WSJ: Federal Plans That Forgive Student Debt Skyrocket Forum

[d cooper]

--LinkRemoved--

[A. Nony Mouse]

I'd love to know the math behind that.... is enrollment surging because the plans have only been around for a couple of years, so each year's graduating class adds a significant percentage to the total? (I mean, if [however many people] in the class of 2013 sign up for PAYE, and then the same number of people in the class of 2014 sign up for PAYE, enrollment has "doubled", but, well, duh.)

[NYSprague]

I like this comment:
"You know something is a huge bubble when the government is freaked out about its own bailout program."

[Nelson]

If they ever tried to retroactively withdraw this stuff, the takings class action would be amazing to watch.

[Nomo]

If the comments section of this article is represents the views of typical people (and I bet it does) IBR/PAYE are in real trouble. And I am increasingly worried about the possibility of retroactive changes.

[baloneydanza]

Time to hop on the gravy train before it's too late

If the comments section of this article is represents the views of typical people (and I bet it does) IBR/PAYE are in real trouble. And I am increasingly worried about the possibility of retroactive changes.

It's the Wall Street Journal's online comments section. It definitely does not represent the views of typical people

[Nelson]

I am increasingly worried about the possibility of retroactive changes.

If the gov't promises a party favorable regulatory treatment and that party relies on that promise of regulatory treatment, then the gov't statutorily precludes that favorable regulatory treatment, that sounds exactly like a Winstar taking. That would mean potentially huge damages for students who entered master promissory notes during the time IBR/PAYE were in effect if those programs were then withdrawn after the fact.

If the comments section of this article is represents the views of typical people (and I bet it does)

I really hope that the WSJ online comments section doesn't accurately represent the views of any people, let alone typical people.

[d cooper]

Do we have any guesses about how quickly changes to IBR/PAYE/PSLF can be made at this point? What are the chances that c/o 2017 are safe for all three years?

[didntgo89072014]

I am increasingly worried about the possibility of retroactive changes.

If the gov't promises a party favorable regulatory treatment and that party relies on that promise of regulatory treatment, then the gov't statutorily precludes that favorable regulatory treatment, that sounds exactly like a Winstar taking. That would mean potentially huge damages for students who entered master promissory notes during the time IBR/PAYE were in effect if those programs were then withdrawn after the fact.

If the comments section of this article is represents the views of typical people (and I bet it does)

I really hope that the WSJ online comments section doesn't accurately represent the views of any people, let alone typical people.

Maybe, but any damages actually won through litigation and paid would take years to collect and be only a fraction of the savings won by retroactive application.

The optics of Ibr/paye are terrible. I would be surprised if the program was around in 5 years let alone 20. This is to say don't take out loans you have no intention or ability to pay back, no matter what you're interested in.

[Nomo]

I am increasingly worried about the possibility of retroactive changes.

If the gov't promises a party favorable regulatory treatment and that party relies on that promise of regulatory treatment, then the gov't statutorily precludes that favorable regulatory treatment, that sounds exactly like a Winstar taking. That would mean potentially huge damages for students who entered master promissory notes during the time IBR/PAYE were in effect if those programs were then withdrawn after the fact.

If the comments section of this article is represents the views of typical people (and I bet it does)

I really hope that the WSJ online comments section doesn't accurately represent the views of any people, let alone typical people.

Well the link is to a reposting in Yahoo finance, so probably a more common news outlet.

I'm not claiming to know much about takings. But, it seem like the contractual terms actually addressed the regulatory scheme there . . . I'm not going to go back and read up on it (at least not now), but if you want to explain your understanding of the law and how it applies here I'd be interested to here it.

[Big Dog]

That would mean potentially huge damages for students who entered master promissory notes

Do the MPN's actually say that loan forgiveness will be tax free 10/20 years hence? If not, then Congress can easily change that aspect of the program.

[Nelson]

The programs may be bad in the eyes of certain "back in my day we used bootstraps" boomers, but it's not just students that are in favor of the programs. It's the loan servicers who pushed the programs too, since they wanted student loan debt exempted from discharge through bankruptcy.

[Nomo]

Do we have any guesses about how quickly changes to IBR/PAYE/PSLF can be made at this point? What are the chances that c/o 2017 are safe for all three years?

We have literally no idea.

[Nelson]

The holding in Winstar was that the gov't doesn't have to include a promise not to change its regulations for there to be a takings claim. --LinkRemoved--.

