Stability of Federal Loan Forgiveness Programs

(On Campus Interviews, Summer Associate positions, Firm Reviews, Tips, ...)
Forum rules
Anonymous Posting

Anonymous posting is only appropriate when you are revealing sensitive employment related information about a firm, job, etc. You may anonymously respond on topic to these threads. Unacceptable uses include: harassing another user, joking around, testing the feature, or other things that are more appropriate in the lounge.

Failure to follow these rules will get you outed, warned, or banned.
Anonymous User
Posts: 273443
Joined: Tue Aug 11, 2009 9:32 am

Stability of Federal Loan Forgiveness Programs

Postby Anonymous User » Mon Apr 09, 2012 5:36 pm

Just wondering how stable the federal loan forgiveness programs (i.e. IBR) appear to be. I worry what might happen if I enter into the program, and it gets eliminated during year 8 of my 10 year repayment period (meaning then I'll get no forgiveness of the outstanding balance). Is there a grandfathering process into the loan forgiveness system?

Thanks!

GSCgold
Posts: 46
Joined: Tue Feb 21, 2012 12:51 am

Re: Stability of Federal Loan Forgiveness Programs

Postby GSCgold » Mon Apr 09, 2012 5:54 pm

This is relevant to my interests.

luthersloan
Posts: 342
Joined: Thu May 27, 2010 6:43 pm

Re: Stability of Federal Loan Forgiveness Programs

Postby luthersloan » Mon Apr 09, 2012 8:24 pm

I tend to think that the programs will be quite stable once they have been around long enough to have many people benefiting from them, at that point they become like all other entitlements , kind of a scared cow. And It is hard to imagine if the government got rid of them they would not give some transition relief to those who were already in them.

Anonymous User
Posts: 273443
Joined: Tue Aug 11, 2009 9:32 am

Re: Stability of Federal Loan Forgiveness Programs

Postby Anonymous User » Tue Apr 10, 2012 1:02 pm

Bump: Anyone else able to chime in about how confident we can feel that the loan forgiveness program will last long enough to receive its benefits?

gulcregret
Posts: 115
Joined: Mon Aug 30, 2010 11:08 pm

Re: Stability of Federal Loan Forgiveness Programs

Postby gulcregret » Tue Apr 10, 2012 2:09 pm

Student Loan forgiveness will never be an entitlement in the budgetary and legal sense of the word because they are not based on mere circumstances, rather they are based on performance of very specific actions. That said, they will not be repealed anytime soon. They are "budget myths" in that they are not reflected in the the baseline because they are mostly outside the ten year snapshot. Loans are not expenditures, they are net present value assets and very hard to score in the federal budget.

Basically it is impossible for anyone to claim this program will be a net loss for the federal government. It is difficult to say how many people will actually qualify for this and how much money is at stake. Most estimators say that federal loans are net gain over 20 years, regardless of the forgiveness element.

In short, these are not even on the mind of many policy makers at this time. Although, don't be surprised if interest rates go up on federal student loans. This is a real possibility.

See this for further discussion: http://febp.newamerica.net/background-a ... -estimates

Anonymous User
Posts: 273443
Joined: Tue Aug 11, 2009 9:32 am

Re: Stability of Federal Loan Forgiveness Programs

Postby Anonymous User » Tue Apr 10, 2012 3:18 pm

I went to a talk on this yesterday, and the deal is basically that yes, in theory Congress can pull it whenever, but it isn't even part of the discussion yet. No one will be qualified for loan forgiveness under this program until October 2017, so it's impossible to know what the real impact of it will be, and thus whether or not the government will react to that.

However -- so far all actions have been made to expand the program and not reduce it, which is somewhat helpful.

The biggest issue here is that almost no one stays in public interest for the full ten years required for forgiveness (I think they said most people leave after five). And, depending on your debt load, you could pay the IBR amount for ten years and still be left with your initial balance after those ten years. You're basically just paying the interest. That's scary as hell.

