PSLF revisions: New budget proposal screws anyone in PI. Forum

[dresden doll]

How do you "game" the forgiveness program?

You borrow as much as possible rather than using savings to fund any portion of your education.

How many 22-24 year olds have savings?

Not everyone is 22-24. And even among those who are many could otherwise get some help from family. It doesn't make sense to use 529 money or any other family source to pay for law school if the government will forgive everything should you make your PI dreams come true.

That's the average age. I'm not sure we should be making far-sweeping policy changes based on outliers.

Also, from what I've seen, people who could took advantage of their family's willingness to throw money at them either way. Gambling on "your PI dreams coming true" isn't exactly any sounder than gambling on getting biglaw, considering the current state of PI hiring.

I just don't buy that people are so comfortable with not getting as much money on the front end as possible even with PSLF. I certainly wasn't.

[nenydcusc]

I still haven't heard a response from the Dep. of Education, the whitehouse, my senators, or congressperson. Have others?

I'm hoping the slow response means they are getting hammered with similar emails, and they are trying to get to the bottom of the actual issue before responding. Is that overly optimistic?

Who knows? I don't think it's uncommon to wait awhile for a response from the elected rep.

Unless we have a canned response ready to go, my office sends out substantive responses to constituent emails/letters in about a month, on average. The time before a response is sent depends on the amount of research required, several levels of approval before anything can go out with the boss's signature, and the existing volume of correspondence that also needs to be answered.

There are also many offices that generally do not send any responses beyond a generic "thank you for sharing your thoughts on XXX, I appreciate hearing from you and will keep your views in mind."

[dresden doll]

There are also many offices that generally do not send any responses beyond a generic "thank you for sharing your thoughts on XXX, I appreciate hearing from you and will keep your views in mind."

That's actually kind of how I imagine all offices to be like. Good to know that some of them do bother with substantive replies.

[Nomo]

I still haven't heard a response from the Dep. of Education, the whitehouse, my senators, or congressperson. Have others?

I'm hoping the slow response means they are getting hammered with similar emails, and they are trying to get to the bottom of the actual issue before responding. Is that overly optimistic?

Who knows? I don't think it's uncommon to wait awhile for a response from the elected rep.

Unless we have a canned response ready to go, my office sends out substantive responses to constituent emails/letters in about a month, on average. The time before a response is sent depends on the amount of research required, several levels of approval before anything can go out with the boss's signature, and the existing volume of correspondence that also needs to be answered.

There are also many offices that generally do not send any responses beyond a generic "thank you for sharing your thoughts on XXX, I appreciate hearing from you and will keep your views in mind."

That makes sense. I'm mainly surprised I haven't heard from Dep. of Education since another post apparently has a response from them already.

[dresden doll]

This whole debate kind of harkens back to that time when Congress decided that student loans shouldn't be discharged in bankruptcy even though there wasn't actually any data to suggest that students had been abusing chapter 7.

[Tiago Splitter]

Gambling on "your PI dreams coming true" isn't exactly any sounder than gambling on getting biglaw, considering the current state of PI hiring.

There isn't any gambling. If you have 200k in a 529, you borrow the full COA and then if PI doesn't work out you use the 529 to pay off the loans.

I get that this kind of thing isn't available to most, but it's how you game the system, and it's exactly the kind of thing Georgetown recommends.

[patogordo]

wonder if you can use 529 to pay the tax bomb

[dresden doll]

Gambling on "your PI dreams coming true" isn't exactly any sounder than gambling on getting biglaw, considering the current state of PI hiring.

There isn't any gambling. If you have 200k in a 529, you borrow the full COA and then if PI doesn't work out you use the 529 to pay off the loans.

I get that this kind of thing isn't available to most, but it's how you game the system, and it's exactly the kind of thing Georgetown recommends.

What about the interest that accumulates in those 3 years? That would be the risk cost, right?

At any rate, I think this (1) isn't available to most and (2) isn't what most would do anyway. Whatever paltry savings I had, I used to offset COL so I wouldn't have to borrow the full COA, and I wouldn't even consider myself some exemplary paragon of financial responsibility. I also think it's pretty telling that the number of apps to law schools has been dwindling. If people are so nefarious, I'd expect them to figure "what the hell, I always have PSLF to fall back on," as opposed to dropping out of the law school race altogether.

