute just enough to 401k to get the full match, but nothing more (that return is higher than your loans). Everything else should probably go towards the SL.

I’m sure you have already given it much thought, but really focus on what your job options will be in CA. Ideally, you’d already have a job offer. Obviously cost of living can be much higher in some parts of CA than most other places in the country. If your income will be substantially higher in CA, then you’ll have more options and flexibility in how you could save/invest.
TheLaughingCow
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by TheLaughingCow »

It looks like you are paying over 1000/month in interest alone once the forbearance runs out, which is probably about 1/5 of your take home pay. I would consider that an emergency and get that number down as quickly as possible.

Once you pay off your SL you will find that your options widen considerably. You may be able to pursue passion projects with a lower salary, move to a different area, or enjoy a higher standard of living.
Lee_WSP
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by Lee_WSP »

Student loans are an odd debt. Federal ones offer a huge variety of safety nets in case of job loss. Private ones don't.

That said, after filling up your emergency fund, you'll want to aggressively attack the private loan first for the above reason; it's the one without any safety in case stuff goes downhill. The others can be put into forbearance or IBR.

Whether to forgo each year's retirement contribution in pursuit of paying down those loans, I don't think there's a great answer. One side says, fill up the buckets and then pay down the loans since they're not like regular debt. The other side says all debt is bad, get rid of it fast (Dave Ramsey).

It's a personal decision, and certainly relies heavily on future income. Lawyer salaries & career paths vary widely and will depend mostly on who you know and/or what firm you get your first job at.

All that said, what is clear is you need to live like a pauper per Dave Ramsey until they're paid off or you've come to some other decision as to how you'll get them taken care of (ie PLSF or PAYE or IBR). You certainly should not put any money in taxable investments until that private one is gone.
Lee_WSP
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by Lee_WSP »

TheLaughingCow wrote: Sat Sep 19, 2020 11:49 am It looks like you are paying over 1000/month in interest alone once the forbearance runs out
He'll be accruing ~$750/mo in interest alone.
Topic Author
Surfinfan
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by Surfinfan »

fyre4ce wrote: Sat Sep 19, 2020 8:16 am Any estimate on your future income? I don’t know much about lawyer income, but I know there’s a huge income difference between doing mostly pro-bono immigration law vs. a partner track position at a big firm.
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Last edited by Surfinfan on Sat Sep 19, 2020 12:44 pm, edited 1 time in total.
Topic Author
Surfinfan
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by Surfinfan »

fyre4ce wrote: Sat Sep 19, 2020 8:16 am Any estimate on your future income? I don’t know much about lawyer income, but I know there’s a huge income difference between doing mostly pro-bono immigration law vs. a partner track position at a big firm.
I don’t expect my income to rise much unfortunately. I completely underestimated how much attorneys make. I’ve jumped a few firms for salary raises over the years but I’m now at about 5 years in and always looking for new opportunities. I’d say the next move will be closer to $100,000 but with Covid, I don’t see my firm offering me a raise this year and I can’t imagine a lot of firms hiring right now.
Topic Author
Surfinfan
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by Surfinfan »

soxfan10 wrote: Sat Sep 19, 2020 8:34 am As others have said - what your future income is a huge variable.

My finances were very similar to yours when I graduated from law school, but 6 years out I make in then $175-200k range depending on exact bonus numbers (this was the reasonable expected path).

Only you know what your reasonable compensation growth will look like - JD graduates have very wide ranges out outcomes depending on their exact career path.
I was hoping this would be the case. I’m about to be 5 years out. I’m hoping that potentially a move may open up opportunities to raise my salary too. I’ve jumped around to three firms over the past 5 years and that has helped a lot. Believe it or not my first attorney position I was making $45k a year!
Topic Author
Surfinfan
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by Surfinfan »

Lee_WSP wrote: Sat Sep 19, 2020 11:52 am Student loans are an odd debt. Federal ones offer a huge variety of safety nets in case of job loss. Private ones don't.

That said, after filling up your emergency fund, you'll want to aggressively attack the private loan first for the above reason; it's the one without any safety in case stuff goes downhill. The others can be put into forbearance or IBR.

Whether to forgo each year's retirement contribution in pursuit of paying down those loans, I don't think there's a great answer. One side says, fill up the buckets and then pay down the loans since they're not like regular debt. The other side says all debt is bad, get rid of it fast (Dave Ramsey).

It's a personal decision, and certainly relies heavily on future income. Lawyer salaries & career paths vary widely and will depend mostly on who you know and/or what firm you get your first job at.

All that said, what is clear is you need to live like a pauper per Dave Ramsey until they're paid off or you've come to some other decision as to how you'll get them taken care of (ie PLSF or PAYE or IBR). You certainly should not put any money in taxable investments until that private one is gone.
This is the methodology I’ve been following. Although the Federal Loans are accruing more interest they provide more flexibility which I have tapped on before and currently enjoying the benefits of 0% interest.

I got some great responses and I think I’m going to continue to pay everything down aggressively to open up more flexibility down the line.
bearwithbear
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by bearwithbear »

OP,

I wouldn't pass up the match from the company on your 401K contributions.

Best,
Bear
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vineviz
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by vineviz »

Surfinfan wrote: Sat Sep 19, 2020 12:47 pm This is the methodology I’ve been following. Although the Federal Loans are accruing more interest they provide more flexibility which I have tapped on before and currently enjoying the benefits of 0% interest.

