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Discuss various money matters here. Loans (federal and private), scholarships, lottery winnings, or other school finance related information and queries.
LSTfan
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Postby LSTfan » Wed Dec 05, 2012 2:51 am

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Last edited by LSTfan on Tue Mar 12, 2013 11:30 pm, edited 1 time in total.

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Tanicius
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Re: The end of IBR/PAYE?

Postby Tanicius » Wed Dec 05, 2012 3:13 am

Congress will consider overhauling debt collection in the $100 billion-a-year U.S. student loan program, replacing it with automatic withdrawals from borrowers’ paychecks tied to their income -- a system used in the U.K.


First of all, this is a Republican plan and is unlikely to be successful for the foreseeable four years at the very least. Second of all, this system doesn't even sound that bad:

Payments would be capped at 15 percent of borrowers’ income after basic living expenses.


That's actually kind of decent. People who go into public service don't get fucked by huge loan payments because the maximum they are forced to pay is capped by their lower income.

LSTfan
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Re: The end of IBR/PAYE?

Postby LSTfan » Wed Dec 05, 2012 3:41 am

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Tanicius
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Re: The end of IBR/PAYE?

Postby Tanicius » Wed Dec 05, 2012 3:45 am

LSTfan wrote:
Tanicius wrote:First of all, this is a Republican plan and is unlikely to be successful for the foreseeable four years at the very least..


Kind of missing the point, aren't you. Law schools are selling IBR/PAYE (and 0L's are buying it) as a solution to the ridiculously high tuition rates. But this assumes that this program will last without any changes affecting them until the loan is forgiven. That means 10, 20, or 25 years, depending on your program. So what happens when we have an administration change in 4 years? Or 4 years after that?

Tanicius wrote:Second of all, this system doesn't even sound that bad:

Payments would be capped at 15 percent of borrowers’ income after basic living expenses.


That's actually kind of decent. People who go into public service don't get fucked by huge loan payments because the maximum they are forced to pay is capped by their lower income.


Kind of decent, sure, but not as good as the latest and greatest version that (i) caps payments at 10% of above-the-poverty-level income (so, less than 10% of total income), (ii) and promises to forgive your loans eventually. Under this new version, it's quite possible that a person would end up paying twice as much, and making payments for twice as long.


Dude, if you're relying on IBR to forgive your loans 20 years after graduation because you went into private practice, this means you're knowingly taking out 150+k loans with the expectation of not making enough to pay it all back. That's just idiotic. The only people who should be relying on IBR are us public interest folks, who are looking at a ~10-year countdown at this point. Yes, 10 years is longer than 4, but we knew going in that Obama wouldn't be president forever, and for the foreseeable four years at least, IBR should be here to stay.

While it's certainly possible that something like this plan could replace IBR, it's not a doomsday scenario. Tom Petri is not a Tea Party nutjob. He actually knows what he's doing. What I'm afraid of is Tea Party panic taking control of the higher education loan crisis and absolving the country of all of its public interest assistance. That will always be a risk, but it appears to be unlikely.

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bk1
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Re: The end of IBR/PAYE?

Postby bk1 » Wed Dec 05, 2012 3:53 am

I believe, and I could be wrong, that "IBR might not be here in 10 years" is mainly fearmongering. Could IBR be gone in 10 years? Quite possibly. Would they make such a rule retroactive? I highly doubt it (even Petri's proposal doesn't eliminate IBR for current debtors). Granted even if the risk of its occurrence is small, that is quite a lot of debt to be gambling with. Meaning that on the off chance it did happen, people would be very, very screwed.

LSTfan
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Re: The end of IBR/PAYE?

Postby LSTfan » Wed Dec 05, 2012 4:00 am

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Last edited by LSTfan on Tue Mar 12, 2013 11:34 pm, edited 1 time in total.

LSTfan
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Re: The end of IBR/PAYE?

Postby LSTfan » Wed Dec 05, 2012 4:09 am

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Tanicius
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Re: The end of IBR/PAYE?