Point being, G'town's (IMO delusional) recommendations apply to an extreme minority. If the program simply isn't feasible, period, that's one thing, but modifying it in response to those recommendations seems pretty myopic.

[A. Nony Mouse]

Yeah, I'd be really surprised if people who have $200k available to pay loans if they don't get PI are numerous enough to be skewing repayment numbers. But maybe I don't know enough rich people going to law school.

[Tiago Splitter]

wonder if you can use 529 to pay the tax bomb

Earnings are taxed and penalized if not used for education, and paying off loans or taxes doesn't count. But all the contributions are after tax and come out tax/penalty free. Basically like a Roth IRA but only for education.

[patogordo]

wonder if you can use 529 to pay the tax bomb

Earnings are taxed and penalized if not used for education, and paying off loans or taxes doesn't count. But all the contributions are after tax and come out tax/penalty free. Basically like a Roth IRA but only for education.

you just said something about using 529 plan to pay off your loans if you don't get PI. what am i missing

[Big Dog]

^^however, if one received a state tax deduction for the initial contribution to the 529, withdrawal for non-educ uses would result in a state tax penalty.

But maybe I don't know enough rich people going to law school.

There are plenty of full-payors, using family money.

[Tiago Splitter]

wonder if you can use 529 to pay the tax bomb

Earnings are taxed and penalized if not used for education, and paying off loans or taxes doesn't count. But all the contributions are after tax and come out tax/penalty free. Basically like a Roth IRA but only for education.

you just said something about using 529 plan to pay off your loans if you don't get PI. what am i missing

The tax/10% penalty on the earnings is the price you pay if you decide to use the 529 to pay loans later. You can also just borrow heavy during that first year and if things change start using the 529 money in years 2/3, when nothing is taxed. If the student ends up going with PI, just use LRAP/PSLF and transfer the 529 to a brother or cousin or some other family member. Right now an advisor would be insane to recommend using any savings to pay for law school if the student is set on going the government/PI route.

[A. Nony Mouse]

^^however, if one received a state tax deduction for the initial contribution to the 529, withdrawal for non-educ uses would result in a state tax penalty.

But maybe I don't know enough rich people going to law school.

There are plenty of full-payors, using family money.

Sure, but what does "plenty" mean? Is it enough people to make this a significant factor is curtailing PSLF? (Despite whatever advice Georgetown was giving out.)

[dresden doll]

Right now an advisor would be insane to recommend using any savings to pay for law school if the student is set on going the government/PI route.

But most people aren't 100 percent set. They think that's what they want, but they also want to keep their options open. People who skip OCI altogether at any school because they're that deadset on PI can probably be counted on the fingers of one hand.

Combine that with the fact that very, very few people have 200k stashed away and I really think we're talking extreme outliers here.

I also do know people whose family paid for LS, but damn if I'd ever ask my rich family to hold off like that. In three or 10 or however many years, the money might no longer be there or, better yet, they might no longer be willing to finance me like that. Better to get your hands on that money while you can.

[dresden doll]

I mean of all the loopholes in our vast body of laws, tearing your hair out over some super rich 0L kids stashing away their vast money in reliance on PSLF strikes me as a pretty strange use of the administration's time.

[timbs4339]

The policy group that proposed this keeps mentioning the GULC dean who gave a presentation about how to game the forgiveness programs.

How do you "game" the forgiveness program? Most PI people aren't great candidates for high salaried private sector positions after 10 years in public service. Even in the only halfway plausible scenario I can think of - that of a prosecutor going biglaw (since some biglaw does like former prosecutors with white collar crime backgrounds), there is no argument that the prosecutor wouldn't have fared better financially by doing biglaw to begin with.

I can't think of anyone who comes out ahead after 10 years in PI more so than it would have been the case had she/he gone biglaw in the first place. Are there mounds of people out there taking out millions in student loans?

I can definitely see how med school graduates are able to "game" the forgiveness program, but I assume this person was talking about forgiveness in the context of the legal profession only.