Also, the repayment period doesn't start until you actually start making monthly payments, meaning the first few months you're working after graduation (during your grace period) don't count toward the 120 months.

User avatar
rayiner
Posts: 6184
Joined: Thu Dec 11, 2008 11:43 am

Re: Stability of Federal Loan Forgiveness Programs

Postby rayiner » Tue Apr 10, 2012 3:30 pm

Anonymous User wrote:I went to a talk on this yesterday, and the deal is basically that yes, in theory Congress can pull it whenever, but it isn't even part of the discussion yet. No one will be qualified for loan forgiveness under this program until October 2017, so it's impossible to know what the real impact of it will be, and thus whether or not the government will react to that.

However -- so far all actions have been made to expand the program and not reduce it, which is somewhat helpful.

The biggest issue here is that almost no one stays in public interest for the full ten years required for forgiveness (I think they said most people leave after five). And, depending on your debt load, you could pay the IBR amount for ten years and still be left with your initial balance after those ten years. You're basically just paying the interest. That's scary as hell.

Also, the repayment period doesn't start until you actually start making monthly payments, meaning the first few months you're working after graduation (during your grace period) don't count toward the 120 months.


Note that many schools LRAP mesh with IBR. At NU, for example, if you graduate with $200k of debt working a $50k/year public interest job, you'll get an LRAP award of about $12,000/year. That leaves you with just about $3,000 a year in unpaid interest, which you can easily pay out of pocket even on $50k/year.

User avatar
leobowski
Posts: 511
Joined: Mon Mar 09, 2009 2:11 am

Re: Stability of Federal Loan Forgiveness Programs

Postby leobowski » Tue Apr 10, 2012 4:17 pm

gulcregret wrote:
Basically it is impossible for anyone to claim this program will be a net loss for the federal government.



This. IBR programs are a great incentive for those at risk of possible default. Minimal IBR payments are still preferable to the collection process, from a fiscal standpoint (even with the tremendous garnishment powers).

Anonymous User
Posts: 273443
Joined: Tue Aug 11, 2009 9:32 am

Re: Stability of Federal Loan Forgiveness Programs

Postby Anonymous User » Tue Apr 10, 2012 5:38 pm

Anonymous User wrote:The biggest issue here is that almost no one stays in public interest for the full ten years required for forgiveness (I think they said most people leave after five).


But wait, why in the world would you do that? Are people losing/getting sick of their jobs after five years or are private sector opportunities attractive enough to take the financial hit?

User avatar
sunynp
Posts: 1899
Joined: Tue May 24, 2011 2:06 pm

Re: Stability of Federal Loan Forgiveness Programs

Postby sunynp » Tue Apr 10, 2012 7:34 pm

I also wonder what happens to people who lose their jobs? There were a lot of cutbacks in the recession. If people were on IBR, and they lost their job, what happens to them?

The other problem with IBR for new grads is that people who are on IBR are not going to leave their jobs, unless they can lateral into another similar one, for 10 years. The demand for IBR jobs is going to far exceed the supply.

I think that for many reasons IBR is a huge gamble and a mistake to rely on. I know that other people here disagree with me.

LawIdiot86
Posts: 1159
Joined: Tue Nov 15, 2011 5:21 pm

Re: Stability of Federal Loan Forgiveness Programs

Postby LawIdiot86 » Tue Apr 10, 2012 7:42 pm

sunynp wrote:I also wonder what happens to people who lose their jobs? There were a lot of cutbacks in the recession. If people were on IBR, and they lost their job, what happens to them?

The other problem with IBR for new grads is that people who are on IBR are not going to leave their jobs, unless they can lateral into another similar one, for 10 years. The demand for IBR jobs is going to far exceed the supply.

I think that for many reasons IBR is a huge gamble and a mistake to rely on. I know that other people here disagree with me.