Postby Tanicius » Wed Dec 05, 2012 4:10 am

LSTfan wrote:
Tanicius wrote:The only people who should be relying on IBR are us public interest folks, who are looking at a ~10-year countdown at this point.


If you qualify for the 10 year forgiveness plan, you are looking at two more presidential election cycles (three if you are a 0L), and five congressional election cycles (again, more for the 0L's) during this countdown period. That's not as idiotic as someone on the 20-year countdown, but it's still pretty risky. My point is no one should be relying on IBR. Either get a scholarship or don't go, but don't pay full price and expect a government bail-out a decade (or more) down the road.


Nothing is certain. I think public interest folks are going to be okay, though. See also: bk1's post.

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Tanicius
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Re: The end of IBR/PAYE?

Postby Tanicius » Wed Dec 05, 2012 4:13 am

2. If changes are retroactive, you might need to add a "very" to express just how screwed some people will be. For many on IBR, the required payment will be less than the accrued interest. For these people, the amount that will be owed at 10 or 20 years will be significantly more than the amount borrowed.


The interest rate is capped at 50% of the loan. It would fucking suck to pay 150% interest, but that's actually better than a lot of currently underemployed people can hope to have to deal with by the time they're supposed to be retiring.

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SuperCerealBrah
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Re: The end of IBR/PAYE?

Postby SuperCerealBrah » Wed Dec 05, 2012 4:20 am

Tanicius wrote:
Congress will consider overhauling debt collection in the $100 billion-a-year U.S. student loan program, replacing it with automatic withdrawals from borrowers’ paychecks tied to their income -- a system used in the U.K.


First of all, this is a Republican plan and is unlikely to be successful for the foreseeable four years at the very least. Second of all, this system doesn't even sound that bad:

Payments would be capped at 15 percent of borrowers’ income after basic living expenses.


That's actually kind of decent. People who go into public service don't get fucked by huge loan payments because the maximum they are forced to pay is capped by their lower income.


This. While I have some reservations about this plan for various reasons, OP, you need to pay attention to the details first before freaking out about things like this. This is a republican plan yet they are still advocating people in lower incomes only paying 15% after basic living expenses. This basically means "forced IBR". The only real downside to this plan is it seems like they are scrapping forgiveness, which does pose other problems. However, they are just not letting students hang out to dry entirely. One of the bills biggest advocates was saying, and I paraphrase, how "many who could use IBR don't because they don't realize it is even there". Read the whole story. The devil is in the details. They are not just getting rid of safety nets.

Edit: When not even a republican is advocating eliminating safety nets entirely and immediately resorting to "personal responsibility" bullshit rhetoric, I think it is safe to say, absent a super republican extremist, that these type of things may change, but they will not be eliminated.

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SuperCerealBrah
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Re: The end of IBR/PAYE?

Postby SuperCerealBrah » Wed Dec 05, 2012 4:29 am

LSTfan wrote:
bk1 wrote:I believe, and I could be wrong, that "IBR might not be here in 10 years" is mainly fearmongering.


How long has it been around? And we already have people looking to dismantle it. I would take the over-under that it won't exist in its current form in ten years. And I would bet big money that it won't last twenty years, like some people are counting on.

bk1 wrote:Could IBR be gone in 10 years? Quite possibly. Would they make such a rule retroactive? I highly doubt it (even Petri's proposal doesn't eliminate IBR for current debtors). Granted even if the risk of its occurrence is small, that is quite a lot of debt to be gambling with. Meaning that on the off chance it did happen, people would be very, very screwed.


Two points:
1. Even if it isn't retroactive, it will catch a significant number of students mid-law school. If they do make changes, all then enrolled 1L and 2L students will have to make the choice of either dropping out or continuing another year or two by taking out loans that will not be part of IBR.

2. If changes are retroactive, you might need to add a "very" to express just how screwed some people will be. For many on IBR, the required payment will be less than the accrued interest. For these people, the amount that will be owed at 10 or 20 years will be significantly more than the amount borrowed.