I'm more talking about the schools linking PSLF to LRAPs and essentially paying the fed gov back with their own money, which is what the New America Foundation seems to be complaining about aside from people getting "expensive" educations on the taxpayer dime.

http://www.washingtonpost.com/blogs/won ... nts-bills/

EDIT: At one point the authors of the proposal actually suggested capping GRADPLUS loans would be a solution, but obviously did not propose that, or it might be something they can't do in the budget.

[LSL]

I mean of all the loopholes in our vast body of laws, tearing your hair out over some super rich 0L kids stashing away their vast money in reliance on PSLF strikes me as a pretty strange use of the administration's time.

Yeah this. Also, just wanted to point out that what might be considered "gaming the system" is those who forewent larger scholarships at lower-ranked schools because PSLF was a touted option for repayment (the much more likely scenario IMO). Is it still gaming the system to take out 200k to go to T14 instead of taking out 50k to go to a TT or TTT? I guess if you wanted to look at it like that, but again, it seems dumb to blame those people who thought they were probably just going to be able to use the program in a way that makes sense for them to use. There's no rule that they should have been expected to go to the lower cost school for the sake of the gov'ts thriftiness.

[dresden doll]

I'm more talking about the schools linking PSLF to LRAPs and essentially paying the fed gov back with their own money, which is what the New America Foundation seems to be complaining about aside from people getting "expensive" educations on the taxpayer dime.

Yeah, I can see that. I'd be sorely tempted to just require lawl schools to make up the difference when 10 years are up. (Yes, I realize that's not possible.)

[timbs4339]

What percentage of 0Ls do you guys think have heard or IBR/PAYE/PSLF- not even who actually know what the terms of the program are, but can tell you what the letters mean?

[timbs4339]

I'm more talking about the schools linking PSLF to LRAPs and essentially paying the fed gov back with their own money, which is what the New America Foundation seems to be complaining about aside from people getting "expensive" educations on the taxpayer dime.

Yeah, I can see that. I'd be sorely tempted to just require lawl schools to make up the difference when 10 years are up. (Yes, I realize that's not possible.)

I agree but that's likely politically impossible because of interests in both parties.

[patogordo]

i posted an article earlier that said 600k people are on IBR/PAYE. out of 37 million borrowers. but the % has to be higher for law and med students just bc of the sheer cost.

[anyriotgirl]

What percentage of 0Ls do you guys think have heard or IBR/PAYE/PSLF- not even who actually know what the terms of the program are, but can tell you what the letters mean?

I'm a 0L who talked to an LRAP officer at a school who was surprised with my basic understanding of these programs. She said that she counsels 3Ls who have no clue about them. This was at a T14.

So in response to your question, I'd wager that it's a pretty low percentage.

[ggocat]

The policy group that proposed this keeps mentioning the GULC dean who gave a presentation about how to game the forgiveness programs.

How do you "game" the forgiveness program?

It is conceivable that an individual could form a nonprofit entity to provide legal services at below-market rates and qualify for the 10-year forgiveness program.

• -- the program is available not just to 501(c)(3) organizations, but also any other "private non-profit organization," including one that provides "public interest law services." http://studentaid.ed.gov/sites/default/ ... F_PSLF.pdf (page 2); see also http://studentaid.ed.gov/repay-loans/fo ... employment
  
  -- a borrower may certify his or her own employment to qualify for the loan forgiveness program. http://studentaid.ed.gov/sites/default/ ... stions.pdf (question & answer # 53)
  
  -- nonprofits may charge for services. http://nonprofitanswerguide.org/faq/leg ... -services/

Arguably, this is not really "gaming" the forgiveness program because by providing low-cost legal services, it seems you are furthering the goal of the program.

In fact, Stanford specifically allows self-employed private law practitioners to qualify for its LRAP program. --LinkRemoved-- (I understand I'm comparing apples to oranges here, but I'm trying to say only that it is conceivable to think that something like this would pass muster).

[A. Nony Mouse]

I didn't know anything about these programs till the financial aid session we had 3L talking about our options after graduation. Admittedly IBR/PSLF were created in 2007 and I applied to LS in 2007, so there wasn't much info at that point. I hope people are better informed now.