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I'm not entirely sure where this question belongs. If this isn't the right place I apologize in advance. I'm a law student and I've been hired by a law firm and I'll be starting fall of 2012 (provided I pass the bar, god willing). That's awesome because I love the firm and the income is very high, but I'm a guy who has paid his way through both undergrad and law school and as a result I have tons of federal student loan debt. I have just under $160,000 (about 5% are Perkins loans, 45% are Stafford loans and the rest are GradPLUS) in federal student debt and my income will be just over ~$100,000 the first year. I have absolutely no other debt of any kind. Where I'm confused is that I'm not sure how to formulate a plan. Should I pay off the debt as fast as possible? Should I reconsolidate and invest? Should I use the IBR plan to cap my payments and have the government eat the rest after 25 years? I know I have a lot of options but I'm not sure where to start thinking about this. Any advice?
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Sep 15, 2011 17:55
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Feces Starship posted:Should I use the IBR plan to cap my payments and have the government eat the rest after 25 years? Have you looked at the IBR calculators? If you're single and making over $100,000+ with expected salary increases, is IBR really going to save you a lot of money? I realize your monthly payments will be lower, but by extending it out over 25 years, won't you have more interest, yet still pay it all back (principal + interest) before the 25 years are up? I'm not an IBR expert, I just think with your income to debt ratio, you're probably not someone who is going to be super benefited by IBR.
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Sep 15, 2011 22:39
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Feces Starship posted:I'm not entirely sure where this question belongs. If this isn't the right place I apologize in advance. Your option is the same way everyone else gets out of debt. Roll up your sleeves, get on a written budget, and life on less than you make. There are two things you will have to guard against: The thought that there is an easy way to pay them off, and you can do it by playing interest rate games and investing your way out of this. The other thing is $100,000 good money, but since you are starting out there, you will rub elbows with your more established coworkers and rich clients. When you see the types of cars they drive and where they go on vacation, your view of what is normal will be skewed and the temptation will be to spend all of it and more on the material trappings of being a lawyer and think you will pay it back when you are earning even more money.
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Sep 15, 2011 23:05
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Ashcans posted:Where did you apply for an unsecured card? If you have your savings in a local bank/credit union, go in and ask them about credit cards. I got my first credit card (which was unsecured) by going to my bank and talking to them. It was a lovely low-limit card but they were happy to give it to me because I had been banking with them for a couple years and they could look at that history as well as my raw score. This is actually exactly what I did, thinking that if I just explained my situation to someone who can look at my account balances and direct deposit amounts I'd get some exception. I do my checking and saving through Chase; went to a branch and talked to two people who didn't seem know anything and only tried to upsell me on some mutual fund accounts before referring me to their website wrt credit cards. Online application came back "insufficient data to determine yadda yadda".
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Sep 16, 2011 01:24
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Chase sucks at everything.
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Sep 16, 2011 03:00
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Mexican Radio posted:salary: 90k/year Big banks are stupid. As stated before, you really have 2 options. If you like Chase, or need to stay with them, get a secured card. If you don't like Chase, join a credit union or smaller bank, and they'll be happy to give you a card.
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Sep 16, 2011 03:36
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Feces Starship posted:I'm not entirely sure where this question belongs. If this isn't the right place I apologize in advance. The plan: I assume your rates are the fixed ones (i.e 6.8% for Stafford, 8.5% for GradPLUS, and I don't know for Perkins). First, IBR is not meant for you. IBR is meant for people who make so little that they can't afford the payments. If you were to stretch it out over 25 years, the interest would almost certainly exceed your expected savings by having the government write it off at the end. To put it another way, do you really want to still be trying to get the government to eat the remainder of your loans when you're 50? 1)Pay it off right away, no consolidation - start paying whatever monthly payments they set for you, and then taking any extra money you have every month to first set up a small emergency fund for yourself of a few grand and then throwing the rest at the loans. If you give us more information about your monthly paycheck/monthly payments, we can help you figure a good amount to throw in extra each month. If you get a bonus, throw that in there as well. You should be able to pay it all off in 3-6 years, depending on how tight a budget you can keep. 2)Pay it off right away, consolidation - see if you can get a lower interest loan than 8.5%. Interest rates are low right now, but I doubt this is possible anyways...maybe I'm wrong. If you can, bully for you - it will save you money on interest while you follow plan 1. 3)Interest rate arbitrage - if you think you can use your money to earn a return higher than the interest you're paying (6.8-8.5%), then do that. If not, plans 1 or 2. I hate the idea of paying interest, because it is money that I don't need to spend if only I had the ability to pay off my loans faster. You do, so go for it! Good luck, and you can post more info when you get it (paycheck, budget, monthly payments).
