IBR discussion

[fonzerelli]

Seems like a great idea - will it last?

http://www.ibrinfo.org/

p.s. debt gremlins are legit

[Anonymous Loser]

I am always baffled by threads suggesting that this program is unlikely to last.

What, exactly, is the political vulnerability of a program that both saves money and provides desirable services to constituents, which is funded largely by fees imposed on large lending institutions, and received wide bi-partisan support in both bodies of Congress when under consideration?

_______________________________

[The CCRAA will] reduce direct spending by $752 million over the 2007-2012 period and by $3.6 billion over the 2007-2017 period.

Source: Congressional Budget Office Cost Estimate, H.R. 2669 College Cost Reduction and Access Act, September 19, 2007 available at --LinkRemoved--

7/11/2007 Passed/agreed to in House: On passage Passed by recorded vote: 273 - 149 (Roll no. 613).
7/20/2007 Passed/agreed to in Senate: Passed Senate with an amendment by Yea-Nay Vote. 78 - 18. Record Vote Number: 272.

Source: http://thomas.loc.gov/cgi-bin/bdquery/z ... 02669:@@@R

[YCrevolution]

..

[FREEDOM99]

This program doesn't make much sense to me. If the government wants to help struggling students why can't they lower the interest rates on the loans or forgive the interest? Grad plus has 8.5% interest.

If I understand this correctly, anyone can take out as much government loans as they want and their monthly payments will be limited by their income. If your monthly income enables you to pay less than the interest rates, the interest will continue to accumulate each month on top of the principle for 25 years. At the end of 25 years the government is supposed to forgive you for what could be well over half a million dollars thanks to the interest rates. If you ever disqualify the program because your income is too high you will be screwed.

Also, this will probably encourage schools to raise tuition even higher because everyone can take out as much debt as they want and expect to be forgiven after 25 years (if forgiveness is not taxable).

[vanwinkle]

This program doesn't make much sense to me. If the government wants to help struggling students why can't they lower the interest rates on the loans or forgive the interest? Grad plus has 8.5% interest.

This program provides a bigger benefit to those who do PI work (remaining debt after 10 years is forgiven, vs. 25 years for everyone else). This way it provides incentives depending on the type of work someone does after graduation, giving the greatest benefit to those who are doing the greatest good with their education and incurring the biggest detriment as a result.

[YCrevolution]

..

[vanwinkle]

This program doesn't make much sense to me. If the government wants to help struggling students why can't they lower the interest rates on the loans or forgive the interest? Grad plus has 8.5% interest.

This program provides a bigger benefit to those who do PI work (remaining debt after 10 years is forgiven, vs. 25 years for everyone else). This way it provides incentives depending on the type of work someone does after graduation, giving the greatest benefit to those who are doing the greatest good with their education and incurring the biggest detriment as a result.

Communist.

Oh noes, I have been outed.

[bluejayk]

I don't quite understand how this is so great for PI people. Don't get me wrong, it's better than nothing, but I see people here saying, "Well, I'm gonna end up $150k in debt, but whatever, I'll just do IBR." Well, you're still looking at an entire decade of having to pay 10-12% of your family's income. If you're married, you have to be really, seriously poor not to end up paying at least 9.5% of your GROSS income every year. That's still a stifling financial burden for a couple making $80k a year.

[vanwinkle]

I don't quite understand how this is so great for PI people. Don't get me wrong, it's better than nothing, but I see people here saying, "Well, I'm gonna end up $150k in debt, but whatever, I'll just do IBR." Well, you're still looking at an entire decade of having to pay 10-12% of your family's income. If you're married, you have to be really, seriously poor not to end up paying at least 9.5% of your GROSS income every year. That's still a stifling financial burden for a couple making $80k a year.

I will pay 10% for 10 years for 1) the ability to work a job that pays $70-80K/yr and 2) the ability to build up experience so that I can move up even further once those 10 years are over (or possibly even sooner). This is a godsend for anyone who wants to do PI law, because it's far, far cheaper than what you'd have to pay otherwise.

