Graduating Soon Need Advice

[Bmn5940]

Hello everyone,

I will be graduating in May 2020 with my Bachelors in Engineering from Penn State!

I have accepted a full time position working in Silicon Valley for a tech company. My starting salary is high 90K and they're paying for all my moving expenses plus sign on bonus and other perks.

Currently I have about 75K in private student loans I pay interest on all of them except 2 or 3 since I started school.

I also have an additional 40K in federal subsidized and unsubsidized loans that I do not pay monthly interest on as my private loan interest rates are horrible compared to federal rate.

My private loans are through Discover, College Ave, and Citizens Bank and all of their rates range from 9%ish to 14% (sadly I don't have co-signers so my rates aren't great) I'm very happy that myFico taught me how to build and manage credit as my scores have led to me being able to stay in school and get an education due to my family not being able to afford to help me financially (thankful that emotionally they have my back every step of the way, whether it be with groceries, gas money etc my family has been a huge help)

With all of this said, my primary goal is to find the cheapest apartment/living option in San Jose area as well as make a monthly budget and stick to it. I'm very strict with my money and make sure I account for every dollar I spend but want to make sure I take the smartest option for repaying my loans. Due to my high rates on private loans I think it would be smart to refinance all of them into one company/one payment and with my credit score being in the high 700's (only debt I have is student debt) I was thinking I'll be able to get a much better rate than what I am now.

I guess my major question is:

How much should I be taking out of my annual income to put towards repayment?

Is it smart to leave my government loans separate payments and try to manage them all monthly (I have to read through this forum more on different options I have with federal loan repayment) and Then consolidate private loans?

Just looking for any advice you guys can give. Best banks to refinance? Interest rates? Etc

[calyx]

Congrats on graduation and securing a full time job so quickly!

If you can consolidate your private loans into a lower interest loan - then yes, absolutely do it.   We can talk about what kind of impact it'll have on your score all day, but honestly, finances > FICO.

As for your federal student loans - IF you are as organized as you say you are, and you stay on top of them, then yes, I would leave them as-is if you can handle the payments.   If they're all held with the same servicer - will they let you make one payment that they disburse to all of your loans?    I am not sure what specific kind of federal loans you have, but if you don't need income based repayment plans or to lower them, then the standard payment plan will usually be the one that gets them paid the fastest and with the lowest amount of interest ultimately paid.    And usually, the multiple older-tradelines are a great buffer for your FICO scoring and changes to your credit profile.

As far as "how much of your income" you should spend - I would honestly not make that assessment at this time.    You need to get your housing and life set up.   You will be moving to a part of the country with a different cost of living, plus student life is going to be far different from full-time job life and you need to assess your needs before getting too strict with your budgeting.

Sofi, Earnest, Lendkey, BofA, and a couple of other private banks are some of the places that have sent me information re: refinancing my student loans, so shop around for a rate you will like.   Another option would be to check out local credit unions in the Bay Area once you get there.

[Bmn5940]

Thank you so much this was super helpful and calmed a little anxiety as well. I'm hoping to keep my score as high as possible so I can refinance my private loans and maybe score an apartment with a smaller security deposit. It's hard for me not to panic because I want to make sure that I don't get a huge surprise when my first loan payment shows up

[Anonymous]

Congrats on your graduation and job acceptance!!

