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http://money.cnn.com/2011/10/25/news/ec ... &hpt=hp_t2
Heads up to those of you up to your eye balls in debt.

Motherfucker I consolidated my loans two weeks ago. Uggh I'm so irritated right now.

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

I think this is awesome but I don't understand this stuff well enough so I'm tagging in case there is any insightful conversation about this later.

This is being discussed in detail on other lawyer forums.
It will affect far fewer loans than the article is otherwise portraying.
Not completely sure on the details yet, but don't get too excited. It may only apply to a portion of your loans since law school loans are so large.
This was not designed with law school sized debt in mind. It was aimed more at the typical student with $20,000 to $50,000 in debts.

However, the White House announcement doesn't offer much new help for existing borrowers who are already eligible for the income-based repayment plan and who have been able to consolidate federal loans for more than a year, said Mark Kantrowitz, publisher of FinAid.org.

"It preserves the cost of the loans," Kantrowitz said. "And existing borrowers who are up to their eyebrows in debt, they don't get the benefit" of the lower payments on the income-based repayment plan.

U.S. Secretary of Education Arne Duncan said his agency has regulatory power to move up the start date. He said the move would save current students originating loans next year hundreds of dollars a year.

Congress passed a law set to go into effect in 2014 that would drop the monthly payment for loans originated that year to 10% of discretionary income and would forgive all debt after 20 years.

As I understand it, this will not apply to loans that have already been taken out prior to the law going into effect.
Obama has indicated that they will accelerate this law and start it in 2012 instead of 2014. But that still won't help all of the debt already on the books.

There may be more details, we will see.

This proposal is a political stunt and SPS. It won't help barely anyone, except for a .5% interest cut woohoo only if you consolidate your 3% private loans with FG for 8% instead of 8.5%. Just LOL.

--Somebody who bought Obama's BS for far too long

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It won't help barely anyone, except for a .5% interest cut woohoo only if you consolidate your 3% private loans with FG for 8% instead of 8.5%. Just LOL.

If they let me consolidate subsidized Staffords with unsubsidized Staffords, that would get me down to 6.3%. The article wasn't clear about "two or more kinds".

nealric wrote:The article wasn't clear about "two or more kinds".

The Special Direct Consolidation Loan requires that borrowers have both Direct and FFEL loans: this is likely what the article was trying to articulate.

More here

This is lame. Way to get our hopes up. That's actually pretty messed up because I saw the "debt up to your eyeballs" part and then someone said something about IBR. To say I was extremely disappointed in the actual article is an understatement. C'mon man.

Jack Smirks wrote:Motherfucker I consolidated my loans two weeks ago. Uggh I'm so irritated right now.

These changes wouldn't have been a huge help to you anyway, to be honest. Certainly nothing to write home about.

cattleprod wrote:
As I understand it, this will not apply to loans that have already been taken out prior to the law going into effect.
Obama has indicated that they will accelerate this law and start it in 2012 instead of 2014. But that still won't help all of the debt already on the books.

There may be more details, we will see.

Your "understanding" doesn't make much sense. iIt SHOULD be aimed at the loans that already exists. New borrowers can prevent going into debt by reducing the amount of loans they take out, but existing borrowers have taken out loans under suspicious marketing and have endured being debtors under a really bad economy. For example, it has been pointed out that schools take great efforts to camouflage the percentage of loans offered in student aid packages, which is why the executive order is also mandating that schools simplify the financial aid award letters.

What you propose by your "understanding" is that new borrowers will be given carte blanche to run up debt under the president's new order. That would be retarded.

It appears that the relief is targeted at existing borrowers who are already in trouble and may need help preventing serious financial crises or bankruptcies.

If you have private loans, they may have been as low as Prime (3.25%). Yes risky, but sdtiull quite low. Trouble is, they are not eleigible for IBR. So now you are "incented" to consolidate at what, 7.4%? Great deal huh.

Of course then you pay to the 10% IBR cap for 20 years (20 years yikes), and get the balance forgiven- but get a tax bill on the forgiven amount (only public interst forgiveness is given after 10 years of PI work).

Sorry you're screwed. This bill does nothing to help law students 100-150000 in debt.

We're subsidizing UG student loans with the exorbitant interest we're paying. What Obama should have done is cut the interst rates to something reasonable. It wouldn't "cost" the government a thing- it would just make less profit off starving post grads. (Loans aren't dischargeable- so unless we die penniless (a distinct possibility) or never work again (also possible), the government will get repaid.)

