Paying Sticker Price & Federal Loan Forgiveness Forum

[Pomeranian]

Let's say one gets into a reach school at sticker/close to sticker price (COA: 200k+). What would be the downside to enrolling if, worst case, one can rely on the myriad taxpayer funded loan forgiveness programs? I suppose there is a risk the programs can be cut or changed after the election, but I don't see the government changing the rules for people already enrolled.

[HonestAdvice]

You'd still have to pay loans on anything you make over 18k. I'd also imagine your odds of being audited would go up a lot. Unless you're obviously lying (boss gives you a w-2 and you say you had 0 income), the odds you'll get audited making under 300k are one in the thousands. Under PAYE, in addition to filing taxes, you need to send in proof of income each year, and the federal government will research it and there better not be a discrepancy b/w that and your IRS statement.

In addition, the debt is forgiven after 30 years, but forgiven debt is treated as taxable income so if your student loan balloons to 400k, which it will due to interest, you're then going to be responsible for essentially the same $200k you borrowed in a one time fee to the IRS. You can work out some kind of deal, but ultimately your bank accounts, your home, etc. will all go to the US government when you die. You will own nothing.

[White Dwarf]

The Obama administration proposed lowering the federal loan forgiveness cap to something like $60K last year. A program like PAYE pays off your loans over a 25-year period. They're not just going to grandfather everyone in for the next 25-30 years.

You don't get far in life relying on boomers to "do the right thing" when their money is at stake.

[HonestAdvice]

The Obama administration proposed lowering the federal loan forgiveness cap to something like $60K last year. A program like PAYE pays off your loans over a 25-year period. They're not just going to grandfather everyone in for the next 25-30 years.

You don't get far in life relying on boomers to "do the right thing" when their money is at stake.

How would they be able to change the terms of a transaction? People are signing up for PAYE, because of the 25 year forgiveness so wouldn't they be entitled to have their payments returned and all interest earned while in PAYE returned?

[Tiago Splitter]

20 years for PAYE guys.

The issue with borrowing all that money is that you'll pay a bunch to the government every year for 20 years and then pay taxes on the rest. It's not the end of the world if the program stays as is, but a) who knows if it might change and b) even if it does your "good outcome" if you borrow sticker these days is something like 400k paid to the feds over 20 years.

[HonestAdvice]

Would they be allowed to change it for people 15 years in, and say that the system's over so their payments for 15 years will be counted against the 400k+ interest (to use your example). With OP's plan, if you're making 50k a year then under PAYE, the interest per year exceeds how much you're paying towards your loans so at 20 years in, even paying for 20 years, your 400k tab would be around 600k. Would the government be able to do this or would it violate some right?