CNN Article: Student Loan Help Forum

[spondee]

What if you took out UG loans before 2008 but you will take out a "new loan" next year? Does that mean that all of your loans b/w 2008 and 2012 will qualify?

I don't think they're covered. To be eligible for the "new" benefit a borrower needs to take out a loan in 2012 or later; then, for that borrower, it covers loans taken out from 2008 onward. Current 3Ls receive no benefit. Neither do current college seniors, recent graduates, etc.

As others have said, it's political posturing. Though, to be fair to Obama, this may be the most radical change he can make on his own without congressional action.

1. Does nothing to address rising tuition rates because loans are all still federally guaranteed/nondischargeable.

2. Does nothing to slow the student debt bubble from ballooning further.

3. Does nothing to help the high numbers of currently unemployed recent college, LS, etc. graduates.

4. Does nothing to help out the soon-to-be unemployed graduates next May.

5. Does nothing to solve the end-of-payment tax problem that accompanies 20/25-term IBR plans. In fact, makes it worse.

[Aberzombie1892]

While the change does little to nothing, President Obama did what he could do. I can't fault him for that.

[rayiner]

Stop taking on tons of debt you can't pay off
The article's example is hilarious. Nobody should ever borrow $200k for GW undergrad! Mason is super cheap.

[A'nold]

What if you took out UG loans before 2008 but you will take out a "new loan" next year? Does that mean that all of your loans b/w 2008 and 2012 will qualify?

I don't think they're covered. To be eligible for the "new" benefit a borrower needs to take out a loan in 2012 or later; then, for that borrower, it covers loans taken out from 2008 onward. Current 3Ls receive no benefit. Neither do current college seniors, recent graduates, etc.

But current 3L's will take out a loan in 2012, right? If so, then the 10% of disposable income applies to those taken out b/w 2008 and 2012, right? What am I missing?

[mrloblaw]

I was completely unaware of those changes to IBR. Holy crap, nobody's going to be paying their student loans anymore.

You have to keep making regular payments in order to continue receiving the benefits of IBR. They may not be high enough to repay your loans, but most people I know want to actually have a nice income, and the higher your income rises the more you have to repay. Basically nobody will have to worry about their loans anymore, but the tradeoff is that it just keeps following them for decades, waiting for the day they start making real money.

I should have been more clear and less conclusory with what I said. I transferred to a T14 in no small part due to my interest in public service and the fact that my old school didn't have a significant LRAP. For people at my old school also planning to do public service, this could be huge. Especially now that the cap is 10% of discretionary [post blah blah poverty line, etc.], people who owe $200k and end up in a state DA/Public defender office will likely not be paying enough to significantly exceed the interest on their loans (or even cover it?). If they plan to stay in public service, they'll likely never make as much as a first year biglaw associate, so it's not like they're going to end up having massive payments down the road.

While this plan was almost certainly not targeted at law students, it creates a viable LRAP alternative for anyone who legitimately wants to do public service. At least, I think it will; it'll be the weekend before I play around with the math enough to test my intuition.

[cattleprod]

Stop taking on tons of debt you can't pay off
The article's example is hilarious. Nobody should ever borrow $200k for GW undergrad! Mason is super cheap.

The purpose of posting the example on TLS is because $200,000 is roughly the amount that many law students can easily find themselves in.
So the math in the example is applicable to many here. Ignoring the example because it uses an extreme undergrad is missing the point.

It is a lousy deal for taxpayers.
Providing unlimited amounts of student loan money to graduates, that have no reasonable plan of repaying it, is clearly a bubble that will implode.
So long as students have unlimited funds, the tuition rates will continue to climb.

Eventually the government is going to pull the plug when the default rates, become too large to ignore.
As some point the government will have to recognize on it's books that they are losing a ton of money subsidizing a system that is out of control.
If we have a bunch of well publicized examples of graduates with $200,000 being able to ditch 90% of their loans onto the taxpayers, then there will be demands for it to be halted.

In an era of tight budgets, it could happen soon.

[spondee]

What if you took out UG loans before 2008 but you will take out a "new loan" next year? Does that mean that all of your loans b/w 2008 and 2012 will qualify?

