,, Forum

[RedBirds2011]

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

[chem]

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.

Even better than what you describe, as the 10% is from your discretionary income. So after rent, food, and everything, you will be paying a lot less, getting more forgiven

[Tiago Splitter]

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

The original scenario included 210K in loans before interest. Even though interest doesn't compound under IBR that's a huge tax hit 20 years later, especially with tax rates expected to go up (welcome to the Millionaires Club Mr. 300K debt forgiveness!) Of course the IRS will negotiate payment plans so you can potentially stretch things out even further.

[timbs4339]

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.

A few points:

1) Your analysis misses the massive interest burden that comes from taking out 200K in loans. That's 10-15K per year in interest payments. Luckily, it doesn't capitalize under IBR so you can let it accrue. But imagine you make enough money to pull out of IBR- you'll now owe that interest. You're damned if you do damned if you don't- if you start creeping up out of IBR you could be looking at an even worse lifestyle if your new position has only a marginally better salary.

IBR was not created with 150K-200K of law school debt in mind. The kind of debt law students are carrying is easily within the top 1-2% of student debtholders. I've run the numbers and it does not look good.

2) You won't be able to live like a student forever. Most people graduating law school will be between 25-27 years old. That means they will start looking for a spouse, maybe trying to start families within 5 years of graduation. What bank is going to give a person with over 100K in student loan debt a mortgage? What about a small business loan? That debt is paralyzing. Then you have kids- that's a huge expense. Living on 20K per year forever is not a good plan. Many people don't want to wait until they are 40 to get married and have kids- I sure as hell don't.

3) Why do you think it is highly unlikely IBR won't go away? One half of the current political system in this country favors severe austerity. They are not going to cut defense, and they are not going to cut entitlements. They are going to cut drop in the bucket discretionary spending programs like IBR. The Republicans just recently held student loan interest rates hostage against a program to fucking vaccinate kids and the Democrats caved. Do you really think they give a crap about IBR?

[rayiner]

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

The original scenario included 210K in loans before interest. Even though interest doesn't compound under IBR that's a huge tax hit 20 years later, especially with tax rates expected to go up (welcome to the Millionaires Club Mr. 300K debt forgiveness!) Of course the IRS will negotiate payment plans so you can potentially stretch things out even further.

The lack of compounding interest is a real biggie. Assuming you make no payments at all, $240k at 7.1% interest after 20 years is $950k, if interest were compounding. If instead you paid $1000/month towards covering the interest, your total debt after 20 years would be ~$340k.

[jurisx]

Debt Relief is not always considered income. Bankruptcy is one example, being indigent in comparison to the debt is another. If you have $300K forgiven, and you make $100K a year with less than that in assets (house,car,etc) you will still be partially indigent and not have to consider it all income.

Plus I bet between now and then enough tear jerkers will make it considered tax fee anyways. You see people graduating with $30K or less debt crying up storms about it and getting political attention.

The average grad student gets that much debt first term.

[09042014]

Hyperinflation is my IBR /RonPAUL2012

[timbs4339]

Debt Relief is not always considered income. Bankruptcy is one example, being indigent in comparison to the debt is another. If you have $300K forgiven, and you make $100K a year with less than that in assets (house,car,etc) you will still be partially indigent and not have to consider it all income.

Plus I bet between now and then enough tear jerkers will make it considered tax fee anyways. You see people graduating with $30K or less debt crying up storms about it and getting political attention.

The average grad student gets that much debt first term.

Yeah people seem to have so much sympathy for students and especially law students. That's why student loans are at 6.8%/7.9% even when they are non-dischargeable.

[rickgrimes69]

Hyperinflation is my IBR /RonPAUL2012

Good luck with that. Too bad the Fed is trying to ward of deflation, not inflation.

[sandwiches5000]

In what world are you assuming debt will just disappear after 20 years?

Greece.

[Anonymous Loser]

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.

Tl; dr: with IBR around, don't worry, be happy.

You are overlooking the fact that the IBR program doubles the length of repayment period. Although a borrower using the plan makes smaller payments, the repayment period is twice as long.

In pretty much any realistic scenario that results in the forgiveness of $100,000, the borrower will have made total payments of at least $10,000 more under the IBR program than they would have under the standard repayment plan.

[DiggyHopeful]

.

[DiggyHopeful]

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.

Tl; dr: with IBR around, don't worry, be happy.

You are overlooking the fact that the IBR program doubles the length of repayment period. Although a borrower using the plan makes smaller payments, the repayment period is twice as long.

In pretty much any realistic scenario that results in the forgiveness of $100,000, the borrower will have made total payments of at least $10,000 more under the IBR program than they would have under the standard repayment plan.

How is this possible?

[Anonymous Loser]

How is this possible?

You raised this issue above:

IBR would prolong your payoff time and thus you'll pay more in interest

[DiggyHopeful]

.

[redbullvodka]

How is this possible?

You raised this issue above:

IBR would prolong your payoff time and thus you'll pay more in interest

Right, but you said that under any possible scenario where someone gets more than $100,000 discharged, they would end up paying more under IBR than under the standard repayment plan. Here me out on why I personally think that might not be the case.

Let's say you make $50,000 a year under IBR (theoretically it would be counted as less because IBR is calculated as anything over $150,000 above the poverty line I believe, but for the sake of simplicity I'll leave it as is).