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Sep 16, 2011 16:16
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Edit: doublepost
maskenfreiheit fucked around with this message at 01:40 on Mar 13, 2017 |
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Sep 16, 2011 16:39
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Many financial institutions use a paltform called "Titan" to underwrite cards. This uses FICO only as a small subset of it's decision engine. Things like deposit balance (if you bank with them), and other factors (over drafts, etc.) are weiged heavier because not only are they more predicitive, but it makes sense from a core deposit point of view as well.
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Sep 16, 2011 16:54
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kaishek posted:3)Interest rate arbitrage - if you think you can use your money to earn a return higher than the interest you're paying (6.8-8.5%), then do that. If not, plans 1 or 2. I was with you until you said this. Reading his original question, paying it back didn’t seem like that high of a priority. My reading of it is he wanted the green light to stretch these out as long as possible. That said, he can not invest his way out of this debt, especially if you are correct about his rates. He makes too much money to be able to deduct the student loan interest. If he invests out of retirement, he will pay taxes on his investments. Assuming he is in the 33% tax bracket, he will need to make about 9% to come out ahead if his loans are 6.8%, over 11% if they are 8.5%. This doesn’t factor in his state taxes. Thinking you can get a higher return than 6.8% to 8.5% is different than actually doing it. In addition to try to get a higher than that means stocks, the risk is not negligible. Paying off these loans is a 100% guaranteed return. Are you suggesting he go out and borrow money at 6.8% and use it to play the stock market?
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Sep 16, 2011 17:07
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Zeta Taskforce posted:Reading his original question, paying it back didn’t seem like that high of a priority. My reading of it is he wanted the green light to stretch these out as long as possible. EDIT: I typed some stuff that was too negative. Thank you for your advice but the assumption was wrong. If my phrasing made you think that I apologize but I'm just new to budgeting with big expenses and big income. kaishek posted:The plan: Excellent advice, thank you. I have four different interest rates. A Perkins loan (only about 5% of my loans) at 5% APR, Stafford subsidized and unsubsidized (about 45% of my loans) at 6.8% APR, GradPLUS (about 40%) at 7.9%, and FFEL PLUS loans (about 10%) at 8.25%. All are federal loans, none of them are private, and all interest rates are fixed. I guess this is the current question I'm currently pondering - why does anybody with extra money to spend on loan repayment consolidate their student loans at all other than the extremely small benefit of writing only one check? Wouldn't it make the most sense for me to make minimum payments on every loan except my highest interest rate ones in order to pay back those most quickly? Why don't people seem to snowball their loans according to interest rates when it comes to student loans? Feces Starship fucked around with this message at 17:31 on Sep 16, 2011 |
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Sep 16, 2011 17:27
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I got a crappy $1500 limit capital one card with a $39 annual fee a few years ago when I was first working on building my credit. My credit is now pretty good and I have Discover and Amex blue cards. How much of a hit would my credit take if I canceled my account with capital one? Would it be worth it so I don't have to pay the $39 every year when I never use the card?
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Sep 16, 2011 18:36
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Not enough of a hit to warrant paying $40 annually. Your credit will take care of itself as long as you don't gently caress around and play games. Just take care of your poo poo and you'll be just fine. Any notable difference will resolve itself in a short amount of time.
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Sep 16, 2011 22:36
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Zeta Taskforce posted:I was with you until you said this. My bad - I intended to include it as an option only to illustrate that is was not feasible/recommended. By "if you think you can get a return better than XX, do that" I was trying to illustrate the difficulty of "beating" the loan rates [THIS ECONOMY, AM I RIGHT FOLKS]. No, that is not at all what I'm suggesting. Options 1 or 2! Feces Starship posted:I guess this is the current question I'm currently pondering - why does anybody with extra money to spend on loan repayment consolidate their student loans at all other than the extremely small benefit of writing only one check? Wouldn't it make the most sense for me to make minimum payments on every loan except my highest interest rate ones in order to pay back those most quickly? Why don't people seem to snowball their loans according to interest rates when it comes to student loans? It used to be the case [THIS ECONOMY, AM I RIGHT FOLKS] that you could consolidate at a lower interest rate - I actually did this, consolidating two roughly 4% loans into a 2.3% loan. Consolidation (and someone can correct me if I am wrong) can make sense if you can get a lower interest rate (if, for example, you got totally shafted on a loan and find a better rate) and if you expect rates to stay low for a while if the rate is flexible. Flexible rates are incredibly dangerous...the fixed rates of govt loans are higher than they used to be, but at least they can't jack them up on you. It does indeed make the most sense to do as you said. And the answer to your question is that people don't like to think very hard about this stuff. They are given a payment, and they pay it without considering that they can shorten the duration of those payments.
