Yup currently under the public service loan forgiveness program, all public service employees (feds and otherwise) can get 100% of their loan forgiven after 120 consecutive payments while employed in public service (so 10 years). This would work for state jobs.
I do have a graduate degree, but yes you can use it on undergrad loans. They must be federal loans though. You have to be on some income based plan (ibr or icr) or standard (but this is usually only if you phase out of ibr). I posted the applications above, if you want to look them over. Otherwise here is a link - studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service
As for 7% i can't remember which was which now but stafford loan interest rates were something like 8.5% and 6% or something. It averaged out to 7.25% when I consolidated. I can't remember the exact numbers now. I started taking out loans in 2007
I work for the government and don't think I qualify.
Really? Your position should qualify you. Whether your loans qualify is another story though.
"You want a “safeguard”? I have one. After ten years, if a student owes more than $57,500 in outstanding debt, the SCHOOL that charged the ridiculous prices in the first place has to pay the government back. How about that? How about making the schools financially responsible for their willingness to saddle students with debt that they won’t be able to manage? Maybe the school should have an interest in charging people what they can afford, or, you know, EDUCATING THEM so they have the practical skills to make good on their payments. "
I completely agree with the spirit of his proposal, but it ignores the reality of student loan defaults. The students most likely to default are those at for profit universities and certain bad community colleges. They aren't borrowing that much, they just aren't earning enough, aren't finishing their degrees, and therefore don't have the benefit of the degree. I'd rather see schools on the hook immediately for some portion of every dollar lent, so that everyone benefits from reform, and all schools have pressure to keep costs down.
I do understand that and I really understand what the law is trying to do. I just think President Obama's proposal seems to ignore the high cost of grad school, but yes I would like everyone to benefit from lower school costs. I mean it is just frustrating $57,500 of forgiveness doesn't even cover the tuition at my law school (for the 3 yr period) and I am obviously paying!
Plus, the forgiveness program doesn't allow forgiveness if you ever default so I am not even sure how these new proposals is addressing those people enrolled in the forgiveness plan.
The PSLF program has always frustrated me, because it's very "haves and have nots." It's really amazing for some people like Kari. But there are plenty of other people who need it just as badly who can't take advantage of it for a variety of reasons, and that has always bothered me. Not to be all "poor us," but we started out $280k or so in the education hole, and Calvin's a salary-frozen government employee. It's kind of a bummer that we have to pay all that back, but not everyone does.
It was even worse when Calvin was still in private practice. When he left private practice to go to the government he actually got a big pay jump ($49k to start, what what!) in addition to better benefits. But when he was doing family law for $35k/year, and we were desperately broke and needed it the most, he didn't qualify for any assistance at all, from anywhere. We tried. Not federal, not state, not the school's now-defunct LRAP program, since he was in private practice. Now we get a couple $k a year (with a lifetime cap of $20k or so) from a state program. It's nice now, but I'd have given my right arm for him to have gotten anything back then.
It has always seemed to me that PSLF and other piecemeal programs are a very partial solution to the cost of education, and mostly miss the point. So I'm in favor of reform, just not necessarily as proposed!
Well, it would be like 1900 Our household income is over 200K. I am not sure how it is all calculated. I just know when I put my debt in the calculator with both our incomes that is what it gave me. That is with a spouse and 1 kid.
@koshball - I started with 197K. Since I have basically been paying very little due to IBR (BECAUSE I WAS COUNTING ON PSLF!) I know owe 248K
Yikes. I was hoping you were wrong and it would be less than that
I think the accrual of interest in the last few years would be the worst part. To owe more now because of this program would be truly ridiculous.
This would kill me! My payment would jump like Kari's to about $1850 a month. I could never afford my kids and daycare etc! And the amount of interest that has accrued in the last 4 years is frightening!!! I would owe more now than I did when I took my fed job and started all of this.
Eta: in all seriousness, DH and I would probably divorce until my loans are paid off and then remarry after. I don't see what other option we would have. Quietly, divorcing seems better than selling my house, uprooting my kids etc. To try and make my SL payment.
I only lurk here on MM mostly, but just wondering, right now if you work for the feds, you can get loan forgiveness without a capped amount? How does that work? Also, does this work for state jobs too in public service?
And I'm guessing you have some sort of graduate degree with about $200k in loans, right? Can you have loan forgiveness on undergrad and graduate loans?
So sorry about 7%...how did that happen? I guess I was lucky to only have loans from undergrad when the rates were low. Mine are at like 3%.
Yup currently under the public service loan forgiveness program, all public service employees (feds and otherwise) can get 100% of their loan forgiven after 120 consecutive payments while employed in public service (so 10 years). This would work for state jobs.
I do have a graduate degree, but yes you can use it on undergrad loans. They must be federal loans though. You have to be on some income based plan (ibr or icr) or standard (but this is usually only if you phase out of ibr). I posted the applications above, if you want to look them over. Otherwise here is a link - studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service
As for 7% i can't remember which was which now but stafford loan interest rates were something like 8.5% and 6% or something. It averaged out to 7.25% when I consolidated. I can't remember the exact numbers now. I started taking out loans in 2007
Is it just undergrad that has to be all federal loans?