Anonymous User wrote:If you have private loans, they may have been as low as Prime (3.25%). Yes risky, but sdtiull quite low. Trouble is, they are not eleigible for IBR. So now you are "incented" to consolidate at what, 7.4%? Great deal huh.

Of course then you pay to the 10% IBR cap for 20 years (20 years yikes), and get the balance forgiven- but get a tax bill on the forgiven amount (only public interst forgiveness is given after 10 years of PI work).

Wow. If the IBR amount does not cover at least the interest costs, those get tacked onto the amount?
Then the final amount after 20 years is the amount forgiven, then you get a 1099-C for that amount and have to pay taxes on it as misc income?
For law grads that could be an insane amount of money after 20 years.

Let's say the starting loan amount is $150,000 when it enters this 20 year plan. The interest rate is 7.4% so about $10,000 per year in interest payments.
But if your IBR amount is only 10% of your income, of the income above 150% poverty line, then your annual payment will likely be less than your interest.
Your original $150,000 loan could be $300,000 to $500,000 by the time it is written off, depending on how much of a deficit your payment lacks.
Then you get a 1099-C reported to the IRS for that year? And you would likely owe at the top marginal rate for that year on possibly $500,000?

Is that an unrealistic scenario? or plausible.

Edit: Someone told me that there is a formula with the IRS that would declare you insolvent so you would likely not owe the IRS such a huge amount from a 1099-C.
But you might owe a portion of it that would make you insolvent. Nice, right before retirement you are wiped out by the IRS.

mrloblaw wrote: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.

cattleprod wrote:Wow. If the IBR amount does not cover at least the interest costs, those get tacked onto the amount?

Under IBR, any time your payment is less than the amount of interest you owe, the interest is added to the amount of your loan. However, accrued unpaid interest does not compound under IBR. This keeps it from running away too much. Your unpaid interest keeps adding on, but you won't be paying interest on unpaid interest...

Also, the tax bill for $200K in "income" is still a lot less, at the end of the day, than repaying $200K. And the IRS does set up payment plans for people who are willing to pay. They're not evil toward people who want to pay. So after 20 years, your large income-based student loan becomes a smaller fixed-payment income tax loan. You're still a lot better off than if you'd repaid the $200K itself.

So my 20 year loan is now a 30 year loan? At what rate? And I have to depend on the IRS to make a deal with me to repay?And now I have a mortgage and kids just starting college, and am approaching retirement? (Oh yeah I won't be able to retire becasue Socoal Security won;t kick in till im 80 LOL!

And who knows what tax rates will be in 20 years? If the Dems are in power, that tax rate may be north of 50% (marginal rate).

Sorry, you better pay down more than IBR minimum whether or not you can afford it or you are looking at a lifetime of non dischargeable debt.

Then again maybe Rick Perry or Ron Paul will disband the IRS or Herman Cain will get 9-9-9 through and we won't have to worry.

OH yeah, and don't forget IBR benefits phase out as your income goes up- so many of us won't be eligible for the IBR cap anyway.

Have to hope we all have a good IRAP to fall back on I guess.

Edit: Someone told me that there is a formula with the IRS that would declare you insolvent so you would likely not owe the IRS such a huge amount from a 1099-C.
But you might owe a portion of it that would make you insolvent. Nice, right before retirement you are wiped out by the IRS

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Maybe this is a way around the nondischargeability of a student loan. Wait 20 years, convert it to an IRS settlement. And then declare bankruptcy!

Here is an example similar to the size of debt for law school students.

http://www.foxnews.com/politics/2011/10 ... -stimulus/

Take this example: If Suzy Creamcheese gets into George Washington University and borrows from the government the requisite $212,000 to obtain an undergraduate degree, her repayment schedule will be based on what she earns. If Suzy opts to heed the president’s call for public service, and takes a job as a city social worker earning $25,000, her payments would be limited to $1,411 a year after the $10,890 of poverty-level income is subtracted from her total exposure.

Twenty years at that rate would have taxpayers recoup only $28,220 of their $212,000 loan to Suzy.

The president will also allow student debtors to refinance and consolidate loans on more favorable terms, further decreasing the payoff for taxpayers.

Obama’s move comes at a moment when many economists are warning of a college debt bubble that is distorting college tuition rates and threatening to further damage credit markets. The president’s move is intended to make college more affordable for more people, which will, in turn allow universities to jack up their rates.

Anonymous User wrote:So my 20 year loan is now a 30 year loan? At what rate? And I have to depend on the IRS to make a deal with me to repay?And now I have a mortgage and kids just starting college, and am approaching retirement? (Oh yeah I won't be able to retire becasue Socoal Security won;t kick in till im 80 LOL!