I got some great responses and I think I’m going to continue to pay everything down aggressively to open up more flexibility down the line.
I think continuing to pay down the loans ASAP is the right approach, and in the order you've proposed.

My advice would be to stop the Roth contributions but continue the 401k contributions up to the point that you're getting the maximum employer match.

I'd also advise selling the car and buying something cheaper. A $17k car loan on an income of $80k with over $200k in student loans? Seriously?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
pasadena
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by pasadena »

I'm not familiar with the specificities of student loans, but generally speaking: the more you pay off debt, the closer you are to meeting your other goals. In the mid- or long-term, paying them off will be a lot more beneficial than stretching out your money to try and meet several goals at the same time. They're ballast, and will keep weighting you down until you get rid of them.

That said, kudos for keeping your costs as low as possible to pay them down. Boston is not cheap.

On the other hand, the cost of living in CA will be much higher than that, if you're planning on going somewhere in the western half of CA. $850 a month for rent in coastal CA means 1 or 3 roommates. And you don't have the money for the actual move so you need to find a job that will pay for your relocation.

I would keep doing what you're doing now (unless there's a more optimal way to arrange your payments, taking into account the 0% on federal SL). Then reassess once you've paid off the smaller ones. Contribute to the 401k up to the match if you can. I would also stop the Roth contributions and sell the car to buy a cheaper used one (assuming you're not upside down on that loan).
Kelrex
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by Kelrex »

Yikes.

Okay, well, I won't comment on 200K of loans for an 80K career. That's already done.

Otherwise, it's simple math: your loan interest is pretty high, so I would prioritize tackling that aggressively. I wouldn't give up free money like an employer matching program, but aside from free money, I would focus solely on eliminating that oppressive and suffocating amount of student debt.

Also, if you don't absolutely LOVE your career, I would be looking at whatever other options you might have with respect to work: relocating, consulting, further specialization, whatever.

If you are blissfully, wildly happy with your career and could comfortably do it for decades, then cool, hunker down and enjoy it and you will be just fine pretty much no matter how you approach it as long as you live relatively frugally.

However, if you don't see yourself doing this long term, then it's time to start thinking outside the box.
NYCaviator
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by NYCaviator »

Surfinfan wrote: Sat Sep 19, 2020 12:47 pm
Lee_WSP wrote: Sat Sep 19, 2020 11:52 am Student loans are an odd debt. Federal ones offer a huge variety of safety nets in case of job loss. Private ones don't.

That said, after filling up your emergency fund, you'll want to aggressively attack the private loan first for the above reason; it's the one without any safety in case stuff goes downhill. The others can be put into forbearance or IBR.

Whether to forgo each year's retirement contribution in pursuit of paying down those loans, I don't think there's a great answer. One side says, fill up the buckets and then pay down the loans since they're not like regular debt. The other side says all debt is bad, get rid of it fast (Dave Ramsey).

It's a personal decision, and certainly relies heavily on future income. Lawyer salaries & career paths vary widely and will depend mostly on who you know and/or what firm you get your first job at.

All that said, what is clear is you need to live like a pauper per Dave Ramsey until they're paid off or you've come to some other decision as to how you'll get them taken care of (ie PLSF or PAYE or IBR). You certainly should not put any money in taxable investments until that private one is gone.
This is the methodology I’ve been following. Although the Federal Loans are accruing more interest they provide more flexibility which I have tapped on before and currently enjoying the benefits of 0% interest.

I got some great responses and I think I’m going to continue to pay everything down aggressively to open up more flexibility down the line.
OP, how much are you paying per month on your student loans? At $200k in debt with those interest rates, how do you plan to pay them off in 5-7 years? You'd have to be paying at $3k/month just on the student loans. That is a HUGE chunk of your take home pay, and doesn't include your car payment or rent (which is very cheap and probably won't stay that way in CA). I would also be concerned about the size of your emergency fund. You won't be able to stay afloat for long with just $4,500 in the bank. It can take lawyers much longer to find a new job when the economy tanks; just look back to 2008/2009.

I think your top priority needs to be to increase your income ASAP in whatever way you can, even if it means taking a big law job you hate. It doesn't sound like you have a government job, so $80-100k after 5 years practicing is low for 2020.

I think you should find a better paying job, dial back on the aggressive loan repayment and build up your emergency fund. I would also caution you against constantly moving firms. I have a lot of lawyer friends, and people who do that are viewed as a perpetual "associate" who never really moves up the ranks because every time you start at a new firm its usually at the bottom.
hoffse
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by hoffse »

Your top priority needs to be increasing your income. At 5 years out of law school, your income is very low for Boston if you are in private practice. For reference, at 5 years out husband and I were both making around $150k each in a southeastern mid-sized city (not Atlanta, Miami, or even Nashville). Our COL was way lower and incomes 50% higher than you are reporting for Boston. An equivalent income in Boston should be substantially higher than my city.