I don't think they're covered. To be eligible for the "new" benefit a borrower needs to take out a loan in 2012 or later; then, for that borrower, it covers loans taken out from 2008 onward. Current 3Ls receive no benefit. Neither do current college seniors, recent graduates, etc.

But current 3L's will take out a loan in 2012, right? If so, then the 10% of disposable income applies to those taken out b/w 2008 and 2012, right? What am I missing?

Maybe you're not; maybe it's me. I don't think we 3Ls take out a loan in 2012. Half of our loans for the school year will be distributed in January, but we already took them out back in August. That's how I understood it.

[Anonymous User]

While the change does little to nothing, President Obama did what he could do. I can't fault him for that.

Actually he did nothing, which is LESS than he could have done.

He could have proposed cutting the usurious interst rate from 7.9% to a "cost of funds: which is closer to 1%. (So grad students stop subsidizing undergraduate Pell grants).

He could have made all loans eligible, so that students who incurred debt in the last 3-4 years and are now entering the work force mught catch a break.

He could have made all/more student loan interest deductible. And he could have considered only the stiudent's income. not halfa married couple's income for determining eligibility. (The way it stands now, high paid spouse subsidized low paid spouse's repayment (don'tt get married to a student with big debt if you make alot of money in Big Law.)

He could have made loan forgiveness on the back end tax free, or taxed at a lower rate- say the capital gains rate of 15%.

He could have made installment payments of the loan forgiveness amount repayable over another 10 years at a low interst rate.

He could have made all loans eligible for IBR, not just direct loans, and he could have done more than give the .5% consolidaiotn break- THose who have provate FFEL loans perobably are paying 3-4%, so they have to pay another 4% per annum to get the benefit of IBR.

He could have stopped loans to for-profit institutions that have abysmal graduation rates or post graduation employment rates.

He could have made student loans dischargeable in bankruptcy - JUST LIKE THEY USED TO BE

Yeah, he really did ALL he could.

If he were serious about putting dollars back into the economy, easing the pain of the newly unemployable, and avoiding the student loan bubble calamity that is waiting for us down the road, he could have proposed any or all of these things. But he didn't- because he knew he could never get them through Congress, and this way it SOUNDS like he actually is doing something- which he isn't.

(ANd I like and voted for the guy).

[ToTransferOrNot]

While the change does little to nothing, President Obama did what he could do. I can't fault him for that.

Actually he did nothing, which is LESS than he could have done.

He could have proposed cutting the usurious interst rate from 7.9% to a "cost of funds: which is closer to 1%. (So grad students stop subsidizing undergraduate Pell grants).

He could have made all loans eligible, so that students who incurred debt in the last 3-4 years and are now entering the work force mught catch a break.

He could have made all/more student loan interest deductible. And he could have considered only the stiudent's income. not halfa married couple's income for determining eligibility. (The way it stands now, high paid spouse subsidized low paid spouse's repayment (don'tt get married to a student with big debt if you make alot of money in Big Law.)

He could have made loan forgiveness on the back end tax free, or taxed at a lower rate- say the capital gains rate of 15%.

He could have made installment payments of the loan forgiveness amount repayable over another 10 years at a low interst rate.

He could have made all loans eligible for IBR, not just direct loans, and he could have done more than give the .5% consolidaiotn break- THose who have provate FFEL loans perobably are paying 3-4%, so they have to pay another 4% per annum to get the benefit of IBR.

He could have stopped loans to for-profit institutions that have abysmal graduation rates or post graduation employment rates.

He could have made student loans dischargeable in bankruptcy - JUST LIKE THEY USED TO BE

Yeah, he really did ALL he could.

If he were serious about putting dollars back into the economy, easing the pain of the newly unemployable, and avoiding the student loan bubble calamity that is waiting for us down the road, he could have proposed any or all of these things. But he didn't- because he knew he could never get them through Congress, and this way it SOUNDS like he actually is doing something- which he isn't.

(ANd I like and voted for the guy).

Yes. He totally could have done all of these things without Congress. Totally.