In that case, that means you will pay $5,000 a year for 20 years, for a total of $100,000. If you owed $200,000, and you paid $100,000, then you just paid $100,000 out of pocket and got a $100,000 discharged.

Now, let's say you had $200,000 of student loan debt, and did the standard repayment at 10 years. That means that you would have to make 120 payments at $2,301.61, for a grand total of $276,193.20.

So in the theoretical IBR scenario, over 20 years you pay $100,000 and get $100,000 discharged. Under the standard repayment, you just pay $276,193.20.

How on earth is IBR not the better option if you make payments for 20 years? I am truly curious, as I am not an expert on student loans, and would love to hear more advice from anyone on this topic

Let's assume you owe $200,000 in principal at the end of graduation, when your repayment period begins. Under the above scenario, in which you pay $5,000 to your loan in a year, you accrue $15,000 in interest (based on an effective rate of 7.5%). So, you have not even paid down your interest in its entirety with your yearly payment. At the end of 20 years, you will owe $200,000, minus the $100,000 you've paid, PLUS whatever unpaid interest you have (a large amount). Then, when that large amount is forgiven, you owe taxes on that forgiveness.

IBR is not an ideal scenario, by any means.

[jurisx]

Never underestimate the value of the Horses mouth,

http://studentaid.ed.gov/PORTALSWebApp/ ... BRPlan.jsp

Info and Calculator. Enter anything you like. Not as fun as the subservient chicken, but Enjoy.

[RedBirds2011]

How is this possible?

You raised this issue above:

IBR would prolong your payoff time and thus you'll pay more in interest

Right, but you said that under any possible scenario where someone gets more than $100,000 discharged, they would end up paying more under IBR than under the standard repayment plan. Here me out on why I personally think that might not be the case.

Let's say you make $50,000 a year under IBR (theoretically it would be counted as less because IBR is calculated as anything over $150,000 above the poverty line I believe, but for the sake of simplicity I'll leave it as is).

In that case, that means you will pay $5,000 a year for 20 years, for a total of $100,000. If you owed $200,000, and you paid $100,000, then you just paid $100,000 out of pocket and got a $100,000 discharged.

Now, let's say you had $200,000 of student loan debt, and did the standard repayment at 10 years. That means that you would have to make 120 payments at $2,301.61, for a grand total of $276,193.20.

So in the theoretical IBR scenario, over 20 years you pay $100,000 and get $100,000 discharged. Under the standard repayment, you just pay $276,193.20.

How on earth is IBR not the better option if you make payments for 20 years? I am truly curious, as I am not an expert on student loans, and would love to hear more advice from anyone on this topic

Let's assume you owe $200,000 in principal at the end of graduation, when your repayment period begins. Under the above scenario, in which you pay $5,000 to your loan in a year, you accrue $15,000 in interest (based on an effective rate of 7.5%). So, you have not even paid down your interest in its entirety with your yearly payment. At the end of 20 years, you will owe $200,000, minus the $100,000 you've paid, PLUS whatever unpaid interest you have (a large amount). Then, when that large amount is forgiven, you owe taxes on that forgiveness.

IBR is not an ideal scenario, by any means.

In an "ideal" scenario, I would just win the lottery and do whatever the fuck I want.

Also, this sounds about right here.

[jurisx]

Never underestimate the value of the Horses mouth,

http://studentaid.ed.gov/PORTALSWebApp/ ... BRPlan.jsp

Info and Calculator. Enter anything you like. Not as fun as the subservient chicken, but Enjoy.

[bk1]

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.

What happens "in the (not all that unlikely considering the current state of the economy) scenario where you" don't get a full time job as a lawyer?

[RedBirds2011]

Never underestimate the value of the Horses mouth,

http://studentaid.ed.gov/PORTALSWebApp/ ... BRPlan.jsp

Info and Calculator. Enter anything you like. Not as fun as the subservient chicken, but Enjoy.

You already posted this just two comments above...

[jurisx]

Never underestimate the value of the Horses mouth,

http://studentaid.ed.gov/PORTALSWebApp/ ... BRPlan.jsp

Info and Calculator. Enter anything you like. Not as fun as the subservient chicken, but Enjoy.

You already posted this just two comments above...

I wonder if I knew that while quoting myself after seeing additional assumptions.

[jurisx]

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.

What happens "in the (not all that unlikely considering the current state of the economy) scenario where you" don't get a full time job as a lawyer?

You income base repay and suck it up keep aiming for that full time job as a lawyer. Repeat as much as needed.

[bk1]

What happens "in the (not all that unlikely considering the current state of the economy) scenario where you" don't get a full time job as a lawyer?

You income base repay and suck it up keep aiming for that full time job as a lawyer. Repeat as much as needed.[/quote]

My point was that you've spent 3 years and 10% of your income for 20 years and gained nothing.

[jurisx]

What happens "in the (not all that unlikely considering the current state of the economy) scenario where you" don't get a full time job as a lawyer?

You income base repay and suck it up keep aiming for that full time job as a lawyer. Repeat as much as needed.

My point was that you've spent 3 years and 10% of your income for 20 years and gained nothing.[/quote]

yeah except being a lawyer and being better off from that point forward than someone without it (in a worse case scenario where you don't do better, and everyone who can breathe will)