I’m usually in the “stretch law loans out” camp, but in your case the amount is so high relative to your income I think you need to double down on it, at least until you can secure additional income. Contribute to your 401k to get the match and throw the rest of it at your debt.
fyre4ce
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by fyre4ce »

A few things:
  • As has already been stated, you have a high debt to income ratio ($227k/$80k ~= 2.8). You need to address this by a combination of (a) keeping living expenses low - hope you don't like Hawaii, (b) aggressive debt payments, and (c) trying to boost your income. I can't comment on career strategies for lawyers because I don't know much, but you'll be student loan-poor for a while. You can shorten that time by raising your income. $100k in California isn't much - taxes and cost of living are higher than in Boston.
  • Given your debt and income, you're actually doing pretty well. Of your $80k income, $19k is going to taxes, $24k is spent, and $38k (just under half) is going to wealth-building (debt + savings). You'll need to keep this up.
  • I'd favor Roth contributions over Traditional, because you expect your income to rise, and move to a higher-tax state. Does your 401k offer a Roth option, and if it does, can you contribute enough to reach the maximum match without breaking your budget? You should be getting the maximum match as a top priority.
  • I'd suggest using your Roth IRA as a savings account. Remember, contributions can be withdrawn penalty-free (and tax-free). See if you can get at least $3000/year in there, and keep a separate fund inside there invested in cash or bonds to use as an emergency fund. Until you're contributing the max to the IRA ($6k/year), you shouldn't have any savings outside, except what's needed in your checking account to keep from bouncing checks. This money can be reinvested in stocks later, when your income rises, your debts are gone, and you can keep an EF outside the Roth IRA. Definitely an aggressive play, but worth it I think.
  • Pay down debts aggressively. Knock out the $2k/6.5% debt ASAP. If the two student loans are still in forbearance, then start plowing as much as you can against the $98k/3.25% debt. When the two other loans come out of forbearance, see if you can refinance them privately at a lower interest rate.
  • Are there jobs you can take where you'll be eligible for Public Service Loan Forgiveness? Non-profits need lawyers like everyone else I assume.
  • $17k on a car loan is a lot for your situation. This is almost 10% of your total debt. You should sell the car, pay off the loan (transfer the balance to a personal loan if you're under water), and buy a beater with cash. <=$2,500 is good. Can you go without a car in Boston? Going without one in CA will be harder. Inspiration...
Hope that helps. Good luck!
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familythriftmd
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by familythriftmd »

Can lawyers benefit from the same sort of geographic arbitrage as doctors do? Specifically, could he be making MORE money in a lower COL area if it is really short on lawyers, such as personal injury in a primarily Ag and manufacturing community, for instance?
Thrift stores, outlets and market corrections have this in common: you're buying on sale.
Lee_WSP
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by Lee_WSP »

familythriftmd wrote: Sat Sep 19, 2020 6:35 pm Can lawyers benefit from the same sort of geographic arbitrage as doctors do? Specifically, could he be making MORE money in a lower COL area if it is really short on lawyers, such as personal injury in a primarily Ag and manufacturing community, for instance?
No, lawyers are a dime a dozen
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familythriftmd
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by familythriftmd »

So what people are saying is to get a higher-paying job, but that the attorney supply glut is too much. And then other people are saying that OP shouldn't move around so much. Seems like a tough position.
Thrift stores, outlets and market corrections have this in common: you're buying on sale.
Lee_WSP
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by Lee_WSP »

familythriftmd wrote: Sat Sep 19, 2020 7:38 pm So what people are saying is to get a higher-paying job, but that the attorney supply glut is too much. And then other people are saying that OP shouldn't move around so much. Seems like a tough position.
Yup
gclancer
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by gclancer »

fyre4ce wrote: Sat Sep 19, 2020 4:42 pm Hope that helps. Good luck!
Fyre4ce’s post is all great advice. OP - read it closely and best of luck.
soxfan10
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by soxfan10 »

hoffse wrote: Sat Sep 19, 2020 4:08 pm Your top priority needs to be increasing your income. At 5 years out of law school, your income is very low for Boston if you are in private practice. For reference, at 5 years out husband and I were both making around $150k each in a southeastern mid-sized city (not Atlanta, Miami, or even Nashville). Our COL was way lower and incomes 50% higher than you are reporting for Boston. An equivalent income in Boston should be substantially higher than my city.

I’m usually in the “stretch law loans out” camp, but in your case the amount is so high relative to your income I think you need to double down on it, at least until you can secure additional income. Contribute to your 401k to get the match and throw the rest of it at your debt.
As another JD in Boston who is 5-6 years out of law school, there arent a ton of positions that would have a COL adjusted compensation similar to $150k in the southeast. Thats pretty much big firm only level comp - OP isnt getting into a large law firm now.

I have a technically non-legal position that is somewhat similar to your compensation with a minor COL adjustment, but they really arent that common.
Kelrex
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by Kelrex »

familythriftmd wrote: Sat Sep 19, 2020 7:38 pm So what people are saying is to get a higher-paying job, but that the attorney supply glut is too much. And then other people are saying that OP shouldn't move around so much. Seems like a tough position.
My suggestion was actually to start thinking outside the box professionally.

Really savvy people in oversaturated fields start looking closely at the market they work in, where the money is, how the money moves, where there are small holes in the talent supply in various areas of their industry, what skills would meet the demand of those supply holes, and how to get those skills with the least amount of investment and outlay. They would also become absolute experts at networking and use their network to generate a host of opportunities.

Just because someone trained as a lawyer doesn't mean they have to be limited to working as a lawyer until they retire.

