PSLF - Should I borrow all I can in anticipation of forgiveness?

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circus torts

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PSLF - Should I borrow all I can in anticipation of forgiveness?

Postby circus torts » Tue Sep 11, 2018 8:09 pm

Title says it all; I am attending with a full tuition scholarship, only borrowing for living expenses. I plan to go into public service, and without tuition loans I won't get much advantage out of Public Service Loan Forgiveness. So, should I just take out all the loans I can that will qualify later for forgiveness, and squirrel this extra cash away to meet my monthly payments in the meantime? Free money, or too good to be true?
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mmac

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Re: PSLF - Should I borrow all I can in anticipation of forgiveness?

Postby mmac » Wed Sep 12, 2018 11:29 am

I would only take out what you need. The program may not be around forever. Also, I think you sign something saying you will use for education expenses only. It's not really free money; it's at like 7% interest (right?) if something goes wrong.

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Re: PSLF - Should I borrow all I can in anticipation of forgiveness?

Postby Npret » Wed Sep 12, 2018 11:58 am

This is a terrible plan.
A large number of PI students change their plans once they are in school and you haven’t even had a class, much less found and kept a job.
You’re assuming your perfect outcome and it may (probably won’t) not happen.
Even apart from that, the program can end or change.

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totesTheGoat

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Re: PSLF - Should I borrow all I can in anticipation of forgiveness?

Postby totesTheGoat » Wed Sep 12, 2018 12:17 pm

circus torts wrote:So, should I just take out all the loans I can that will qualify later for forgiveness, and squirrel this extra cash away to meet my monthly payments in the meantime? Free money, or too good to be true?


Risk is completely missing from your analysis. What happens if you get hit by a bus and can't work your PI job? What happens if PSLF goes away? What happens if you're sick of not making very much money and you want to work a better paying job?

PSLF sucks, if only because it incentivizes something as wildly reckless as OP's tentative plan.

circus torts

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Re: PSLF - Should I borrow all I can in anticipation of forgiveness?

Postby circus torts » Wed Sep 12, 2018 9:47 pm

I am pretty set on public service based on my prior work experiences, and believe that even if the government cancelled PLSF there would probably be some sort of "grandfathering in" provision so long as I had started my qualifying payments before the program was ended. But, you all are probably right that there is too much uncertainty to take the risk. Thanks for your perspectives.

albanach

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Re: PSLF - Should I borrow all I can in anticipation of forgiveness?

Postby albanach » Thu Sep 13, 2018 3:38 pm

totesTheGoat wrote:PSLF sucks, if only because it incentivizes something as wildly reckless as OP's tentative plan.


Seriously? OP is, I think, pretty rare in considering that plan and they, like most others, abandon it when they consider the risks.

The real problem is with student funding more generally, in that it covers unlimited tuition. That incentives schools to raise tuition which forces graduates to demand greater private sector salaries (increasing the cost to access legal advice for most Americans) and necessitates loan forgiveness so that the government and others have any ability to attract and retain counsel.

SPLF is just a consequence of the problem.

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Re: PSLF - Should I borrow all I can in anticipation of forgiveness?

Postby nixy » Thu Sep 13, 2018 3:42 pm

mmac wrote:I would only take out what you need. The program may not be around forever. Also, I think you sign something saying you will use for education expenses only. It's not really free money; it's at like 7% interest (right?) if something goes wrong.

Yeah, loans have to be used for education-related expenses, and while I don’t know how likely it is that anyone would investigate in these circumstances, the feds do care and they do investigate generally.

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totesTheGoat

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Re: PSLF - Should I borrow all I can in anticipation of forgiveness?

Postby totesTheGoat » Thu Sep 13, 2018 4:10 pm

albanach wrote:
totesTheGoat wrote:PSLF sucks, if only because it incentivizes something as wildly reckless as OP's tentative plan.


Seriously? OP is, I think, pretty rare in considering that plan and they, like most others, abandon it when they consider the risks.

The real problem is with student funding more generally, in that it covers unlimited tuition. That incentives schools to raise tuition which forces graduates to demand greater private sector salaries (increasing the cost to access legal advice for most Americans) and necessitates loan forgiveness so that the government and others have any ability to attract and retain counsel.

SPLF is just a consequence of the problem.


Most people may not be extreme like the OP, but they certainly overborrow and don't take the full risk picture into account. It's like playing the lotto, people vastly underestimate their chance of a bad outcome and vastly overestimate the number of tickets they should buy.

I think your argument is a bit inconsistent. You correctly identify student funding as the issue, but say that it "necessitates loan forgiveness," missing the point that PSLF and other loan forgiveness programs are subsidies just like the government guaranteed student loans and other subsidies. A contingent subsidy is no less a subsidy, especially when it preys on the risk taking/gambling centers of the brain (we'll pay you $200k if you meet these criteria for 10 years), resulting in kids just hearing "free college!!"

Subsidies, whether direct (like PSLF) or indirect (like federal backing of student loans), whether guaranteed (like the loans) or contingent (like PSLF), raise prices. If the NY Fed is to be believed, that number is 55-65 cents in tuition raise for every dollar in tuition subsidy for the types of subsidy they studies. https://www.wsj.com/articles/federal-aids-role-in-driving-up-tuitions-gains-credence-1438538582

albanach

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Re: PSLF - Should I borrow all I can in anticipation of forgiveness?

Postby albanach » Thu Sep 13, 2018 4:33 pm

totesTheGoat wrote:

I think your argument is a bit inconsistent. You correctly identify student funding as the issue, but say that it "necessitates loan forgiveness," missing the point that PSLF and other loan forgiveness programs are subsidies just like the government guaranteed student loans and other subsidies. A contingent subsidy is no less a subsidy, especially when it preys on the risk taking/gambling centers of the brain (we'll pay you $200k if you meet these criteria for 10 years), resulting in kids just hearing "free college!!"


No, you're just missing my point. I believe, and we can beg to differ, that abolishing PSLF would have no effect on the cost of tuition. Government positions would be forced to pay more - so tax dollars would be used either way. And government positions are the bulk of PSLF, at least for lawyers (and also in education). Other non-profits would be forced to either raise salaries (difficult to do on fundraising income) or reduce positions (more likely).

PSLF is much more flexible than an equivalent salary based system that would tie you to one employer for ten years to get reimbursed and therefore, moving away from it might in fact increase the cost premium demanded by graduates.

tl;dr; removing PSLF won't reduce tuition but could force non-profit employers to spend more to recruit than PSLF currently costs to run.



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