As far as the loans, as you said, the private loans are going to be the ones to look out for. As such, you will want to put all you have into paying then back first imo. This means paying as little as possible on those federal loans in the mean time. You didn't get a graduate loan so your loan rates should be very low. You likely will not fair better privatizing them and you definitely won't improve your situation by losing all the federal benefits (yet). I'd stick to only doing the private loans as soon as your job supports it. Navy Federal Credit Union has great rates. Other Credit Unions do too. Imo it's better to have two payments (federal and private) than the risk of irreversibly privatizing the federal loan. You'll have to stay on top of the federal loans though. Trust them to mess something up...
So the next issue would be how to get the lowest monthly payment for your federal student loans. The subsidized ones are covered as far as interest. The unsubsidized I believe are not but it's relatively not that much. If you completed your schooling in 4 years-ish you'll have a 6 month deferment period after graduation. Off the top of my head, option 1: take the deferment and see what your cheapest plan will be in 6 months. It's probably going to be either the ICR income-driven repayment plan or standard/ graduated/ extended. You can use the calculator to figure that out.
Option 2 is to waive the deferment and pay immediately after graduation. I know...that sounds crazy, but think about what you will be paid in the 3 months (90 days) before graduation. Because if it's low enough...you can apply for an Income-driven repayment plan and instead of using the IRS upload, submit your paystub. This will lock in a low monthly rate, as low as $0, for a whole year. More money to throw at the private loan. You don't need to send anything in when your wages go up. I'll give you the calculator so you can determine if this would be lower than option 1.
Option 3: Take a deferment. The problem is I don't know if you would qualify for a hardship deferment if you looked purely at wages, but with the housing, taxes (in CA, yeesh!) and your private loan payments...maybe you would. I think this can be for up to a year per deferment (3x max? I don't remember).
The overall goal being of course to use the "savings" from the extra payments to pay down your loans.

As for housing... There's a lot of things you can do but if you're not really familiar with the SF bay area, you might think you have to live in San Jose. Many people who work there might not live there. The can live in a less expensive area near San Jose, or just live in another part of the bay that has much lower rents and a was to commute (maybe besides driving, like BART or Caltrain). If you do want to live in San Jose, no biggie. You mentioned least expensive...are you okay with a roommate? Craigslist often has listings for good rentals. (If it's too cheap it's a scam). A $2500 2-BR (or 3 BR) and a roommate might be cheapest.

As far as how to manage your income, that's out of my league. I've read here people recommending that you should make sure to max out any 401K (?) match each year? Idk, that's all Greek to me. But the personal finance board is an excellent place for that. In think you could ask them that specific question there without double-posting.

Sorry for the long post. Hope this helps. If you have any more questions, feel free to ask (the ones you asked were great!).

[Anonymous]

Repayment Estimator
https://studentloans.gov/myDirectLoan/repaymentEstimator.action

[Bmn5940]

Wow okay @Sabii thank you so so so much this all is wonderful. I read about all of this but now it all makes sense!!

I agree my goal is to refinance all my private loans in one payment with lowest interest rate I can find. As for my federal I will leave them as they are and buy a big ole planner to make sure I don't miss any payments and to keep track of all of them.

Is it possible for me to do the 6-month deferment but maybe start paying some payments to my loans maybe like 3-4 months after graduating? I'll be moving across country and might have to buy some cheap furniture/other things that aren't covered through my company. (Depends in apartment)

I've been searching for apartments as far as a 30 minute commute in the outside San Jose/Bay Area. I'm also in search of a roommate. My company said that some other company will contact me and help Me with all the roommate search and apartment search.

Anyway I would say I'm going to need about 3 months to get Stabilized financially so I would only want to be making private loan payment and let federal sit for the 6-month period.

After my first 6 months though I'll receive my sign on bonus which I'm hoping to use to knock out some of the smaller federal loans I have ( I have one for $750.00 and 2 for $1000) I know with my bonus alone I could get rid of roughly 4-5 of the smaller federal loans I have. But also want to stash some of my bonus away for a rainy day.(going to read finance forums!)

Thank you for all the help

[calyx]

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@Bmn5940 wrote:

Is it possible for me to do the 6-month deferment but maybe start paying some payments to my loans maybe like 3-4 months after graduating? I'll be moving across country and might have to buy some cheap furniture/other things that aren't covered through my company. (Depends in apartment)

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^  Absolutely - you can always pay early/extra towards your loans.   Most servicers will apply your payments towards interest ( & fees if any) first and then principle after that.