There are so, so, so many roles where a legal background, and where knowing a lot of lawyers would be a huge asset.
hoffse
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by hoffse »

soxfan10 wrote: Sat Sep 19, 2020 8:10 pm
hoffse wrote: Sat Sep 19, 2020 4:08 pm Your top priority needs to be increasing your income. At 5 years out of law school, your income is very low for Boston if you are in private practice. For reference, at 5 years out husband and I were both making around $150k each in a southeastern mid-sized city (not Atlanta, Miami, or even Nashville). Our COL was way lower and incomes 50% higher than you are reporting for Boston. An equivalent income in Boston should be substantially higher than my city.

I’m usually in the “stretch law loans out” camp, but in your case the amount is so high relative to your income I think you need to double down on it, at least until you can secure additional income. Contribute to your 401k to get the match and throw the rest of it at your debt.
As another JD in Boston who is 5-6 years out of law school, there arent a ton of positions that would have a COL adjusted compensation similar to $150k in the southeast. Thats pretty much big firm only level comp - OP isnt getting into a large law firm now.

I have a technically non-legal position that is somewhat similar to your compensation with a minor COL adjustment, but they really arent that common.
Husband and I are both in mid-law in the southeast. We are not in big law. His firm has 150 lawyers, mine has about 300 (but primarily concentrated in a very low COL state). As fifth year associates our comp was each within $5k/year of 4 or 5 other mid-sized firms in our city, all within the 150-500 lawyer range. Our comp would have been substantially higher at big law in Atlanta, etc. We know this because we both turned down offers with ~$100k bumps in comp in Atlanta in our fourth and fifth years. The extra money wasn’t worth the horrible lifestyle to us.

Midlaw firms are hiring again. Both of our firms have hired new laterals in the last month, and all of our new associates started on time in the last couple weeks. None of our associates took a pay cut during covid. Nor did my husband (who is still an associate!).

I don’t know Boston’s legal market at all, but midlaw in Boston should absolutely pay more than where I live. If it doesn’t, then OP should look into some geographic arbitrage. COL here is very low.
fyre4ce
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by fyre4ce »

gclancer wrote: Sat Sep 19, 2020 7:57 pm
fyre4ce wrote: Sat Sep 19, 2020 4:42 pm Hope that helps. Good luck!
Fyre4ce’s post is all great advice. OP - read it closely and best of luck.
Thanks.

One more thing for OP: I’d rethink whether this is the best time to move to California. Tax rates here are almost double (9.3% vs 5.05%) and rent is at least that multiple higher. I’m paying just over $3000 for a small 2-bdr that’s really meant for just one person. And we’re getting a deal - our landlord is raising rent to $3700 on the next tenant. Granted, we’re in a higher cost suburb, but you could be too depending on where you work and if you don’t want a long commute. I like the idea of finding a lower cost part of the country where you can work for a few years and burn down this debt. Choose a job/location that you can tolerate and that will maximize your disposable income. And hopefully one that will be at least neutral to your desired career path. I promise, the sunshine, beaches, earthquakes, fires, and smoke will be waiting for you when you’re financially ready! :twisted:
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Surfinfan
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by Surfinfan »

fyre4ce wrote: Sun Sep 20, 2020 7:00 am
gclancer wrote: Sat Sep 19, 2020 7:57 pm
fyre4ce wrote: Sat Sep 19, 2020 4:42 pm Hope that helps. Good luck!
Fyre4ce’s post is all great advice. OP - read it closely and best of luck.
Thanks.

One more thing for OP: I’d rethink whether this is the best time to move to California. Tax rates here are almost double (9.3% vs 5.05%) and rent is at least that multiple higher. I’m paying just over $3000 for a small 2-bdr that’s really meant for just one person. And we’re getting a deal - our landlord is raising rent to $3700 on the next tenant. Granted, we’re in a higher cost suburb, but you could be too depending on where you work and if you don’t want a long commute. I like the idea of finding a lower cost part of the country where you can work for a few years and burn down this debt. Choose a job/location that you can tolerate and that will maximize your disposable income. And hopefully one that will be at least neutral to your desired career path. I promise, the sunshine, beaches, earthquakes, fires, and smoke will be waiting for you when you’re financially ready! :twisted:

I really appreciate the advice. Some really good stuff I hadn’t thought off. First, I am realizing I am being significantly underpaid. My rent now is crazy low even for Boston. But I’m sharing a three bedroom in a “bad” neighborhood. I can’t do without a car now because I work outside the city but I’m going to start looking for jobs again inside the city where I can commute and ditch the car. Relooking at my finance again I’m spending 15% of my take home on transportation including car payment, insurance, fuel and registration. That’s pathetic!

I really like the idea of keeping the emergency fund in cash inside the Roth. How much would you suggest? This has been something I’ve started to reassess with COVID. Up until March I kept it at $1k. Do you think 3-6 months is too conservative with the amount of debt I have?
soxfan10
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by soxfan10 »

hoffse wrote: Sun Sep 20, 2020 6:14 am
soxfan10 wrote: Sat Sep 19, 2020 8:10 pm
hoffse wrote: Sat Sep 19, 2020 4:08 pm Your top priority needs to be increasing your income. At 5 years out of law school, your income is very low for Boston if you are in private practice. For reference, at 5 years out husband and I were both making around $150k each in a southeastern mid-sized city (not Atlanta, Miami, or even Nashville). Our COL was way lower and incomes 50% higher than you are reporting for Boston. An equivalent income in Boston should be substantially higher than my city.