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Sep 17, 2011 18:17
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I have a friend in need of some help regarding credit card consolidation. She has 8 credit card bills to keep up with after bad decisions during college, and she is looking to pay 1 payment instead of 8 plus another 3 or 4 in school loans. Can someone point me to us some reputable credit card debt consolidation companies? Also, some pros and cons of doing this would be very helpful. How will it affect her credit score? How much more does she end up paying? What's the catch?
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Sep 20, 2011 01:21
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Feces Starship posted:I guess this is the current question I'm currently pondering - why does anybody with extra money to spend on loan repayment consolidate their student loans at all other than the extremely small benefit of writing only one check? Wouldn't it make the most sense for me to make minimum payments on every loan except my highest interest rate ones in order to pay back those most quickly? Why don't people seem to snowball their loans according to interest rates when it comes to student loans? They either don't know better or there is some mental aspect to paying them off at once. I had a friend who got into debt and paid off his credit cards not by interest rate, but by balance because it felt to him like he was accomplishing things along the way faster. But you should do as you mentioned above. I would also second the advice about building a small emergency fund first. Congrats on the job and the start toward becoming debt free. I just got a letter in the mail from one of mine saying it was all paid off and it's a great feeling.
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Sep 20, 2011 07:53
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heyniceperro posted:I got a crappy $1500 limit capital one card with a $39 annual fee a few years ago when I was first working on building my credit. My credit is now pretty good and I have Discover and Amex blue cards. How much of a hit would my credit take if I canceled my account with capital one? Would it be worth it so I don't have to pay the $39 every year when I never use the card? If you're able to get an Amex and Discover, I'd say your credit is at a point where you don't need to worry about it. From what I've seen it's a bigger issue for those who don't have much of a credit history at all.
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Sep 20, 2011 07:54
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I've had 3 cards for several years now and I've just only recently started paying them off because now I can afford to, I'm wondering if I should cancel 2 of them when they're paid off or just lower the limit?
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Sep 20, 2011 13:13
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whatupdet posted:I've had 3 cards for several years now and I've just only recently started paying them off because now I can afford to, I'm wondering if I should cancel 2 of them when they're paid off or just lower the limit?
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Sep 20, 2011 13:53
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hog wizard posted:I have a friend in need of some help regarding credit card consolidation. She has 8 credit card bills to keep up with after bad decisions during college, and she is looking to pay 1 payment instead of 8 plus another 3 or 4 in school loans. How much debt are we talking about? Virtually all of the credit card companies range somewhere between incompetent and criminal. The concept is you pay them one payment, and they divvy it up to all the creditors. What ends up happening is they send out the payments at the wrong time, or they forget, or it goes to the wrong place. Of course sometimes they just steal your money and don’t send it to anyone. They make all kinds of promises how they will negotiate your debt down. Pretty much the only way either you, or they can do this is if the accounts are severely delinquent. Credit card companies are not in the business of lopping off balances on current accounts because they are nice or some company asks them to. Some will tell you do strategically default, which will trash her credit, and these tend to be the scummy ones that will run off with your money. If she really wanted to do it, she can look into Money Management International (MMI), formerly CCCS. This is the industry supported national one, and the only one I would touch with a 10 foot pole. A consolidation loan is a better prospect IF AND ONLY IF SHE DOESN’T EVER USE CARDS AGAIN. A bank or a credit union will give you a loan, usually a fixed rate loan, and pay off all the credit cards, which are usually variable. Its good because a term loan keeps you honest. If you get a 2 year loan, in 2 years the debt is paid. You can make payments on cards for 2 years and get nowhere. But there is no magic consolidation fairy dust or interest rate game that makes the debt go away. But because minimum payments on credit cards can be so low, many, most people’s loan payments do not go down. Of course its because they are paying down their debt as opposed to just servicing it. But if someone is struggling to make their card payments, they will struggle to make their consolidation loan payments. Regardless of what you do, credit cards and student loans are completely different. Student loans are usually lower rates, fixed rates, various payment plans, and can be deferred or put in forbearance if you hit a rough patch. Credit cards or consolidation loans do not have most of these features. Pay student loans off directly, don’t put them in a consolidation loan. Don’t do anything with an eye only on the credit score. If you stay current on everything, pay down and off your debts, and borrow responsibly and sparingly, your credit will take care of itself.
