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+1IBR is going to be short lived
Wouldn't he be grandfathered in?Voodoo94 wrote:+1IBR is going to be short lived
It's on very tenuous ground as it is and if the Senate flips next year, it may be as good as gone.
IBR is not any type of rational, long range plan for managing student loan debt.
IBR isn't a "contract," and even if it was, the federal government can breach any contract it wants to breach. If Congress wanted to, they could wait until the 24th year of IBR and then ax the forgiveness; short of any political ramifications, there would be no recourse aside from a doomed-to-fail substantive due process attempt.conn09 wrote:Wouldn't he be grandfathered in?Voodoo94 wrote:+1IBR is going to be short lived
It's on very tenuous ground as it is and if the Senate flips next year, it may be as good as gone.
IBR is not any type of rational, long range plan for managing student loan debt.
There's never been a student loan program with the same kind of bottom-line implication of PSLF and the 25-year forgiveness.Anonymous User wrote:The government has never removed a student loan program retroactively. Once you are paying into IBR and documenting your public service work, the chances of the 10-year PSLF program being swiped out from under you are exceedingly slim.
The government has never removed a student loan program retroactively. Once you are paying into IBR and documenting your public service work, the chances of the 10-year PSLF program being swiped out from under you are exceedingly slim.
I don't think IBR itself is doomed. But IBR and the discharge that go along with it are not mutually dependent. Explain how, exactly, whether a 25-year discharge exists is relevant to regaining some money from someone at risk of default? The government could just as easily have you be in IBR forever. You could argue that without the discharge on the horizon, people would just stop paying; but that doesn't work, because if you have a job (to make the on-time IBR payments that are required for discharge), the department of ed can garnish it.leobowski wrote:I'd love to see a legitimate source from the "IBR is doomed" people. The program makes sense from a fiscal standpoint. It's designed to still regain some money from those at a high risk of default. It's not exactly some kind of entitlement/benefit in the traditional sense.
ToTransferOrNot wrote:I don't think IBR itself is doomed. But IBR and the discharge that go along with it are not mutually dependent. Explain how, exactly, whether a 25-year discharge exists is relevant to regaining some money from someone at risk of default? The government could just as easily have you be in IBR forever. You could argue that without the discharge on the horizon, people would just stop paying; but that doesn't work, because if you have a job (to make the on-time IBR payments that are required for discharge), the department of ed can garnish it.leobowski wrote:I'd love to see a legitimate source from the "IBR is doomed" people. The program makes sense from a fiscal standpoint. It's designed to still regain some money from those at a high risk of default. It's not exactly some kind of entitlement/benefit in the traditional sense.
Er, the incentive to pay instead of defaulting is the fact that the federal government has full, non-dischargeable garnishment power over every penny you ever make, every tax return, etc. They don't need the carrot of a 25-year discharge: the feds could just as easily say "we can garnish your income, and the amount of the garnish is 15% of your 'disposable' income" (i.e., the same amount that is currently paid under IBR).leobowski wrote:ToTransferOrNot wrote:I don't think IBR itself is doomed. But IBR and the discharge that go along with it are not mutually dependent. Explain how, exactly, whether a 25-year discharge exists is relevant to regaining some money from someone at risk of default? The government could just as easily have you be in IBR forever. You could argue that without the discharge on the horizon, people would just stop paying; but that doesn't work, because if you have a job (to make the on-time IBR payments that are required for discharge), the department of ed can garnish it.leobowski wrote:I'd love to see a legitimate source from the "IBR is doomed" people. The program makes sense from a fiscal standpoint. It's designed to still regain some money from those at a high risk of default. It's not exactly some kind of entitlement/benefit in the traditional sense.
The eventual discharge provides an incentive to pay instead of defaulting. This incentive, in turn, reduces the risk of default from those likely to default. Of course the govt. won't recoup the full amount but that's much better than selling the debt for pennies on the dollar. Paying forever--basically indentured servitude--provides little to no incentive, and this whole system falls apart. IMO.
Wouldn't the net present value have to account for the possibility of the 25-year forgiveness (or the 10-year forgiveness)?gulcregret wrote:IBR is not going anywhere, even very conservative budget haws are not targeting the program, yet. They got the subsidized stafford loans removed last year, so they are good for now. This is inside information (I work on the Hill).
Loans are treated differently in the federal budget, so it really doesn't have a bottom line effect. The net present value is reflected when the loan is made, future receipts or costs are not included on a cash basis. If the government wipes out loans later, it does nothing to the annual budget deficit and the national debt would have already taken into account the amount of the loan. It's kind of a budget myth in a way, for federal scoring purposes. Besides no one knows the actual cost because it is so far away and theoretically no one could need a loan forgiveness. Paying less or no interest does not hurt the government's bottom line. Mass loan forgiveness, which won't happen anyway, would be accounted for as a past loss.
I'm pretty new to learning about IBR/PSLF/etc, and it sounds like you know your stuff.gulcregret wrote:So NPV would need to take into account default rates and loan forgiveness. HOWEVER, OMB and CBO do not estimate effects to the baseline past a 5 year or 10 year window. So, it is very hard to estimate the number of loans and the amounts that could be potentially forgiven within 10 years. Only the public interest component would qualify for this forgiveness. Let's face it, most people will not do public interest for 10 years receiving a law degree. I fully anticipate and expect to do so, but if Patton Boggs or KL Gates comes calling to make me counsel (lobbyist, basically) in 6 years or so, for probably 5 times the salary, I could see myself pulling a Steve Miller Band (very bad reference and somewhat shameful).
On this point, even though the government accounting is misleading, there are some circumstances in which the NPV of payments made under the IBR program would exceed those made under the traditional repayment scheme:gulcregret wrote:IBR is not going anywhere, even very conservative budget haws are not targeting the program, yet. They got the subsidized stafford loans removed last year, so they are good for now. This is inside information (I work on the Hill).
Loans are treated differently in the federal budget, so it really doesn't have a bottom line effect. The net present value is reflected when the loan is made, future receipts or costs are not included on a cash basis. If the government wipes out loans later, it does nothing to the annual budget deficit and the national debt would have already taken into account the amount of the loan. It's kind of a budget myth in a way, for federal scoring purposes. Besides no one knows the actual cost because it is so far away and theoretically no one could need a loan forgiveness. Paying less or no interest does not hurt the government's bottom line. Mass loan forgiveness, which won't happen anyway, would be accounted for as a past loss.