I’m usually in the “stretch law loans out” camp, but in your case the amount is so high relative to your income I think you need to double down on it, at least until you can secure additional income. Contribute to your 401k to get the match and throw the rest of it at your debt.
As another JD in Boston who is 5-6 years out of law school, there arent a ton of positions that would have a COL adjusted compensation similar to $150k in the southeast. Thats pretty much big firm only level comp - OP isnt getting into a large law firm now.

I have a technically non-legal position that is somewhat similar to your compensation with a minor COL adjustment, but they really arent that common.
Husband and I are both in mid-law in the southeast. We are not in big law. His firm has 150 lawyers, mine has about 300 (but primarily concentrated in a very low COL state). As fifth year associates our comp was each within $5k/year of 4 or 5 other mid-sized firms in our city, all within the 150-500 lawyer range. Our comp would have been substantially higher at big law in Atlanta, etc. We know this because we both turned down offers with ~$100k bumps in comp in Atlanta in our fourth and fifth years. The extra money wasn’t worth the horrible lifestyle to us.

Midlaw firms are hiring again. Both of our firms have hired new laterals in the last month, and all of our new associates started on time in the last couple weeks. None of our associates took a pay cut during covid. Nor did my husband (who is still an associate!).

I don’t know Boston’s legal market at all, but midlaw in Boston should absolutely pay more than where I live. If it doesn’t, then OP should look into some geographic arbitrage. COL here is very low.
Sure - those places pay more than $150k a lot of them are closer to typical big firm pay grades than $150k. However, unless OP has some special niche where hes being really underpaid, he has no realistic chance of being hired at those firms. They pay similarly to big law and they look for the same type of people (i.e., they hire out of OCI at schools and then predominantly/almost exclusively from the larger firms as people get tired of them).
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mmmodem
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by mmmodem »

Surfinfan wrote: Sun Sep 20, 2020 7:39 am I really like the idea of keeping the emergency fund in cash inside the Roth. How much would you suggest? This has been something I’ve started to reassess with COVID. Up until March I kept it at $1k. Do you think 3-6 months is too conservative with the amount of debt I have?
In addition to doing what fyre4ce wrote, I’d max out the Roth IRA. The Roth IRA is such flexible and valuable space that you shouldn’t waste it. You can take out contributions without penalty and gains are tax free. The government limits your Roth IRA contribution to $6000 this year. I’d argue you should max it out this year and every year if you can even with your debt load. It’s second priority after 401k match because the Roth IRA doubles as an emergency fund and savings.

You can use all your savings to max out your Roth IRA right now. If it makes you nervous to dump your savings into a Roth IRA all at once, you can dollar cost average slowly by contributing $500/month which would’ve maxed it out if you started at the beginning of the year. Stop your savings and that leaves you $300 short on your budget. Take that out of your emergency fund a month instead and slowly transition to the Roth IRA as your emergency fund. Be sure you contribute the max for 2020 by April tax day 2021.

I’d encourage you to sell the car and get a beater but if it’s a sure thing you’ll be moving in less than a year, just sell it then. It will be too much trouble to worry about selling a car twice in a year especially during COVID. Buy a beater in California.
tashnewbie
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by tashnewbie »

A few follow up questions:

1. Where are you from? Your OP suggested you’re not from NE or CA. Would there be any desire to move back? Close family or friend ties, job opportunities?
2. What type of law have you been practicing?
3. Would you have reciprocity/be able to waive into any state’s bar? I know some states allow attorneys who’ve practiced in other states for a certain amount of time to be admitted into the bar without examination.
4. What makes you want to move to CA? Have you explored job opportunities in CA?
uthendo
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by uthendo »

I've got an out-of-the-box idea for you. Enroll in an online college half-time. I'm taking classes at my local community college. Online is great because it doesn't prevent me from going to my 9-5 job. If you're enrolled at least half-time, all loans are deferred... in the case of subsidized federal loans the government covers the interest. Because of the size of your loans you might find that the cost per semester ($1k for me) is much less than the interest being covered. The classes are tax deductible if you can find something that's relevant to your work, which is doubtful. You'll have to do the math to see if it makes sense for you.
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anon_investor
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by anon_investor »

soxfan10 wrote: Sun Sep 20, 2020 8:15 am
hoffse wrote: Sun Sep 20, 2020 6:14 am
soxfan10 wrote: Sat Sep 19, 2020 8:10 pm
hoffse wrote: Sat Sep 19, 2020 4:08 pm Your top priority needs to be increasing your income. At 5 years out of law school, your income is very low for Boston if you are in private practice. For reference, at 5 years out husband and I were both making around $150k each in a southeastern mid-sized city (not Atlanta, Miami, or even Nashville). Our COL was way lower and incomes 50% higher than you are reporting for Boston. An equivalent income in Boston should be substantially higher than my city.

I’m usually in the “stretch law loans out” camp, but in your case the amount is so high relative to your income I think you need to double down on it, at least until you can secure additional income. Contribute to your 401k to get the match and throw the rest of it at your debt.
As another JD in Boston who is 5-6 years out of law school, there arent a ton of positions that would have a COL adjusted compensation similar to $150k in the southeast. Thats pretty much big firm only level comp - OP isnt getting into a large law firm now.