Also, I quit a $60k/yr job to go to law school. Part of it is about doing something you love, which is priceless. IBR just makes that more affordable for me. If you can't stomach even just a 10% cut off the top of what you make when you get out, then, well, you probably don't love it enough to go all in like many need to.

[YCrevolution]

..

[bluejayk]

Versus the old alternative of: if you do PI, no loan forgiveness (and an arguably worse income-sensitive repayment plan)?

Versus an alternative of not taking on $150k in debt for a job that you think might only pay $50-60k a year. I'm glad about the new IBR program, I said I thought it was better than nothing, and for the people who have always been hardcore focused on going into PI work, it's great. But it doesn't change the basic calculus, and I think people mention IBR a lot without looking at the numbers.

$150,000 in debt, single, no dependents

$50k/year salary = about $3000/month take home, depending on your state taxes.

IBR payment calculator says you have to pay $420 a month. You pretty much have to go PI at that point, cause being stuck with that for 25 years = killself.

[vanwinkle]

Versus an alternative of not taking on $150k in debt for a job that you think might only pay $50-60k a year. I'm glad about the new IBR program, I said I thought it was better than nothing, and for the people who have always been hardcore focused on going into PI work, it's great. But it doesn't change the basic calculus, and I think people mention IBR a lot without looking at the numbers.

$150,000 in debt, single, no dependents

$50k/year salary = about $3000/month take home, depending on your state taxes.

IBR payment calculator says you have to pay $420 a month. You pretty much have to go PI at that point, cause being stuck with that for 25 years = killself.

Two problems with this:

1) Assuming you remain at the same pay rate constantly. I actually just spoke to a PD and he started at $50k/yr but after 5 years he's now at $70k/yr. You're not exactly stuck with your hiring income forever.

2) Can you easily find a job that starts at $50k and gives you opportunities to make more with experience without a law degree?

I understand the problems with IBR, but it's still far, far better than anything out there, and $420/mo. in payments is not terrible at all, esp. since a good chunk of it is paying off interest and you can deduct that from your income taxes.

[bluejayk]

Also, I quit a $60k/yr job to go to law school. Part of it is about doing something you love, which is priceless. IBR just makes that more affordable for me. If you can't stomach even just a 10% cut off the top of what you make when you get out, then, well, you probably don't love it enough to go all in like many need to.

I'll amend my previous statement, you're right. It's very good for people who were honestly targeting PI work the whole time. That's a much smaller % of law graduates than will actually end up on IBR though.

[ozarkhack]

I think the trick is to do IBR and get married to a real money-maker. (Also, have a couple of kids. Turns out, those little shits are worth something after all!)

I'm still trying to figure this out, and definitely would appreciate being corrected, but my understanding so far is that if you're married but file your income taxes separately, IBR cares only about the borrower's income. Meaning if spouse has a great job (here's hoping) and makes more than your $40K working as an assistant city attorney for East Jesus, Oklahoma, or some such, you're paying IBR rates on the $40K alone. That would mean payments less than $300/month (much less if children). And East Jesus will not give you giant raises, so you'll be fine!

"The marriage penalty inherent in the IBR formula was corrected by Congress (P.L. 110-153, December 21, 2007) by allowing a married borrower who files income tax returns as "married filing separately" to count only the borrower's adjusted gross income and student loan debt. This lets a borrower exclude the (higher) income of his/her spouse when calculating the cap on monthly payments under income-based repayment instead of combining the income as under the original legislation."

From: http://www.finaid.org/loans/ibr.phtml

[vanwinkle]

I'll amend my previous statement, you're right. It's very good for people who were honestly targeting PI work the whole time. That's a much smaller % of law graduates than will actually end up on IBR though.

This is probably true. I'd worry about someone who "plans" on BigLaw and looks at PI as some kind of fallback. IBR may make it bearable enough anyway, but that kind of thinking still indicates they're not really planning adequately for reality.