I just pulled up a sample MPN. It says:

ED will provide me with a choice of repayment plans. Information on these repayment plans is included in the Borrower’s Rights and Responsibilities Statement

That statement includes information on IBR/PAYE. So the contract you're entering with the gov't includes a promise of favorable regulatory treatment (payment plans) as part of the contract. ICR (which is PAYE) and IBR are both explicitly included in the MPN:

Income Contingent Repayment (ICR) Plan–Under this plan, your monthly payment amount will be based on your annual income (and that of your spouse if you are married), your family size, and the total amount of your Direct Loans. Until we obtain the information needed to calculate your monthly payment amount, your payment will equal the amount of interest that accrues monthly on your loan unless you request a forbearance. As your income changes, your payments may change. If you do not repay your loan after 25 years under this plan, the unpaid portion will be forgiven. You may have to pay income tax on any amount forgiven.

Whether courts would buy a takings argument is uncertain. And who knows what the damages theory would be. But the potential for litigation alone is probably enough to ensure that any alterations would be prospective only.

[Humbert Humbert]

Do we have any guesses about how quickly changes to IBR/PAYE/PSLF can be made at this point? What are the chances that c/o 2017 are safe for all three years?

We have literally no idea.

http://educatedrisk.org/analysis/ed-fur ... paye-terms

Text from 2015 budget proposal:

"Students who borrowed their first loans prior to July 1, 2015, would continue to be able to select among the existing repayment plans (for plans for which they now qualify and for loans originated through their current course of study), in addition to the modified PAYE."

So, if this language is approved, then you would not be affected by the proposed changes to PAYE, as long as you take out your first law school loan prior to July 1, 2015 (which you will, assuming c/o 2017).

[Nomo]

The holding in Winstar was that the gov't doesn't have to include a promise not to change its regulations for there to be a takings claim. --LinkRemoved--.

I just pulled up a sample MPN. It says:

ED will provide me with a choice of repayment plans. Information on these repayment plans is included in the Borrower’s Rights and Responsibilities Statement

That statement includes information on IBR/PAYE. So the contract you're entering with the gov't includes a promise of favorable regulatory treatment (payment plans) as part of the contract.
ICR (which is PAYE) and IBR are both explicitly included in the MPN.

Whether courts would buy a takings argument is uncertain. And who knows what the damages theory would be. But the potential for litigation alone is probably enough to ensure that any alterations would be prospective only.

That's helpful. Any idea of how remedies tend to work in these cases? Have there been Winstar class actions before?

As a poster from above mentioned, taking the government to court and sorting out remedies would be a long and frustrating process; and the lawyers would eat up a third of whatever money . . . so its still a major loss for us. But, maybe that's enough to get Congress to write the law in such a way that it doesn't apply retroactively.

[d cooper]

Do we have any guesses about how quickly changes to IBR/PAYE/PSLF can be made at this point? What are the chances that c/o 2017 are safe for all three years?

We have literally no idea.

http://educatedrisk.org/analysis/ed-fur ... paye-terms

Text from 2015 budget proposal:

"Students who borrowed their first loans prior to July 1, 2015, would continue to be able to select among the existing repayment plans (for plans for which they now qualify and for loans originated through their current course of study), in addition to the modified PAYE."

So, if this language is approved, then you would not be affected by the proposed changes to PAYE, as long as you take out your first law school loan prior to July 1, 2015 (which you will, assuming c/o 2017).

Thanks. This is promising, at least.

Even though this is just one proposed budget, I think it's indicative of what sort of shit storms they aren't willing to face.

[Nomo]

Do we have any guesses about how quickly changes to IBR/PAYE/PSLF can be made at this point? What are the chances that c/o 2017 are safe for all three years?

We have literally no idea.

http://educatedrisk.org/analysis/ed-fur ... paye-terms

Text from 2015 budget proposal:

"Students who borrowed their first loans prior to July 1, 2015, would continue to be able to select among the existing repayment plans (for plans for which they now qualify and for loans originated through their current course of study), in addition to the modified PAYE."

So, if this language is approved, then you would not be affected by the proposed changes to PAYE, as long as you take out your first law school loan prior to July 1, 2015 (which you will, assuming c/o 2017).

But, I think we can all be confident that this is only a baseline idea put out by the Obama administration. And its not really on the table now. The other problem is that PSLF isn't a payment plan . . . its a program that interacts with the payment plans (IBR and PAYE). The wording doesn't really make a lot of sense, its certainly not very specific or clear. I don't think the Obama administration put a ton of thought into this, which is even more reason that we have no idea what might happen. God knows what might happen if the Republicans win big in 2016.