I have a technically non-legal position that is somewhat similar to your compensation with a minor COL adjustment, but they really arent that common.
Husband and I are both in mid-law in the southeast. We are not in big law. His firm has 150 lawyers, mine has about 300 (but primarily concentrated in a very low COL state). As fifth year associates our comp was each within $5k/year of 4 or 5 other mid-sized firms in our city, all within the 150-500 lawyer range. Our comp would have been substantially higher at big law in Atlanta, etc. We know this because we both turned down offers with ~$100k bumps in comp in Atlanta in our fourth and fifth years. The extra money wasn’t worth the horrible lifestyle to us.

Midlaw firms are hiring again. Both of our firms have hired new laterals in the last month, and all of our new associates started on time in the last couple weeks. None of our associates took a pay cut during covid. Nor did my husband (who is still an associate!).

I don’t know Boston’s legal market at all, but midlaw in Boston should absolutely pay more than where I live. If it doesn’t, then OP should look into some geographic arbitrage. COL here is very low.
Sure - those places pay more than $150k a lot of them are closer to typical big firm pay grades than $150k. However, unless OP has some special niche where hes being really underpaid, he has no realistic chance of being hired at those firms. They pay similarly to big law and they look for the same type of people (i.e., they hire out of OCI at schools and then predominantly/almost exclusively from the larger firms as people get tired of them).
+1. It is definitely easier said than done to move up.

I wonder if the OP's current firm offers a cut of any business the OP brings in. Some small firms offer associates a cut (~20%) of any business they bring in.
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Surfinfan
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by Surfinfan »

tashnewbie wrote: Sun Sep 20, 2020 8:37 am A few follow up questions:

1. Where are you from? Your OP suggested you’re not from NE or CA. Would there be any desire to move back? Close family or friend ties, job opportunities?
2. What type of law have you been practicing?
3. Would you have reciprocity/be able to waive into any state’s bar? I know some states allow attorneys who’ve practiced in other states for a certain amount of time to be admitted into the bar without examination.
4. What makes you want to move to CA? Have you explored job opportunities in CA?

Great questions.

'm from Long Island, NY. Came to Boston for Law School and stayed. My parents recently (January 2020) moved down to Tennessee to retire and my sister is the only one still in NY. I do have really close friends still living in NY and they have talked about me starting my own firm to do closings for their real estate business. They have a ton of work, and are doing quite well. I will actually have reciprocity in NY this November. I currently do real estate law, evictions, land use, permitting, ect. I haven't done closings before though.

When I was applying to law schools in 2012 almost all the schools I applied to were in CA. I went out and visited and everything and loved it. I choose the school in Boston because they offered me a $90k scholarship. My research about the CA job market is that it is very similar to Boston. A lot of lawyers and salaries about the same averaging about $100k.

Part of me is hoping that at the very least it will just open up different job markets to apply to. Part of me thinks the job market in Boston is stagnate.
ChinchillaWhiplash
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by ChinchillaWhiplash »

Cost of living in CA is high. Any way to go somewhere a lot cheaper? Car loan was a bad idea. If you owe less than the car is still worth. Dump it and buy a cheap beater. Refi on private loans. Rates are low right now. I would max out the 401k as far as getting the match. That would be giving up free money. EF to get through at least 2 months. Everything else to pay off loans. If any other debt like CC, roll over to 0% card and pay off ASAP.
hoffse
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by hoffse »

soxfan10 wrote: Sun Sep 20, 2020 8:15 am
hoffse wrote: Sun Sep 20, 2020 6:14 am
soxfan10 wrote: Sat Sep 19, 2020 8:10 pm
hoffse wrote: Sat Sep 19, 2020 4:08 pm Your top priority needs to be increasing your income. At 5 years out of law school, your income is very low for Boston if you are in private practice. For reference, at 5 years out husband and I were both making around $150k each in a southeastern mid-sized city (not Atlanta, Miami, or even Nashville). Our COL was way lower and incomes 50% higher than you are reporting for Boston. An equivalent income in Boston should be substantially higher than my city.

I’m usually in the “stretch law loans out” camp, but in your case the amount is so high relative to your income I think you need to double down on it, at least until you can secure additional income. Contribute to your 401k to get the match and throw the rest of it at your debt.
As another JD in Boston who is 5-6 years out of law school, there arent a ton of positions that would have a COL adjusted compensation similar to $150k in the southeast. Thats pretty much big firm only level comp - OP isnt getting into a large law firm now.

I have a technically non-legal position that is somewhat similar to your compensation with a minor COL adjustment, but they really arent that common.
Husband and I are both in mid-law in the southeast. We are not in big law. His firm has 150 lawyers, mine has about 300 (but primarily concentrated in a very low COL state). As fifth year associates our comp was each within $5k/year of 4 or 5 other mid-sized firms in our city, all within the 150-500 lawyer range. Our comp would have been substantially higher at big law in Atlanta, etc. We know this because we both turned down offers with ~$100k bumps in comp in Atlanta in our fourth and fifth years. The extra money wasn’t worth the horrible lifestyle to us.

Midlaw firms are hiring again. Both of our firms have hired new laterals in the last month, and all of our new associates started on time in the last couple weeks. None of our associates took a pay cut during covid. Nor did my husband (who is still an associate!).