[rayiner]

While the change does little to nothing, President Obama did what he could do. I can't fault him for that.

Actually he did nothing, which is LESS than he could have done.

He could have proposed cutting the usurious interst rate from 7.9% to a "cost of funds: which is closer to 1%. (So grad students stop subsidizing undergraduate Pell grants).

He could have made all loans eligible, so that students who incurred debt in the last 3-4 years and are now entering the work force mught catch a break.

He could have made all/more student loan interest deductible. And he could have considered only the stiudent's income. not halfa married couple's income for determining eligibility. (The way it stands now, high paid spouse subsidized low paid spouse's repayment (don'tt get married to a student with big debt if you make alot of money in Big Law.)

He could have made loan forgiveness on the back end tax free, or taxed at a lower rate- say the capital gains rate of 15%.

He could have made installment payments of the loan forgiveness amount repayable over another 10 years at a low interst rate.

He could have made all loans eligible for IBR, not just direct loans, and he could have done more than give the .5% consolidaiotn break- THose who have provate FFEL loans perobably are paying 3-4%, so they have to pay another 4% per annum to get the benefit of IBR.

He could have stopped loans to for-profit institutions that have abysmal graduation rates or post graduation employment rates.

He could have made student loans dischargeable in bankruptcy - JUST LIKE THEY USED TO BE

Yeah, he really did ALL he could.

If he were serious about putting dollars back into the economy, easing the pain of the newly unemployable, and avoiding the student loan bubble calamity that is waiting for us down the road, he could have proposed any or all of these things. But he didn't- because he knew he could never get them through Congress, and this way it SOUNDS like he actually is doing something- which he isn't.

(ANd I like and voted for the guy).

These would not help avoid the student loan bubble calamity. It would cause it to grow bigger while shifting more of the burden of the bubble popping onto the government.

[mrloblaw]

These would not help avoid the student loan bubble calamity. It would cause it to grow bigger while shifting more of the burden of the bubble popping onto the government.

+1. No one wants to hear it, but the only solution to the student loan bubble crisis is to STOP GIVING SO DAMNED MUCH MONEY TO STUDENTS.

[A'nold]

What if you took out UG loans before 2008 but you will take out a "new loan" next year? Does that mean that all of your loans b/w 2008 and 2012 will qualify?

I don't think they're covered. To be eligible for the "new" benefit a borrower needs to take out a loan in 2012 or later; then, for that borrower, it covers loans taken out from 2008 onward. Current 3Ls receive no benefit. Neither do current college seniors, recent graduates, etc.

But current 3L's will take out a loan in 2012, right? If so, then the 10% of disposable income applies to those taken out b/w 2008 and 2012, right? What am I missing?

Maybe you're not; maybe it's me. I don't think we 3Ls take out a loan in 2012. Half of our loans for the school year will be distributed in January, but we already took them out back in August. That's how I understood it.

Yeah, I don't know which one it is. Does anyone know the answer to this? It will make a pretty dang difference for all of us counting on IBR.

[lawduder]

Re: 2012 loans vs older ones etc...

As long as you take out a new loan in 2012, any pervious loans you've taken out since 2008 will qualify for the new 10% rate. It's on the whitehouse website and I'm not looking for it on my phone.

[Anonymous User]

Re: 2012 loans vs older ones etc...

As long as you take out a new loan in 2012, any pervious loans you've taken out since 2008 will qualify for the new 10% rate. It's on the whitehouse website and I'm not looking for it on my phone.

+1

See, http://www.washingtonpost.com/business/ ... story.html

[A'nold]

Re: 2012 loans vs older ones etc...

As long as you take out a new loan in 2012, any pervious loans you've taken out since 2008 will qualify for the new 10% rate. It's on the whitehouse website and I'm not looking for it on my phone.

Thanks. But what we are wondering now is whether the loans you take out in the 2011-2012 school year count as being taken out in 2012 or just 2011 b/c you get your package at that time. My guess is that the 2012 loan/loans will count as being taken out in 2012. Does anyone know for sure?

The other thing I'm wondering is what happens to the pre-2008 loans? 15%? So you'd be paying two different percentages, right?