[Anonymous Loser]

This program doesn't make much sense to me. If the government wants to help struggling students why can't they lower the interest rates on the loans or forgive the interest? Grad plus has 8.5% interest.

The rates for undergraduate subsidized Stafford loans are in the midst of a scheduled four-year rate reduction. Also, as of late there has been a push to eliminate the FFLEP lending program in favor of Direct lending: under the Direct lending program, GradPLUS rates are 7.9%, which certainly isn't great, but it is an improvement over 8.5%. So, there are some efforts underway to reduce the expense of federal educational lending.

Bear in mind that the GradPLUS loan was just created in 2006: prior to that most students would have been forced to rely on private loans, which, in addition to having unfavorable forbearance and deferment options when compared to federal loans, likely had high interest rates for most borrowers, as rates were based upon credit-worthiness. In other words, although the GradPLUS loan seem like an expensive lending option, it's actually a pretty good deal compared to what was available just a few years ago.

[bluejayk]

The rates for undergraduate subsidized Stafford loans are in the midst of a scheduled four-year rate reduction. Also, as of late there has been a push to eliminate the FFLEP lending program in favor of Direct lending: under the Direct lending program, GradPLUS rates are 7.9%, which certainly isn't great, but it is an improvement over 8.5%. So, there are some efforts underway to reduce the expense of federal educational lending.

Really, anonymously?

[Anonymous Loser]

The rates for undergraduate subsidized Stafford loans are in the midst of a scheduled four-year rate reduction. Also, as of late there has been a push to eliminate the FFLEP lending program in favor of Direct lending: under the Direct lending program, GradPLUS rates are 7.9%, which certainly isn't great, but it is an improvement over 8.5%. So, there are some efforts underway to reduce the expense of federal educational lending.

Really, anonymously?

[bluejayk]

Do you get that much?

[ps494]

So let me get this straight. A law school graduate could rack up 150k in debt, take a local government job (i.e., public defense or DA's office), make the $420.00 monthly payments, and then be completely forgiven of their debt after 10 years?

[bluejayk]

So let me get this straight. A law school graduate could rack up 150k in debt, take a local government job (i.e., public defense or DA's office), make the $420.00 monthly payments, and then be completely forgiven of their debt after 10 years?

You have it straight. Although, no reason to cap yourself at $150k. Colombia/NYU/Fordham could end up costing $200k.

Also, it wouldn't have to be a legal job. IBR is not for law schools, just federal loans in general. You could get an anonymous drone job at the DMV.

[Mr. Matlock]

My whole focus in going into law has been a career in ADA or PD. For that, this program is a "choose your spiritual entity" send. However, my biggest fear is devoting my 3 years and immersing myself in every clinic, internship, and applicable organization, only to be under-cut by some kid from Columbia/Chicago...etc., who couldn't get a job anywhere else.

[interestedbyestander]

I am always baffled by threads suggesting that this program is unlikely to last.

What, exactly, is the political vulnerability of a program that both saves money and provides desirable services to constituents, which is funded largely by fees imposed on large lending institutions, and received wide bi-partisan support in both bodies of Congress when under consideration?

A government way too big with a federal deficit than is out of control and unsustainable.

[ps494]

My whole focus in going into law has been a career in ADA or PD. For that, this program is a "choose your spiritual entity" send. However, my biggest fear is devoting my 3 years and immersing myself in every clinic, internship, and applicable organization, only to be under-cut by some kid from Columbia/Chicago...etc., who couldn't get a job anywhere else.

+ 1

But I think (hopefully) the legal market will be better in three years.

[ps494]

Something doesn't add up, though. It seems like someone could really take advantage this program. What's stopping someone from taking out excessive students loans for frivolous things (i.e. an expensive apartment in Manhattan, a car, etc.) and then just being forgiven for their debt after ten years?

I guess what I'm wondering is what incentive does a perspective law student have to keep their debt to a minimum. If you're going into PI, then you might as well go to the best school possible and rack up serious debt.