I don’t know Boston’s legal market at all, but midlaw in Boston should absolutely pay more than where I live. If it doesn’t, then OP should look into some geographic arbitrage. COL here is very low.
Sure - those places pay more than $150k a lot of them are closer to typical big firm pay grades than $150k. However, unless OP has some special niche where hes being really underpaid, he has no realistic chance of being hired at those firms. They pay similarly to big law and they look for the same type of people (i.e., they hire out of OCI at schools and then predominantly/almost exclusively from the larger firms as people get tired of them).
This is really an overstatement IMO. More than 2/3 of our attorneys were lateral hires, very few from big law (almost none actually because most of those people aren’t a good culture fit for us). My husband’s firm is more OCI-to-partner than mine is, but they have been on an aggressive lateral hiring streak recently as well. Again, they generally don’t hire from big law.

My point is you can’t lump all firms in the same bucket, or even all geographic locations in the same bucket.

As I said, I don’t know Boston’s legal market, but I know mine pretty well and other southeastern cities pretty well too. The midlaw door may not be fully closed to OP in some of those markets if he is willing to move. A move to TN would be compelling because he could tell a recruiter his parents just moved there. Our single largest issue is convincing people to give the south a shot - and most southern firms want some “tie” to the south because they don’t want to invest in you if you plan to leave. Once people move here though, they tend to stay. I suspect the Midwest is similar.

From your experience it sounds like New England is less open to the kind of lateral move I am describing. There is a glut of top tier law schools up there, so I can see why that might be. I would guess California behaves the same way. It’s really not like that everywhere though.

OP, if you are willing to think outside the box and really focus on increasing your income I think you can right this ship.
soxfan10
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by soxfan10 »

hoffse wrote: Sun Sep 20, 2020 1:34 pm
soxfan10 wrote: Sun Sep 20, 2020 8:15 am
hoffse wrote: Sun Sep 20, 2020 6:14 am
soxfan10 wrote: Sat Sep 19, 2020 8:10 pm
hoffse wrote: Sat Sep 19, 2020 4:08 pm Your top priority needs to be increasing your income. At 5 years out of law school, your income is very low for Boston if you are in private practice. For reference, at 5 years out husband and I were both making around $150k each in a southeastern mid-sized city (not Atlanta, Miami, or even Nashville). Our COL was way lower and incomes 50% higher than you are reporting for Boston. An equivalent income in Boston should be substantially higher than my city.

I’m usually in the “stretch law loans out” camp, but in your case the amount is so high relative to your income I think you need to double down on it, at least until you can secure additional income. Contribute to your 401k to get the match and throw the rest of it at your debt.

As another JD in Boston who is 5-6 years out of law school, there arent a ton of positions that would have a COL adjusted compensation similar to $150k in the southeast. Thats pretty much big firm only level comp - OP isnt getting into a large law firm now.

I have a technically non-legal position that is somewhat similar to your compensation with a minor COL adjustment, but they really arent that common.
Husband and I are both in mid-law in the southeast. We are not in big law. His firm has 150 lawyers, mine has about 300 (but primarily concentrated in a very low COL state). As fifth year associates our comp was each within $5k/year of 4 or 5 other mid-sized firms in our city, all within the 150-500 lawyer range. Our comp would have been substantially higher at big law in Atlanta, etc. We know this because we both turned down offers with ~$100k bumps in comp in Atlanta in our fourth and fifth years. The extra money wasn’t worth the horrible lifestyle to us.

Midlaw firms are hiring again. Both of our firms have hired new laterals in the last month, and all of our new associates started on time in the last couple weeks. None of our associates took a pay cut during covid. Nor did my husband (who is still an associate!).

I don’t know Boston’s legal market at all, but midlaw in Boston should absolutely pay more than where I live. If it doesn’t, then OP should look into some geographic arbitrage. COL here is very low.
Sure - those places pay more than $150k a lot of them are closer to typical big firm pay grades than $150k. However, unless OP has some special niche where hes being really underpaid, he has no realistic chance of being hired at those firms. They pay similarly to big law and they look for the same type of people (i.e., they hire out of OCI at schools and then predominantly/almost exclusively from the larger firms as people get tired of them).
This is really an overstatement IMO. More than 2/3 of our attorneys were lateral hires, very few from big law (almost none actually because most of those people aren’t a good culture fit for us). My husband’s firm is more OCI-to-partner than mine is, but they have been on an aggressive lateral hiring streak recently as well. Again, they generally don’t hire from big law.

My point is you can’t lump all firms in the same bucket, or even all geographic locations in the same bucket.

As I said, I don’t know Boston’s legal market, but I know mine pretty well and other southeastern cities pretty well too. The midlaw door may not be fully closed to OP in some of those markets if he is willing to move. A move to TN would be compelling because he could tell a recruiter his parents just moved there. Our single largest issue is convincing people to give the south a shot - and most southern firms want some “tie” to the south because they don’t want to invest in you if you plan to leave. Once people move here though, they tend to stay. I suspect the Midwest is similar.

From your experience it sounds like New England is less open to the kind of lateral move I am describing. There is a glut of top tier law schools up there, so I can see why that might be. I would guess California behaves the same way. It’s really not like that everywhere though.