Again, even this plan has nothing in it that advocates dismantling IBR. People who are in a fix are not all of a sudden going to be responsible for the full balance as opposed to how it is today. Read tanicious post and the details, bro.

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SuperCerealBrah
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Re: The end of IBR/PAYE?

Postby SuperCerealBrah » Wed Dec 05, 2012 4:31 am

LSTfan wrote:
Tanicius wrote:The only people who should be relying on IBR are us public interest folks, who are looking at a ~10-year countdown at this point.


If you qualify for the 10 year forgiveness plan, you are looking at two more presidential election cycles (three if you are a 0L), and five congressional election cycles (again, more for the 0L's) during this countdown period. That's not as idiotic as someone on the 20-year countdown, but it's still pretty risky. My point is no one should be relying on IBR. Either get a scholarship or don't go, but don't pay full price and expect a government bail-out a decade (or more) down the road.


Despite my previous posts, this is still credited though. However, again, my point is this proposed bill is still not just getting rid of these programs.
Last edited by SuperCerealBrah on Wed Dec 05, 2012 4:44 am, edited 1 time in total.

LSTfan
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Re: The end of IBR/PAYE?

Postby LSTfan » Wed Dec 05, 2012 4:32 am

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SuperCerealBrah
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Re: The end of IBR/PAYE?

Postby SuperCerealBrah » Wed Dec 05, 2012 4:42 am

LSTfan wrote:
SuperCerealBrah wrote:While I have some reservations about this plan for various reasons, OP, you need to pay attention to the details first before freaking out about things like this. This is a republican plan yet they are still advocating people in lower incomes only paying 15% after basic living expenses. This basically means "forced IBR". The only real downside to this plan is it seems like they are scrapping forgiveness, which does pose other problems.


I did pay attention to the details. The plan is significantly worse than IBR/PAYE. 10% of above-the-poverty-line income is going to be more like 7-8% for most people on IBR. So a person is looking at doubling their monthly payments. And no forgiveness. This is potentially huge -- instead of a 10 (or 20) year period, a person will be faced with a lifetime of wage garnishment.

Edit: Oops, it seems we are talking over each other (or more accurately, posting over each other because we are on here at the same time) so my response doesn't account for some of your recent posts. At any rate, I am done for today, so I'll check back and respond tomorrow.


I am of the opinion that the bolded is much, much better than the current massive tax bill that sends someone directly into bankruptcy at year 25 or whatever. This along with capping the interest seems very inadequate, but still a step in the right direction at least. But again, this plan still has tons of problems. I do not expect any plan proposed to ever solve anywhere close to the true underlying issues, so I just take what I can get I guess lol (not that this will likely pass anyway)

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dingbat
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Re: The end of IBR/PAYE?

Postby dingbat » Wed Dec 05, 2012 7:02 am

I think people view IBR completely wrong. It's a worst-case scenario safety net. As in, if you can't get a job, you can fall back on IBR. You shouldn't go in expecting to survive off of it.
Hell, I have reservations about PSLF, and think people should do what people used to do in ages past: get a good paying soul sucking job (I know, doesn't really exist anymore) for a few years to pay down their loan, and then go into public service. How can you serve the public while you're still mooching off them?

But at least PSLF has a purpose that makes sense to consider going in. IBR does not and any time I hear someone take IBR into account when considering going to law school I want to shoot them (or send them to a communist country)

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scottyc66
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Re: The end of IBR/PAYE?

Postby scottyc66 » Wed Dec 12, 2012 1:41 pm

LSTfan wrote:
bk1 wrote:I believe, and I could be wrong, that "IBR might not be here in 10 years" is mainly fearmongering.