[Nelson]

The holding in Winstar was that the gov't doesn't have to include a promise not to change its regulations for there to be a takings claim. --LinkRemoved--.

I just pulled up a sample MPN. It says:

ED will provide me with a choice of repayment plans. Information on these repayment plans is included in the Borrower’s Rights and Responsibilities Statement

That statement includes information on IBR/PAYE. So the contract you're entering with the gov't includes a promise of favorable regulatory treatment (payment plans) as part of the contract.
ICR (which is PAYE) and IBR are both explicitly included in the MPN.

Whether courts would buy a takings argument is uncertain. And who knows what the damages theory would be. But the potential for litigation alone is probably enough to ensure that any alterations would be prospective only.

That's helpful. Any idea of how remedies tend to work in these cases? Have there been Winstar class actions before?

As a poster from above mentioned, taking the government to court and sorting out remedies would be a long and frustrating process; and the lawyers would eat up a third of whatever money . . . so its still a major loss for us. But, maybe that's enough to get Congress to write the law in such a way that it doesn't apply retroactively.

Winstar claims have kept half of DC's plaintiff's bar working for the past decade. They're all class actions since they're shareholder suits.

In this hypothetical, it's a contract claim so the sky's the limit on damages. I would think you could get damages beyond just the tuition forgiveness less taxes since the class is going to be able to argue all kinds of reliance theories.

[Nomo]

Even though this is just one proposed budget, I think it's indicative of what sort of shit storms they aren't willing to face.

I really don't think this is a sign of what shit storms they are and aren't willing to face (and note that "they" is an administration that will be out of office in 2017). When I look at the full language from the budget I see an administration that doesn't really understand this and basically copy and pasted language that the New America Foundation gave them.

[didntgo89072014]

The holding in Winstar was that the gov't doesn't have to include a promise not to change its regulations for there to be a takings claim. --LinkRemoved--.

I just pulled up a sample MPN. It says:

ED will provide me with a choice of repayment plans. Information on these repayment plans is included in the Borrower’s Rights and Responsibilities Statement

That statement includes information on IBR/PAYE. So the contract you're entering with the gov't includes a promise of favorable regulatory treatment (payment plans) as part of the contract.
ICR (which is PAYE) and IBR are both explicitly included in the MPN.

Whether courts would buy a takings argument is uncertain. And who knows what the damages theory would be. But the potential for litigation alone is probably enough to ensure that any alterations would be prospective only.

That's helpful. Any idea of how remedies tend to work in these cases? Have there been Winstar class actions before?

As a poster from above mentioned, taking the government to court and sorting out remedies would be a long and frustrating process; and the lawyers would eat up a third of whatever money . . . so its still a major loss for us. But, maybe that's enough to get Congress to write the law in such a way that it doesn't apply retroactively.

Winstar claims have kept half of DC's plaintiff's bar working for the past decade. They're all class actions since they're shareholder suits.

In this hypothetical, it's a contract claim so the sky's the limit on damages. I would think you could get damages beyond just the tuition forgiveness less taxes since the class is going to be able to argue all kinds of reliance theories.

In class actions plaintiffs typically settle for 10 cents on each dollar of conservatively calculated damages. Objectively speaking it would be shocking to see someone expecting $200,000 of loan forgiveness to receive more than even $25,000 in cash due to these kind of claims. The government might not apply it retroactively but more likely because of moral reasons than fear of litigation.

[linkx13]

tag

[Nelson]

In class actions plaintiffs typically settle for 10 cents on each dollar of conservatively calculated damages. Objectively speaking it would be shocking to see someone expecting $200,000 of loan forgiveness to receive more than even $25,000 in cash due to these kind of claims. The government might not apply it retroactively but more likely because of moral reasons than fear of litigation.

No. Just because class actions on average settle for ten cents on the dollar doesn't mean that a hypothetical takings case would settle for that amount. Not sure why you think "objectively" it would be shocking to get more. The claim is based on the regulatory promise made by the government in the MPNs.

[A. Nony Mouse]

Just to be pedantic re one of the above posts: ICR isn't PAYE. It's its own thing. It was around before PAYE.

[Nelson]

Just to be pedantic re one of the above posts: ICR isn't PAYE. It's its own thing. It was around before PAYE.

Yeah, you're right, but I couldn't find a more recent MPN sample online. The one I used was from a few years so it only had IBR and ICR in it