DiggyHopeful wrote:The doom and gloom espoused on these boards is downright hilarious. Yes, a lot of people are taking out ridiculously large amounts of loans, but with IBR existing as an option, I really don't see how it's that enormous of a risk. The way I see it, the average attorney where I live (San Francisco) is making about 105k a year. No matter what, that is undoubtedly enough money to pay off your loans comfortably and live a pretty good life (especially if you're significant other makes comparable money ---- in that case, you're living VERY comfortably). Granted, San Francisco may not be as expensive as midtown manhattan, but I doubt anywhere else in the country is more expensive than SF (again, save for possibly Mahattan).
Even in the (not all that unlikely considering the current state of the economy) scenario where you're only making $50,000 a year, if you use IBR that means that only 5 thousand dollars a year is going toward loans and the rest is forgiven after 20 years (and if you're really smart/lucky you work for a nonprofit/government job and it's all discharged tax free after 10 years). None of these scenarios sound THAT bad to me. I know for a fact that in San Francisco, probably the second most expensive city in the country, you can live very comfortably even making "only" 50 grand a year and paying back 5k a year in loans --that includes eating out, traveling, partying, whatever (you know, the things that actually make life enjoyable). I know some people are averse to the idea of carrying debt on them, but you have to understand that there is more to life than living debt free. What good is it to say you're debt free when you've spent you're entire life living like a troll while the world around you enjoys themselves?
Some people are claiming it's "likely" the government will end the IBR program but I see this as highly unlikely. Who really thinks that the government would renege an option it gave people when they entered into the loans? Also, this would undoubtedly cause the amount of defaults to skyrocket, putting a serious drag on the economy, and no president would want that on their own watch.
Also, even assuming that you have to treat the discharged amount as taxable income after 20 years, you would still come out greatly ahead by doing IBR. Let's say that after 20 years you get $100k discharged. That means that if you end up paying 30k in taxes after 20 years, you still come out ahead by about 70 grand. Not a bad option from the government if you ask me...and that's not even considering the fact that 20 years from now 30 grand will be a lot less than it is today because of inflation. Here's an idea: divide 30,000 by 240 payments (20 years) and add it to your monthly amount, then stick it in a savings account. That's only an extra $125 a month.
Tl; dr: with IBR around, don't worry, be happy.
Yea, TCR is when your in a situation in which you need IBR, just try making more than the minimum payment and PLAN AHEAD for the tax bomb. If you know youre likely to get nailed it's not the end of the world so long as you save up a little each month for 20 years expecting it. However, it would be depressing to see all that hard saved money go straight to the government in one year lol