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Good LRAP+PI career aspirations = borrow as much as you can?
Posted: Fri Oct 22, 2010 2:37 pm
by homestyle28
Barring the obvious "you might not want to do PI in 3 years" response, I was curious about people's thoughts on this. I'll be attending NU next fall and paying sticker. Also as the TAR suggests just had a kid, so will be paying for childcare in Chicago (~1200/mo). Do I live in a slum to cover this? Or just request a COA adjustment and borrow it? NU's LRAP doesn't have any divisions after $150k in debt, so it seems to me that there's not much of a meaningfull difference between 200k and 230k in debt upon graduation. Again, assuming I take advantage of LRAP fully, would you just borrow it or try to figure out some alternative?
Re: Good LRAP+PI career aspirations = borrow as much as you can?
Posted: Fri Oct 22, 2010 2:46 pm
by Big Dog
what about the "obvious" spousal income? (Will that count againts NU's LRAP repapyment?)
Re: Good LRAP+PI career aspirations = borrow as much as you can?
Posted: Fri Oct 22, 2010 3:15 pm
by homestyle28
Big Dog wrote:what about the "obvious" spousal income? (Will that count againts NU's LRAP repapyment?)
Like a lot of other LRAPs I've seen, if the spouse works, your income for LRAP purposes = (Your income+spouse income)/2. My wife works in higher ed administration and will likely be making PI money (like Chicago ADA level ~55k) in 3 years.
I figure worse case scenario, we make too much money, but it seems to me that at that point we'd be more than able to pay the debt.
Re: Good LRAP+PI career aspirations = borrow as much as you can?
Posted: Fri Oct 22, 2010 3:17 pm
by sundance95
I heard some discussion of the loan forgiveness being considered taxable income by the IRS. I too am considering PI and it would be great if anyone who knows about this could comment, because it obviously changes the equation.
Re: Good LRAP+PI career aspirations = borrow as much as you can?
Posted: Fri Oct 22, 2010 3:19 pm
by sundance95
Should have googled it first:
From
http://www.finaid.org/loans/ibr.phtml.
The maximum repayment period is 25 years. After 25 years, any remaining debt will be discharged (forgiven). Under current law, the amount of debt discharged is treated as taxable income, so you will have to pay income taxes 25 years from now on the amount discharged that year. But the savings can be significant for students who wish to pursue careers in public service. And because you will be paying the tax so long from now, the net present value of the tax you will have to pay is small.
A new public service loan forgiveness program will discharge the remaining debt after 10 years of full-time employment in public service. Unlike the 25-year forgiveness, the 10-year forgiveness is tax-free due to a 2008 IRS ruling. The borrower must have made 120 payments as part of the Direct Loan program in order to obtain this benefit. Only payments made on or after October 1, 2007 count toward the required 120 monthly payments. (Borrowers may consolidate into Direct Lending in order to qualify for this loan forgiveness program starting July 1, 2008.)
The 10 year plan is the current one so no tax bomb.
Re: Good LRAP+PI career aspirations = borrow as much as you can?
Posted: Fri Oct 22, 2010 3:22 pm
by homestyle28
sundance95 wrote:Should have googled it first:
From
http://www.finaid.org/loans/ibr.phtml.
The maximum repayment period is 25 years. After 25 years, any remaining debt will be discharged (forgiven). Under current law, the amount of debt discharged is treated as taxable income, so you will have to pay income taxes 25 years from now on the amount discharged that year. But the savings can be significant for students who wish to pursue careers in public service. And because you will be paying the tax so long from now, the net present value of the tax you will have to pay is small.
A new public service loan forgiveness program will discharge the remaining debt after 10 years of full-time employment in public service. Unlike the 25-year forgiveness, the 10-year forgiveness is tax-free due to a 2008 IRS ruling. The borrower must have made 120 payments as part of the Direct Loan program in order to obtain this benefit. Only payments made on or after October 1, 2007 count toward the required 120 monthly payments. (Borrowers may consolidate into Direct Lending in order to qualify for this loan forgiveness program starting July 1, 2008.)
The 10 year plan is the current one so no tax bomb.
Now all we need to worry about is a GOP repeal of IBR...ah the future!