And who knows what tax rates will be in 20 years? If the Dems are in power, that tax rate may be north of 50% (marginal rate).

Sorry, you better pay down more than IBR minimum whether or not you can afford it or you are looking at a lifetime of non dischargeable debt.

Then again maybe Rick Perry or Ron Paul will disband the IRS or Herman Cain will get 9-9-9 through and we won't have to worry.

OH yeah, and don't forget IBR benefits phase out as your income goes up- so many of us won't be eligible for the IBR cap anyway.

Have to hope we all have a good IRAP to fall back on I guess.

Edit: Someone told me that there is a formula with the IRS that would declare you insolvent so you would likely not owe the IRS such a huge amount from a 1099-C.
But you might owe a portion of it that would make you insolvent. Nice, right before retirement you are wiped out by the IRS

.

Maybe this is a way around the nondischargeability of a student loan. Wait 20 years, convert it to an IRS settlement. And then declare bankruptcy!

It's good to post anonymously when you decide to go full retard.

So does the new plan cover our old loans or not? There seems to be much disagreement about this.

A'nold wrote:So does the new plan cover our old loans or not? There seems to be much disagreement about this.

The "new plan" has two aspects; there is no disagreement. The timeline for increasing the benefit of the IBR program has been accelerated, which effects newly disbursed loans. A new consolidation loan has also been introduced, which effects previously disbursed loans.

Anonymous Loser wrote:

A'nold wrote:So does the new plan cover our old loans or not? There seems to be much disagreement about this.

The "new plan" has two aspects; there is no disagreement. The timeline for increasing the benefit of the IBR program has been accelerated, which effects newly disbursed loans. A new consolidation loan has also been introduced, which effects previously disbursed loans.

That didn't answer my question at all. The new 10% of disposable income thing.....does that apply to our loans or does it not matter for us? Like a poster said above, that would do nothing for the people that actually need it and help out future loan takers. That makes no sense.

Anonymous User wrote:OH yeah, and don't forget IBR benefits phase out as your income goes up- so many of us won't be eligible for the IBR cap anyway.

My expectations are admittedly quite low when it comes to TLS, but I can't believe are you seriously arguing that the Income Based Repayment Program is flawed because its benefits are proportional to income.

A'nold wrote: That didn't answer my question at all. The new 10% of disposable income thing.....does that apply to our loans or does it not matter for us?

Read my response again. The "10% disposable income thing" you refer to is the acceleration of the IBR program, which, as I mention above, applies only to newly disbursed loans.

Anonymous Loser wrote:

A'nold wrote: That didn't answer my question at all. The new 10% of disposable income thing.....does that apply to our loans or does it not matter for us?

Read my response again. The "10% disposable income thing" you refer to is the acceleration of the IBR program, which, as I mention above, applies only to newly disbursed loans.

O.k., so I'm stupid. Can you please explain this without being conclusory and smart assish?

What would be the point of the President doing any of this? I thought the point was to help those with loans, not high school seniors with 0 debt. If you take out 3L, second semester loans in 2012, only those loans would be eligible? So you'd have 90% of your loans at 15% and 10% at 10%?

"According to Federal Student Aid, an office of the U.S. Department of Education, these federal student loans are eligible to be repaid under an IBR plan: All Stafford, PLUS and consolidation loans made under either the Direct Loan or FFEL Program are eligible. The loans can be new or old and can cover any type of education (undergraduate, graduate, professional, job training)."

The "old" only qualify for the "old" 15% then, is that what you're saying. If so, once again, what is the point?

Edit: And what about this part?:

"Let me put it another way so you are clear on who will benefit from this change. The president’s plan does not affect borrowers who took on loans before 2008 and who do not take out a new loan next year. So, if you are already in repayment and are not planning to take out new student loans, this plan does not affect you."

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?

These changes are largely political posturing, with little actual effect. As with all such posturing, the point is to make the proponent look good, while expending little political capitol and limiting exposure to risk.

A handful of borrowers who would have otherwise been eligible for the 15% IBR program will now be eligible for the 10% IBR program.

A larger number of borrowers will be eligible for a new type of consolidation loan that offers a slight interest rate reduction. Many loans, however, already qualify for a similar rate reduction due to borrower incentives offered by lenders in the FFEL program.* Thus, only a handful of borrowers would benefit.


*The private lenders that previously originated federal educational loans under a program which has since been dismantled typically offered reductions for maintaining a checking/savings account with that lender, as well as enrolling in automatic payment plans. These benefits are typically not transferrable.