karinothing - I have a sort of practical-MM question about IBR. My understanding is that you pay taxes on the forgiven amount the year it's forgiven, kii.e. when you hit 10 years. With your blossoming balance due to interest, it'll be a pretty huge number. How do you prepare for that tax bill? Do you estimate what it'll be and start saving now to deal with it? (And how absurd would that feel, instead of just paying the stupid SL?) Do you pay penalties if you hit your 10 years and get your forgiveness early in the calendar year and don't pay quarterly estimated taxes that year? I just see the logistics of forgiveness as being totally overwhelming for people, and really odd in how I imagine them playing out. It seems like there has to be a better way.
Under the PSLF program the amount forgiven is not taxable. Under the traditional pay 25 years the forgiven program it is taxable.
I totally agree that the cost of education is ridiculous and there has been a big change in cost since I started college in the late 90's and frankly i wonder how we'll ever afford our children's college tuition costs. On the other hand though, I'm sort of tired of the gripe about law school or medical school being so expensive. It's not like people were forced to go to med school or law school. Also, I thought most poeple think about the cost of college when deciding where to go? I know I did for undergrad and part of my decision about grad school vs. med school was the money-so I went the phd route rather than the MD route.
Overall I guess I'm in the same camp as bird girl
Right - but if people don't go to law or med school b/c of money doesn't that just further increase the amount of "rich" kids who get privledges? The whole point is to make college accessible to all.
The bottom line is schools charge whatever they want. There is no cap.
Congress could (in my opinion) either cap what schools can charge and a better idea would be to lower interest rates on SLs. I have no clue what it is now but when I got my undergrad in 04' it was ridiculously low (like under 3%) - when I got my masters in 08 it was around 5 or 6%. when you look at the life of a loan that is a LOT of money.
There should be some oversight. The issue is what continues to make school accessible to all income levels, not ruin a students future b/c they are strapped with all this loan debt, and still make it profitable (in terms of income rates) and colleges? How do you balance all of that?
And also, I'm not sure how much you can take out "extra" for a SL but I know in undergrad we were only allowed to take out tuition & room & board. No books, no extras. No idea why but that was the rule. Grad school they just offered me X amount and since I was working full time I only took what I needed for tuition and returned the rest (and it was something like 6k extra they wanted to give me a semester...crazy!)
I totally agree that the biggest problem is the cost of the schools and the exorbitant rate at which those tuitions are increasing
Post by karinothing on Mar 7, 2014 13:06:34 GMT -5
I 100% get the argument about why it doesn't make sense to do loan forgiveness for high earners. But I look at it this way.
I have been told all my life to go to school to get ahead. I did that. Except my getting ahead still means my loans are a huge burden. Yes, my household income is higher which is why my loans would be $1990 a month or whatever with dual incomes and yes I could pay it but that means a few options
- eliminate retirementt and have another kid and find another daycare
- Keep retirement and don't have another kid.
I don't like either option. I know I have no right to a kid or retirement and these are just such first world problems. A change like this would just really hurt us and it really fing sucks.
I am just going to hold out for hope that it is NOT retroactive if it ever does pass.
ETA: IBR (as it is now) allowed me to save up to buy a house, to have a kid, to save for retirement and to contribute money to a struggling economy in many other ways. Tying up a large portion of my income will eliminate that. Why would we try to limit consumer spending in this crappy economy?
karinothing - I have a sort of practical-MM question about IBR. My understanding is that you pay taxes on the forgiven amount the year it's forgiven, i.e. when you hit 10 years. With your blossoming balance due to interest, it'll be a pretty huge number. How do you prepare for that tax bill? Do you estimate what it'll be and start saving now to deal with it? (And how absurd would that feel, instead of just paying the stupid SL?) Do you pay penalties if you hit your 10 years and get your forgiveness early in the calendar year and don't pay quarterly estimated taxes that year? I just see the logistics of forgiveness as being totally overwhelming for people, and really odd in how I imagine them playing out. It seems like there has to be a better way.
Public service loan forgiveness is tax free it is only the 25 year forgiveness that is not tax free and they (the president) are trying to make it tax free.
karinothing - I have a sort of practical-MM question about IBR. My understanding is that you pay taxes on the forgiven amount the year it's forgiven, i.e. when you hit 10 years. With your blossoming balance due to interest, it'll be a pretty huge number. How do you prepare for that tax bill? Do you estimate what it'll be and start saving now to deal with it? (And how absurd would that feel, instead of just paying the stupid SL?) Do you pay penalties if you hit your 10 years and get your forgiveness early in the calendar year and don't pay quarterly estimated taxes that year? I just see the logistics of forgiveness as being totally overwhelming for people, and really odd in how I imagine them playing out. It seems like there has to be a better way.