How long has it been around? And we already have people looking to dismantle it. I would take the over-under that it won't exist in its current form in ten years. And I would bet big money that it won't last twenty years, like some people are counting on.

bk1 wrote:Could IBR be gone in 10 years? Quite possibly. Would they make such a rule retroactive? I highly doubt it (even Petri's proposal doesn't eliminate IBR for current debtors). Granted even if the risk of its occurrence is small, that is quite a lot of debt to be gambling with. Meaning that on the off chance it did happen, people would be very, very screwed.


Two points:
1. Even if it isn't retroactive, it will catch a significant number of students mid-law school. If they do make changes, all then enrolled 1L and 2L students will have to make the choice of either dropping out or continuing another year or two by taking out loans that will not be part of IBR.

2. If changes are retroactive, you might need to add a "very" to express just how screwed some people will be. For many on IBR, the required payment will be less than the accrued interest. For these people, the amount that will be owed at 10 or 20 years will be significantly more than the amount borrowed.

According to math, people applying in our cycle won't be effected if it does change after the next presidential election.

LSTfan
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Re: The end of IBR/PAYE?

Postby LSTfan » Mon Dec 17, 2012 3:30 am

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wbrother
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Re: The end of IBR/PAYE?

Postby wbrother » Tue Dec 25, 2012 12:26 am

LSTfan wrote:
scottyc66 wrote:According to math, people applying in our cycle won't be effected if it does change after the next presidential election.


But according to high school Civics, people appying in your cycle might be affected if it changes after the mid-term election.

True. But as much as Obama talked about student loans during his campaign, I don't think he'd let anything like that pass. In one speech he mentioned that he and his wife had only finished paying off their loans within the last 2 or 3 years. I didn't fact check it, but either way it doesn't seem like he'd before messing up IBR.

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cahwc12
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Re: The end of IBR/PAYE?

Postby cahwc12 » Tue Dec 25, 2012 2:14 pm


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scottyc66
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Re: The end of IBR/PAYE?

Postby scottyc66 » Fri Jan 04, 2013 2:03 pm

LSTfan wrote:
scottyc66 wrote:According to math, people applying in our cycle won't be effected if it does change after the next presidential election.


But according to high school Civics, people appying in your cycle might be affected if it changes after the mid-term election.

You had already basically accepted the premise that it probably won't happen until after the next presidential election. At this point you're just arguing for the sake of arguing and just trying to power through every objection. Take a step back and think logically, it may be a problem for future LS students, but it isn't in the foreseeable future. It won't change while Obama is still around and most likely it won't be a huge objective for the next guy. People in our cycle and even the next couple will be fine.

LSTfan
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Re: The end of IBR/PAYE?

Postby LSTfan » Fri Jan 04, 2013 7:53 pm

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scottyc66
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Re: The end of IBR/PAYE?

Postby scottyc66 » Mon Jan 07, 2013 2:38 pm

LSTfan wrote:
scottyc66 wrote:You had already basically accepted the premise that it probably won't happen until after the next presidential election.


Nope. But if you don't want to look at this realistically, it's your life. It's seems to be a fairly common phenomenon in this country that we elect a president and then give Congress over to the other party at the mid-term election. And with recurring debt/budget fights, politicians will be looking everywhere to save money.

Good to see you're keeping it realistic and sticking to your guns :wink:

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bandenjamin
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Re: The end of IBR/PAYE?

Postby bandenjamin » Mon Jan 07, 2013 3:24 pm

The interest cap is not getting nearly enough credit on this, and the "forgiveness" still has a cost to it (counts as income).

IBR now

Assuming
100,000 initial debt
50,000 income (no raises cause that would make it even more of a pain in the ass)
6.8% Interest rate
20 Year IBR

You would have the following
341 monthly payment (not unreasonable) http://studentaid.ed.gov/repay-loans/un ... calculator
214,742.23 "forgiveness".

The problem is you have to pay taxes on that $214,742.23 as income. Which would come out to an additional $47,907 tax bill (http://www.moneychimp.com/features/tax_calculator.htm) on top of your regular tax bill.

Under the proposed plan your payment would be 1.5 times as much ($511.50) but your total debt would stop at $150,000.