IBR is going to make the legal labor market even more sticky and inefficient than it already is. The people who graduate during the first year or two are going to reap a huge windfall and then lock it in for ten years, even if they hate their job (and do a crappy but not worthy of firing work quality) because they need it keep their IBR.

sidhesadie
Posts: 454
Joined: Mon Jul 12, 2010 4:54 pm

Re: Stability of Federal Loan Forgiveness Programs

Postby sidhesadie » Tue Apr 10, 2012 8:57 pm

sunynp wrote:I also wonder what happens to people who lose their jobs? There were a lot of cutbacks in the recession. If people were on IBR, and they lost their job, what happens to them?

The other problem with IBR for new grads is that people who are on IBR are not going to leave their jobs, unless they can lateral into another similar one, for 10 years. The demand for IBR jobs is going to far exceed the supply.

I think that for many reasons IBR is a huge gamble and a mistake to rely on. I know that other people here disagree with me.


If you lose your job, you can still get income based repayment, but if you're talking about public service loan forgiveness (which I think you are), if you lose your job in a cutback after 5 years, and work private the rest of your career, you don't get the public service 10 year forgiveness. You have to work public service for 10 years. If you get let go before that because of budget cutbacks, that's unfortunate for you. There's no loophole for people who get let go.

Anonymous User
Posts: 273443
Joined: Tue Aug 11, 2009 9:32 am

Re: Stability of Federal Loan Forgiveness Programs

Postby Anonymous User » Tue Apr 10, 2012 11:47 pm

But the breadth of the public interest jobs that the program covers is so great that it seems strange that people who lose their jobs wouldn't be able to find anything else... (or at least absurd to this it would be more likely they'd find private sector stuff)

CanadianWolf
Posts: 10439
Joined: Wed Mar 24, 2010 4:54 pm

Re: Stability of Federal Loan Forgiveness Programs

Postby CanadianWolf » Wed Apr 11, 2012 12:05 am

Comes down to which political party dominates. Republicans are likely to end loan forgiveness programs in an attempt to "balance the budget" so that the ultra-wealthy can pay lower taxes. Democrats recognize that the remaining 99% deal with another type of reality.

User avatar
sunynp
Posts: 1899
Joined: Tue May 24, 2011 2:06 pm

Re: Stability of Federal Loan Forgiveness Programs

Postby sunynp » Wed Apr 11, 2012 1:25 am

Anonymous User wrote:But the breadth of the public interest jobs that the program covers is so great that it seems strange that people who lose their jobs wouldn't be able to find anything else... (or at least absurd to this it would be more likely they'd find private sector stuff)


I was thinking of the recession. I am not saying that people who lost public sector jobs found private sector jobs, I think they may remain unemployed. I don't know if there is any data on these jobs. Everyone is so focused on biglaw, I don't know how these public sector jobs are measured. I know that some people who lost their biglaw jobs had a lot of trouble finding any legal work at all. I think it would be the same in the public sector.

Anonymous User
Posts: 273443
Joined: Tue Aug 11, 2009 9:32 am

Re: Stability of Federal Loan Forgiveness Programs

Postby Anonymous User » Wed Apr 11, 2012 10:31 am

sunynp wrote:
Anonymous User wrote:But the breadth of the public interest jobs that the program covers is so great that it seems strange that people who lose their jobs wouldn't be able to find anything else... (or at least absurd to this it would be more likely they'd find private sector stuff)


I was thinking of the recession. I am not saying that people who lost public sector jobs found private sector jobs, I think they may remain unemployed. I don't know if there is any data on these jobs. Everyone is so focused on biglaw, I don't know how these public sector jobs are measured. I know that some people who lost their biglaw jobs had a lot of trouble finding any legal work at all. I think it would be the same in the public sector.


But the federal loan forgiveness program covers ALL public service jobs, not just legal ones




Return to “Legal Employment”

Who is online

The online users are hidden on this forum.