Public service loan forgiveness is tax free it is only the 25 year forgiveness that is not tax free and they (the president) are trying to make it tax free.
I see.
I really need to back out of this thread I think! I do not envy you the uncertainty that you will understandably have until the day the loans are actually forgiven, but at the same time it is so, so, so frustrating to know that some people with the lucky right combination of loans, employers, etc. get free forgiveness while others have to pay it all back, some of whom are even less able than we are. I absolutely get the fear of "omg how will I afford daycare if this gets taken away," and I don't think it retroactively should be. But it ALSO sucks to have to TTA for longer than you want to (or indefinitely) because you know forgiveness isn't an option for you and you can't afford daycare + SLs, and have to be reminded of those who don't have to make that choice. The inequity makes me so angry that I have to just keep sending my checks to my lenders and not think too hard about it. Someday I'll get to keep that >26% of my take home!
I am in a job that would qualify for PSLF, but I don't have direct loans so no go for me. I think it's a bit crazy that you have to have the "magic" loans to qualify (or not have consolidated once already).
This was not true for my federal loans although Citibank insisted it was and kept refusing to give the payoff to Direct. There was a loophole that applied to me so I could re-consolidate, BUT this loophole may have been closed or modified, so I'm just giving you my experience and it may not end up being applicable to you:
DH's loan company gave up the payoff right away and poof, he was re-consolidated with Direct. My loans had been consolidated with Citibank, and they refused to give the payoff to Direct. I called to ask what was taking so long, and they told me that "by law" that I couldn't consolidate twice. My understanding was that this prohibition did not apply to my situation, that I could in fact consolidate twice and I believe I gave them some info related to that. They still said "the law" prevented me from doing it. They were unable to cite "the law" to prevent the second consolidation in my situation (a consolidation to direct) but kept refusing to do it.
I contacted their in house counsel and and in three days or so my consolidation was final.
If I reconsolidated would my rates go way up? My current rate is 1.625%? It would make send to me to pay for 10 more years at this rate and then get forgiveness (I'd have 11 years left at that point), but not at a much higher rate.
I totally agree that the cost of education is ridiculous and there has been a big change in cost since I started college in the late 90's and frankly i wonder how we'll ever afford our children's college tuition costs. On the other hand though, I'm sort of tired of the gripe about law school or medical school being so expensive. It's not like people were forced to go to med school or law school. Also, I thought most poeple think about the cost of college when deciding where to go? I know I did for undergrad and part of my decision about grad school vs. med school was the money-so I went the phd route rather than the MD route.
Overall I guess I'm in the same camp as bird girl
I do think there are some valid points here, but it isn't always the easy. My husband is in physical therapy school (doctorate program), so while he's still getting into almost as much debt as med students he doesn't really have the potential to earn as much afterward. He applied to several schools but in the end was only accepted at one and it happens to be a more expensive school in a HCOL area. Our choices at that point were basically have him go, or wait a year and hope that he got accepted somewhere a little cheaper. At that point, you wonder if waiting a year for the hope of saving 20k-30k is worth it in the long run, especially with no guarantee of where he'd be accepted the next time around.
So yes, there were probably a lot of reasons to just have him do something else with his life. However, he loves what he is doing. He is passionate about it and I am so happy to see him feeling so fulfilled. Also, he is the first in his family to even get a bachelors, and I'm incredibly proud of him for it. He is really going for his dreams. Perhaps that comes back down to problems with our generation and the push to find something you love for your job, but I think there definitely is value in that.
I think the cost of school is ridiculous, but I'm another one who is more outraged at the interest that is already piling up while he is still going.
So unless I'm misunderstanding, I can consolidate (potentially) at my current rate. And then qualify for loan forgiveness. Hmm. I don't know that I will , but that's very interesting.
Also, I may have just called the Chief of Staff of a congress woman and yelled about this lol (we are friends)
I signed up for the 30 year repayment plan fresh outta grad school... because I made like less than $40K, and it was what I could afford. I paid on it for like 7 years, and then the repayment program was passed. I tried to sign up, but realized that the repayment plan I had been paying on all those years was ineligible. Like, NONE of the payments counted. Well, by then, I was like a GS-12'ish. Moving to an income based repayment didn't make sense. I'd like almost triple my repayment to cut a few measly years off my loan. I calculated it a couple different ways, and it just in no way made sense... mostly because I wasn't able to count any of my past payments toward the 120. And, DH doesn't work for the gov't or a non-profit, so he's out.