To keep it simple, assume you are just going to pay that amount it would take 24.9 years to pay it off at 511.50. This assumes you never have any increases in salary or any kind of windfall of cash (inheritance, poker winnings, accepting bribes, finding unusual sacks of money on the side of the road). Yes it's a significant payment but it doesn't just give you a new loan to start paying on 20 years later. You'll also have an incentive to keep paying it down faster if you come in to more money. The cap basically keeps the bill from ballooning to an even more unreasonable amount.

Cellar-door
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Re: The end of IBR/PAYE?

Postby Cellar-door » Mon Jan 07, 2013 4:46 pm

bandenjamin wrote:The interest cap is not getting nearly enough credit on this, and the "forgiveness" still has a cost to it (counts as income).

IBR now

Assuming
100,000 initial debt
50,000 income (no raises cause that would make it even more of a pain in the ass)
6.8% Interest rate
20 Year IBR

You would have the following
341 monthly payment (not unreasonable) http://studentaid.ed.gov/repay-loans/un ... calculator
214,742.23 "forgiveness".

The problem is you have to pay taxes on that $214,742.23 as income. Which would come out to an additional $47,907 tax bill (http://www.moneychimp.com/features/tax_calculator.htm) on top of your regular tax bill.

Under the proposed plan your payment would be 1.5 times as much ($511.50) but your total debt would stop at $150,000.

To keep it simple, assume you are just going to pay that amount it would take 24.9 years to pay it off at 511.50. This assumes you never have any increases in salary or any kind of windfall of cash (inheritance, poker winnings, accepting bribes, finding unusual sacks of money on the side of the road). Yes it's a significant payment but it doesn't just give you a new loan to start paying on 20 years later. You'll also have an incentive to keep paying it down faster if you come in to more money. The cap basically keeps the bill from ballooning to an even more unreasonable amount.


I wonder if this eliminates PSLF. if it does that would totally fuck people. If it doesn't most people aren't going to be significantly worse off because of the impending tax bomb for those who aren't PSLF.

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bandenjamin
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Re: The end of IBR/PAYE?

Postby bandenjamin » Mon Jan 07, 2013 5:01 pm

Cellar-door wrote:
bandenjamin wrote:The interest cap is not getting nearly enough credit on this, and the "forgiveness" still has a cost to it (counts as income).

IBR now

Assuming
100,000 initial debt
50,000 income (no raises cause that would make it even more of a pain in the ass)
6.8% Interest rate
20 Year IBR

You would have the following
341 monthly payment (not unreasonable) http://studentaid.ed.gov/repay-loans/un ... calculator
214,742.23 "forgiveness".

The problem is you have to pay taxes on that $214,742.23 as income. Which would come out to an additional $47,907 tax bill (http://www.moneychimp.com/features/tax_calculator.htm) on top of your regular tax bill.

Under the proposed plan your payment would be 1.5 times as much ($511.50) but your total debt would stop at $150,000.

To keep it simple, assume you are just going to pay that amount it would take 24.9 years to pay it off at 511.50. This assumes you never have any increases in salary or any kind of windfall of cash (inheritance, poker winnings, accepting bribes, finding unusual sacks of money on the side of the road). Yes it's a significant payment but it doesn't just give you a new loan to start paying on 20 years later. You'll also have an incentive to keep paying it down faster if you come in to more money. The cap basically keeps the bill from ballooning to an even more unreasonable amount.


I wonder if this eliminates PSLF. if it does that would totally fuck people. If it doesn't most people aren't going to be significantly worse off because of the impending tax bomb for those who aren't PSLF.


I think the article implied it was only for people on the "25 year" forgiveness plan. I'm guessing PSLF would remain the same, hopefully with the same cap in place on interest. The tax bomb shouldn't be nearly so drastic on a 10 year loan. Quick check shows your "forgiveness" payment would be $138,632.54 so you would owe ~$26,000 in taxes. Still pretty bad but not horrible.




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