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Sep 20, 2011 14:01
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Ulf posted:If you can trust yourself not to run them up again, it would be best to do neither.
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Sep 20, 2011 14:16
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What is the benefit IF you will not use those cards without paying in full every month/won't use the cards at all unless you were truly in an emergency?
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Sep 20, 2011 14:28
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I don’t think there is a right or wrong answer. I don’t agree that no one should ever close a credit card for any reason like you have to hold on to them like they are precious charm bracelets. But even if you intend to never use them again, until you have a fully funded emergency fund, it could be counterproductive to say the least to close and cut up everything in a moment of passion.
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Sep 20, 2011 14:45
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Zeta Taskforce posted:How much debt are we talking about? She's told me about $10k. The problem for her isn't the balance, but the fact that she has trouble keeping up with so many different bills. She doesn't have trouble paying off the monthly payments (I told her to pay off the lower balance first rather than going for the highest APR) - although it would help, obviously financially but more psychologically, to have a lower balance. quote:CC consolidation I thought so. I'll let her read your post because I don't want her getting tricked into this ordeal. quote:A consolidation loan is a better prospect IF AND ONLY IF SHE DOESN’T EVER USE CARDS AGAIN. A bank or a credit union will give you a loan, usually a fixed rate loan, and pay off all the credit cards, which are usually variable. Its good because a term loan keeps you honest. If you get a 2 year loan, in 2 years the debt is paid. You can make payments on cards for 2 years and get nowhere. But there is no magic consolidation fairy dust or interest rate game that makes the debt go away. But because minimum payments on credit cards can be so low, many, most people’s loan payments do not go down. Of course its because they are paying down their debt as opposed to just servicing it. But if someone is struggling to make their card payments, they will struggle to make their consolidation loan payments. I may suggest this to her, but I imagine her credit is piss poor now and wouldn't even be able to take out a loan. There was a period of time about 5 years ago when she was having trouble keeping up with payments. She originally started out with 13, and she's down to 8. It's a progress. quote:Regardless of what you do, credit cards and student loans are completely different. Student loans are usually lower rates, fixed rates, various payment plans, and can be deferred or put in forbearance if you hit a rough patch. Credit cards or consolidation loans do not have most of these features. Pay student loans off directly, don’t put them in a consolidation loan. Yeah, she doesn't plan on messing with the student loan. I told her to keep paying her bills on time and her credit will eventually restore itself back to a "normal" score.
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Sep 20, 2011 15:19
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$10000 is enough, but not a ridiculous amount and the interest is not killing her. My guess is some of them are fairly small and $2000 might get rid of half of them. She sounds like an ideal candidate for the Dave Ramsey debt snowball. Check out his daily podcast.
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Sep 20, 2011 15:26
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Zeta Taskforce posted:$10000 is enough, but not a ridiculous amount and the interest is not killing her. My guess is some of them are fairly small and $2000 might get rid of half of them. She sounds like an ideal candidate for the Dave Ramsey debt snowball. Check out his daily podcast. Yes, you're rather correct with your guess. She has a few CCs with a couple thousand dollars in debt, but the rest are small - like $300-$600. She's been doing her best to pay these off starting with the smallest balance, but poo poo keeps coming up like owing the IRS $700+ this year.
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Sep 20, 2011 15:51
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Zeta Taskforce posted:I don’t think there is a right or wrong answer. I don’t agree that no one should ever close a credit card for any reason like you have to hold on to them like they are precious charm bracelets. But even if you intend to never use them again, until you have a fully funded emergency fund, it could be counterproductive to say the least to close and cut up everything in a moment of passion.
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Sep 20, 2011 16:19
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whatupdet posted:I can trust myself not to make that mistake again but I'm curious why you say neither?
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Sep 20, 2011 18:32
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Interesting, I figured future creditors would be wary to offer more credit in case I decided to max them all out I might not be able to meet all my monthly obligations.