It's really fucking annoying. I'm also annoyed that we aren't eligible for any of the refinancing programs (we got screwed by the Lehman brothers crap... as it turns out, our mortgage wasn't Fannie/Freddy backed, then it was bounced all over the place), and my fucking mortgage rate for my underwater house is WAY high. I thought I was doing a "good" thing by picking a straight-up 30 year traditional mortgage.
Waa, waaa... cry me a river, right?
Well, at least I should be getting a promotion in a few months. GS-15 here I come, bitches! LOL.
If it makes you feel better, I don't qualify either. Well, I could technically do it but most of my $160K in loans were private, so it didn't make sense to do IBR for my federal loans. And I think I'll be a GS-14 for a loooong time unless I change agencies
I totally agree that the cost of education is ridiculous and there has been a big change in cost since I started college in the late 90's and frankly i wonder how we'll ever afford our children's college tuition costs. On the other hand though, I'm sort of tired of the gripe about law school or medical school being so expensive. It's not like people were forced to go to med school or law school. Also, I thought most poeple think about the cost of college when deciding where to go? I know I did for undergrad and part of my decision about grad school vs. med school was the money-so I went the phd route rather than the MD route.
Overall I guess I'm in the same camp as bird girl
Oh I agree with you, and I think the reason the debate here tends to be about the more expensive degrees is because there are a lot of us with those insane loans, and haven't you heard that lawyers love talking about being lawyers and their loans?
That said, there are incredibly important policy considerations relating to the cost of law school that always get lost in these discussions. Plenty of low and middle income Americans need lawyers. Layoffs and restructuring are increasingly common, and with them, come separation agreements. Ordinary people are getting hit with identity theft, sleazy debt collectors, and erroneous records on their credit reports at new and alarming rates. Fighting over medical bills can be a full time job. Then add in things like car accidents, family law matters, insurance problems, wills, and other more routine legal needs. The problem is there are few lawyers that can serve people with these needs. Public service loan forgiveness doesn't apply to most of these jobs, and when your debt payments are upwards of $1000 a month, it's pretty hard to make ends meet working for a price that the middle/low income Americans can afford to pay. At $40k a year, law school graduates will exit law entirely for a much less stressful job that pays the same.
As debt loads increase, law graduates can't afford to represent regular people anymore. As state legislatures pass insurance company-backed damages caps on tort lawsuits and other "tort reform" measures, the lawyers operating on contingency are finding that (1) lawsuits are becoming riskier and harder to prove, and (2) their pay day is going to be smaller. The ones that are sticking it out are raising the contigency cut, which was traditionally 33% percent for years, whereas now 40-50% is the norm. Even with that larger cut, they are making less, and so are the victims. It's simply not economically feasible to make money representing regular people anymore.
I'm sure many people are sitting here rolling their eyes, all boo hoo the lawyers and their "frivilous" lawsuits.
Well, guess what. We are on a fast track to a world where only the rich have lawyers. We are nearly already there, and if something is not done to curb the cost of law school, we will be there. Corporations know it's becoming less and less economically feasible to represent those who would hold them accountable, and they are exploiting that and pushing it to its absolute brink. The Chamber of Commerce exists to strip every American of their right to sue any company for any reason at all, and as more and more lawyers are being forced out of the fight against them, they are succeeding. As someone who spends a good deal of my time analyzing large corporation contracts on behalf of regular people, I will say that corporations are becoming increasingly emboldened in drafting one-sided, oppressive contracts, and every year, the Supreme Court and legislatures everywhere give them more and more leeway to do so.
So yeah, I will scream from the roof top about law school loans every single day. Because it's creating a horrifying situation in this country.
So unless I'm misunderstanding, I can consolidate (potentially) at my current rate. And then qualify for loan forgiveness. Hmm. I don't know that I will , but that's very interesting.
For me the consolidation rate was the average rate of my loans so 6.8% + 8 = 7.25. So if all your loans are at 1.25% or whatever, that should be your consolidation rate.
So unless I'm misunderstanding, I can consolidate (potentially) at my current rate. And then qualify for loan forgiveness. Hmm. I don't know that I will , but that's very interesting.
For me the consolidation rate was the average rate of my loans so 6.8% + 8 = 7.25. So if all your loans are at 1.25% or whatever, that should be your consolidation rate.
That is crazy. I am, of course, a total hypocrite if I do this, but I think it's very likely I'll be in public service for 10 more years.