OP, if you are willing to think outside the box and really focus on increasing your income I think you can right this ship.
I was speaking about Boston. I do not know the market that well elsewhere.
fyre4ce
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by fyre4ce »

Surfinfan wrote: Sun Sep 20, 2020 7:39 am
fyre4ce wrote: Sun Sep 20, 2020 7:00 am
gclancer wrote: Sat Sep 19, 2020 7:57 pm
fyre4ce wrote: Sat Sep 19, 2020 4:42 pm Hope that helps. Good luck!
Fyre4ce’s post is all great advice. OP - read it closely and best of luck.
Thanks.

One more thing for OP: I’d rethink whether this is the best time to move to California. Tax rates here are almost double (9.3% vs 5.05%) and rent is at least that multiple higher. I’m paying just over $3000 for a small 2-bdr that’s really meant for just one person. And we’re getting a deal - our landlord is raising rent to $3700 on the next tenant. Granted, we’re in a higher cost suburb, but you could be too depending on where you work and if you don’t want a long commute. I like the idea of finding a lower cost part of the country where you can work for a few years and burn down this debt. Choose a job/location that you can tolerate and that will maximize your disposable income. And hopefully one that will be at least neutral to your desired career path. I promise, the sunshine, beaches, earthquakes, fires, and smoke will be waiting for you when you’re financially ready! :twisted:

I really appreciate the advice. Some really good stuff I hadn’t thought off. First, I am realizing I am being significantly underpaid. My rent now is crazy low even for Boston. But I’m sharing a three bedroom in a “bad” neighborhood. I can’t do without a car now because I work outside the city but I’m going to start looking for jobs again inside the city where I can commute and ditch the car. Relooking at my finance again I’m spending 15% of my take home on transportation including car payment, insurance, fuel and registration. That’s pathetic!

I really like the idea of keeping the emergency fund in cash inside the Roth. How much would you suggest? This has been something I’ve started to reassess with COVID. Up until March I kept it at $1k. Do you think 3-6 months is too conservative with the amount of debt I have?
Emergency Fund size depends on a variety of factors. Dave Ramsey's advice is $1,000 until all your non-mortgage debt is paid off, which is about where you are now. I prefer to think about it more in terms of what kind of emergencies you can realistically expect, and what sources of funds are. If a combination of family help, 0% credit card promotions, home equity loans, etc could get you through a worst-case emergency, maybe you don't need an EF at all. A worst-case situation for you is probably a simultaneous job loss and stock market crash (the two often go together). That means I wouldn't rely on any stocks within your Roth IRA to provide your primary EF, because they could lose half their value just when you need them the most. Also, what happens to your loans if you lose your job? I know two are in forbearance now, but if that expires and you then lose your job, will the lenders defer payments? Or do you have to go into some kind of default situation? Given your income and assets, I don't think it's realistic to get an EF big enough to cover a long period of no income and large debt payments, so it may not be worth trying.

I would aim a tiered approach within the Roth IRA. Maybe 20% cash, 30% intermediate term bonds, and the rest in stocks. That way you're striking a good balance between expected returns and liquidity. Another poster recommended trying to get the full $6,000/year into the Roth IRA, and I think that's a good idea if you can, even if it comes at the expense of slightly slower loan burndown. But burning down the loans still needs to be your primary focus.
Lee_WSP
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by Lee_WSP »

fyre4ce wrote: Mon Sep 21, 2020 10:02 am I know two are in forbearance now, but if that expires and you then lose your job, will the lenders defer payments? Or do you have to go into some kind of default situation?
The federal ones can be put into deferment at least once or twice during the loans lifetime. Barring that, they can be put into a lower payment threshold, but it'd be better to put them into an IBR and have 0 payments. It'll take a few months to process, but the servicer can probably put the loan into a 1-2 month deferment.

The private loan is completely up to the servicer. I don't know much about them in that department.

We all know what happens to his other debts though. :beer :sharebeer
SheReadsHere719
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Re: Aggressive SL Debt Pay down v. Not meeting other goals

Post by SheReadsHere719 »

fyre4ce wrote: Sat Sep 19, 2020 4:42 pm
  • I'd suggest using your Roth IRA as a savings account. Remember, contributions can be withdrawn penalty-free (and tax-free). See if you can get at least $3000/year in there, and keep a separate fund inside there invested in cash or bonds to use as an emergency fund. Until you're contributing the max to the IRA ($6k/year), you shouldn't have any savings outside, except what's needed in your checking account to keep from bouncing checks. This money can be reinvested in stocks later, when your income rises, your debts are gone, and you can keep an EF outside the Roth IRA. Definitely an aggressive play, but worth it I think.
  • Pay down debts aggressively. Knock out the $2k/6.5% debt ASAP. If the two student loans are still in forbearance, then start plowing as much as you can against the $98k/3.25% debt. When the two other loans come out of forbearance, see if you can refinance them privately at a lower interest rate.
  • Are there jobs you can take where you'll be eligible for Public Service Loan Forgiveness? Non-profits need lawyers like everyone else I assume.
  • $17k on a car loan is a lot for your situation. This is almost 10% of your total debt. You should sell the car, pay off the loan (transfer the balance to a personal loan if you're under water), and buy a beater with cash. <=$2,500 is good. Can you go without a car in Boston? Going without one in CA will be harder. Inspiration...
Hope that helps. Good luck!
+2 this is excellent advice. OP have you investigated whether you're eligible for PSLF in your current role?
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