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Sep 20, 2011 18:48
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Recently my bank has decided to charge me $4 per transaction with my debit card on my account unless I upgrade to the account with a $12 monthly charge. Having gone to them because Bank of America (may they rot in hell soon) was going to do something similar, I am in the market for a bank that has the least amount of bullshit fees and such. So I'm now considering internet banking except I don't know how to distinguish between Legit Bank Corp and Uncle's Joes Backyard Bank Bonanza! due to staying with only brick and mortar places all of my life Does anyone have any recommendations? Debt card is my most used payment method, but free withdraws from ATMs is a nice bonus as well.
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Sep 20, 2011 19:20
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I don't know much about online-only banking, but look into a credit union. If you're in Washington I highly recommend BECU. No fees on anything, huge ATM network (part of the CO-OP network), still have access to real, helpful people if you need help with anything. How the hell can a bank even begin to justify $4 per debit transaction?? I've never seen anything like that before.
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Sep 20, 2011 19:27
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Have you looked for a credit union? Edit: Beaten, looks like Zeta has us all well-trained. Seriously though, look around your area for a credit union. One of the areas they will definitely beat a bank is on fees and surcharges.
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Sep 20, 2011 19:27
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Edit: doublepost
maskenfreiheit fucked around with this message at 01:40 on Mar 13, 2017 |
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Sep 20, 2011 21:11
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GregNorc posted:I almost never use credit cards - I use my debit card (which runs as a Visa) for everything except when I travel for work, then I charge my plane tickets and get reimbursed. You should really use a credit card for this, as if your card gets stolen and fradulent charges happen, while you will get your money back eventually it takes away from the money in your checking account in the meantime, while with a credit card it is the companies money being held up.
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Sep 20, 2011 21:23
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Edit: doublepost
maskenfreiheit fucked around with this message at 01:40 on Mar 13, 2017 |
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Sep 20, 2011 22:03
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GregNorc posted:I think you misunderstood - I use a credit card on vacation or when making large purchases. Day to day stuff like grocceries or a trip to the bar get the debit card. You get fraud protection from it, but while the fraudulent charges are disputed your money is still being put out. Imagine you go to a bar and the dude behind the bar copies your strip. He goes and uses the card to buy 1000 dollars worth of something. You have 1100 dollars in your checking account. That 1000 dollars gets taken out, you notice it a day or two later, and start to initiate a charge dispute. This takes a few days to resolve, and then finally you get your 1000 dollars back. But what happens in the meantime when your electric bill, cable bill, etc also start to get taken out of your checking account? You overdraw and get charged. If it is a real visa credit card, your money is never held up due to fraudulent charges. Just use a credit card and pay it off every month.
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Sep 20, 2011 22:30
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Chin Strap posted:You get fraud protection from it, but while the fraudulent charges are disputed your money is still being put out. To add, I used to be a only debit card person myself, kept the reciepts, synced with MS Money...it was a good system....until it got cloned at a gas station skimmer. It took loving 2 months to get my money back. It took 6 months to eventually get all the charges reversed, and that was with a detective on my side practically yelling at the branch manager, and then finally someone in corporate. NEVER AGAIN. With a credit card, your limit is reduced for a couple of months while they work it out, with a debit card, it's your REAL loving MONEY.
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Sep 21, 2011 00:45
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LorneReams posted:To add, I used to be a only debit card person myself, kept the reciepts, synced with MS Money...it was a good system....until it got cloned at a gas station skimmer. It took loving 2 months to get my money back. It took 6 months to eventually get all the charges reversed, and that was with a detective on my side practically yelling at the branch manager, and then finally someone in corporate. NEVER AGAIN. With a credit card, your limit is reduced for a couple of months while they work it out, with a debit card, it's your REAL loving MONEY. This, plus rewards points, is why I do 95% of my spending on my credit card and pay it off every month.
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Sep 21, 2011 01:21
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I was just denied for a Discover Student credit card. I guess this was my fault for not researching the "requirements" thoroughly. Apparently I wasn't student enough to be eligible for the card(I attend a community college presently). As a young guy who has no credit history to begin with and works minimum wage should I just go to my bank(BofA) and open a secure line? 
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Sep 21, 2011 02:43
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Copernico posted:I was just denied for a Discover Student credit card. I guess this was my fault for not researching the "requirements" thoroughly. Apparently I wasn't student enough to be eligible for the card(I attend a community college presently). As a young guy who has no credit history to begin with and works minimum wage should I just go to my bank(BofA) and open a secure line? The standard line here would be go to a credit union and get a secured credit card (this requires you putting a cash deposit down which equals your credit limit in value). Pay it off in a timely fashion long enough, and you can ask for your deposit back, turning it into an unsecured credit card.
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Sep 21, 2011 03:01
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