With regards to your bonus and paying off the smaller loans - some servicers will let you dictate where your payment goes (ie: which loans if they hold multiples) within their online payment portals, some require you to call CS.   I would definitely call and talk to someone (and keep notes) just to make sure you get the ones you want paid off (with any trailing interest if any).

You have a great plan and good head on your shoulders.  I commend you for planning this out as well as you have.

For additional resources - if you reddit, there are also some good subreddits that deal with personal finance.

[Anonymous]

Just my little 2 cents on the private loans...

First off, I would keep the private and federal loans separate and do not consolidate all into a private loan.

Since you don't have a cosigner, look into Earnest. They'll even refi you with just a written job offer. You can do a "rate check" with many private loan refinance companies to see what rate they may offer with just a credit soft pull (but make sure it explicitly says this before you agree). Earnest was the only one that would look at me without a cosigner, and I went from 12% interest on loans to 5.5% with them. Good luck! And congrats on graduating and having a job offer!!

[Bmn5940]

Yes definitely keeping federal loans un-consolidated.

Thanks for the Earnest recommendation I actually went on out of curiosity to see their rates and did the soft credit inquiry and they gave me an estimated 5 year rate of 4.14% and and estimated 7 year rate of 4.21% THESE ARE AMAZING compared to what I am currently dealing with. The best part was the soft inquiry. I'm going to keep building my score as solid and high as possible so that these "estimates" become solid offers after graduation.

[empiror22]

Hi Bmn5940,

   I had a similar path as you.  I finished School ( University of Cincinnati), moved to San Jose ( with wife and children).  I worked / still work remotely for one of the BIG companies in Silicon Valley, I lived in South San Jose near cottel road / near the hospital.  Distance to Santa Clara/Sunny Vale approximately 15 miles, the trip during rush hour would take about 1 hour due to traffic (6-930 am, and 4-7 pm ).  I have friends who live all over the area there some come from the East ( very long drive), from the South ( long drive) and from North much higher costs.  If you look in the right areas you can find ok price/commute, you will probably need a roommate with that salary ( 90 k is high, but costs there are crazy).

Example: Household income for my family was 225-275 k yearly, we were able to pay my loans to zero (was 44k) took 3-4 years.  We were able to save to buy a house in Ohio ( currently we live here) (we put 70k down).  We paid off my wifes private school loans (~22k), her car (~5k).  We lived in a cheaper area rent: 3k, houses sold and are selling for 800k plus in that area.

We loved living in San Jose, but the costs/traffic/ hustle was too crazy.  Really my wife wanted to buy a house and being from Ohio, I could not see myself paying 1 million dollars for a 2000 Sqft house.

Total debt went from 160k to 70k in ~ 4 years ( wife works in public sector and the 70k ish will be forgiven in about 2-3 years), and were able to save 150k.  

  as you can see there is great opportunity in SV, I miss it like crazy.  Enjoy your time there, also always look for other opportunities job wise ( there are so many good /great jobs available out there)

As far as the loans being paid:  

1. I would not refi your pubic loans, or pay them off they tend to have the lowest interest rates ( you would lose protections, SV tends to have a lot of layoffs during slow times fyi)

2. I would pay off the private loan with the highest interest first (unless, you have a few smaller loans first)

3.  I would then continue paying off the highest interest loans first ( saves you money in the long run)

4.  As you pay off one loan use that money to pay on the next targeted loan

I used the above rules/guidelines for myself/wife.  I have had other young Engineers use the same basic rules ( all have paid all or most off), on my team I was the guy who had the weird spread sheets that tracked my bills/loans and the younger guys/gals would ask for advice about paying off my loans when they found out I had no/low balances.

Sorry to give so much info, but I hope this helps.  BTW San Fran/san jose/ Oakland has a Penn State Alumi group/ and bar.  Enjoy the area, we loved it (with the few able exceptions)