For me the consolidation rate was the average rate of my loans so 6.8% + 8 = 7.25. So if all your loans are at 1.25% or whatever, that should be your consolidation rate.
That is crazy. I am, of course, a total hypocrite if I do this, but I think it's very likely I'll be in public service for 10 more years.
Honestly, if the numbers work out for you there is no reason not to do it. I would google the IBR calculator to see what your payment is before moving foward. You will want to check with married filing joint and separate.
That is crazy. I am, of course, a total hypocrite if I do this, but I think it's very likely I'll be in public service for 10 more years.
Honestly, if the numbers work out for you there is no reason not to do it. I would google the IBR calculator to see what your payment is before moving foward. You will want to check with married filing joint and separate.
IBR doesn't work for me. My payments are LOW. Can I do forgiveness w/o IBR?
Post by karinothing on Mar 7, 2014 16:21:26 GMT -5
You have to show some form of financial hardship. So you can be on IBR, (I think) ICR, or the pay as you earn plan. I don't know what pay as you earn is. That is new I think.
You have to show some form of financial hardship. So you can be on IBR, (I think) ICR, or the pay as you earn plan. I don't know what pay as you earn is. That is new I think.
Is it just undergrad that has to be all federal loans?
The only loans eligible for forgivenss are federal loans whether they are for grad school or undergrad.
I think you cna use IBR for private loans, but I am not entirely sure.
I am not being snarky, this is a serious questions. I thought there was a cap on the amount of federal loans you could take out? How did you end up with $200k in federal loans only? I remember having to get a private loan for one of my years because of this.
The only loans eligible for forgivenss are federal loans whether they are for grad school or undergrad.
I think you cna use IBR for private loans, but I am not entirely sure.
I am not being snarky, this is a serious questions. I thought there was a cap on the amount of federal loans you could take out? How did you end up with $200k in federal loans only? I remember having to get a private loan for one of my years because of this.
Me too - although now I'm sort of glad! My private loans are at 3.x% while most my federal loans are much higher!
Out of curiosity, did you ever figure out how much filing separately costs you? I am guessing you don't lose out on much because at your income a lot of the deductions phase out anyway.
I won't argue one way or another if it is a good program but I think it is wrong to change it suddenly on people who joined the gov't when the program was available.
sweetnsour filling separately vs jointly was roughly a $3000 difference. Filling jointly though would raise my loan payments about $10k a year.
I understand they are grad loans. I thought there was a limit, still. My one year of law school, I had to take a private loan because it was my understanding there was a limit on my federal loans. Apparently that was incorrect?
sweetnsour filling separately vs jointly was roughly a $3000 difference. Filling jointly though would raise my loan payments about $10k a year.
I understand they are grad loans. I thought there was a limit, still. My one year of law school, I had to take a private loan because it was my understanding there was a limit on my federal loans. Apparently that was incorrect?
My understanding is the same as yours. You can borrow something like 18k a year from the feds. There was some way to get more if you were taking classes in the summer, but I can't remember exactly how it worked. All I know is that most semesters, my federal loans did not cover tuition, let alone living expenses, and it wasn't like I could just ask for more. If I wanted more, I'd have to apply for private loans.
ESFkadams767 I think the limit was based on cost of tuition (like 110% tuition cost) not an actual set dollar amount.
kooshball it looks like you can just submit alternate documentation for what your income would have been if you didn't live in a community property state.
sweetnsour filling separately vs jointly was roughly a $3000 difference. Filling jointly though would raise my loan payments about $10k a year.
I understand they are grad loans. I thought there was a limit, still. My one year of law school, I had to take a private loan because it was my understanding there was a limit on my federal loans. Apparently that was incorrect?
No, I think you're correct. Or at least, that was the case when I was in law school -- I could take something like $18,000 a year in federal loans, but for the rest (meaning, most of it) I had to get private loans.
kooshball it's based on your federal tax return so it shouldn't matter what state you live in
Er right, but in community property states if you want to file married by filing separate you have to claim half the total household income and not just YOUR income.
No, you don't, at least based on my 6 years of married filing separate in a community property state.
kooshball from finaid.org, "...the preamble to the November 1, 2012 regulations encourages borrowers in community property states to use alternative documentation of income instead of income tax returns to obtain the same advantages that are available to borrowers in other states."
ESFkadams767 I think the limit was based on cost of tuition (like 110% tuition cost) not an actual set dollar amount.
I have never heard this before. Everything online says there's an annual borrowing limit. For example, this says that grad students can borrow $20,500 a year.