Yup currently under the public service loan forgiveness program, all public service employees (feds and otherwise) can get 100% of their loan forgiven after 120 consecutive payments while employed in public service (so 10 years). This would work for state jobs.
I do have a graduate degree, but yes you can use it on undergrad loans. They must be federal loans though. You have to be on some income based plan (ibr or icr) or standard (but this is usually only if you phase out of ibr). I posted the applications above, if you want to look them over. Otherwise here is a link - studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service
As for 7% i can't remember which was which now but stafford loan interest rates were something like 8.5% and 6% or something. It averaged out to 7.25% when I consolidated. I can't remember the exact numbers now. I started taking out loans in 2007
Is it just undergrad that has to be all federal loans?
No grad loans need to be federal loans too. I have some private grad loans that aren't part of my ibr and pslf plan. I just pay those regularly.
Yup currently under the public service loan forgiveness program, all public service employees (feds and otherwise) can get 100% of their loan forgiven after 120 consecutive payments while employed in public service (so 10 years). This would work for state jobs.
I do have a graduate degree, but yes you can use it on undergrad loans. They must be federal loans though. You have to be on some income based plan (ibr or icr) or standard (but this is usually only if you phase out of ibr). I posted the applications above, if you want to look them over. Otherwise here is a link - studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service
As for 7% i can't remember which was which now but stafford loan interest rates were something like 8.5% and 6% or something. It averaged out to 7.25% when I consolidated. I can't remember the exact numbers now. I started taking out loans in 2007
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 was reading an article and someone mentioned in the comments that it would be illegal for them to apply this retroactively, but I have no idea if that is true. Someone mentoned that the PSLF portion was in our direct loans consolidation promissory note, but I have no clue where that is (or whether that is true).
I was reading an article and someone mentioned in the comments that it would be illegal for them to apply this retroactively, but I have no idea if that is true. Someone mentoned that the PSLF portion was in our direct loans consolidation promissory note, but I have no clue where that is (or whether that is true).
You must be reading the same thing DH and I are reading right now! I can't remember if it was in there or not either. We are discussing how we would divorce to handle this lol. Seriously though, my law school loans are more now due to interest than they were when I started my fed job.
The PSLF program has always frustrated me, because it's very "haves and have nots." It's really amazing for some people like Kari. But there are plenty of other people who need it just as badly who can't take advantage of it for a variety of reasons, and that has always bothered me. Not to be all "poor us," but we started out $280k or so in the education hole, and Calvin's a salary-frozen government employee. It's kind of a bummer that we have to pay all that back, but not everyone does.
It was even worse when Calvin was still in private practice. When he left private practice to go to the government he actually got a big pay jump ($49k to start, what what!) in addition to better benefits. But when he was doing family law for $35k/year, and we were desperately broke and needed it the most, he didn't qualify for any assistance at all, from anywhere. We tried. Not federal, not state, not the school's now-defunct LRAP program, since he was in private practice. Now we get a couple $k a year (with a lifetime cap of $20k or so) from a state program. It's nice now, but I'd have given my right arm for him to have gotten anything back then.
It has always seemed to me that PSLF and other piecemeal programs are a very partial solution to the cost of education, and mostly miss the point. So I'm in favor of reform, just not necessarily as proposed!
I agree completely. Especially given that many government jobs are desirable to many, many exceptionally qualified graduates. There are certain government jobs I'd never get because they are too competitive. It's frustrating to me that tax dollars are used to subsidize benefits for those workers' loans to create incentives to work for the government. Incentives aren't needed, people want to work there.
Like you, I agree that it's amazing for some people. But it's a terrible public policy, as it doesn't help many of the people who need it most -- and that includes not just the borrowers, but people who need services offered by these trained professionals coming out of expensive programs, such as the low to middle income Americans who need affordable legal services from competent attorneys.
I completely agree with the spirit of his proposal, but it ignores the reality of student loan defaults. The students most likely to default are those at for profit universities and certain bad community colleges. They aren't borrowing that much, they just aren't earning enough, aren't finishing their degrees, and therefore don't have the benefit of the degree. I'd rather see schools on the hook immediately for some portion of every dollar lent, so that everyone benefits from reform, and all schools have pressure to keep costs down.
I do understand that and I really understand what the law is trying to do. I just think President Obama's proposal seems to ignore the high cost of grad school, but yes I would like everyone to benefit from lower school costs. I mean it is just frustrating $57,500 of forgiveness doesn't even cover the tuition at my law school (for the 3 yr period) and I am obviously paying!
Plus, the forgiveness program doesn't allow forgiveness if you ever default so I am not even sure how these new proposals is addressing those people enrolled in the forgiveness plan.
Oh I completely agree that Obama's proposal doesn't solve anything. I like Mystal's proposal more than Obama's, but it's a very law-centric view.
Certainly @spenjamins is right that people can borrow a boatload of cash for a shitty undergrad or certificate program, and my point wasn't to discount that. But the statistics show that most defaults happen much earlier than the ten year mark and the average debt load is $26k. So Mystal's proposal is flawed in that it's not really going to help most borrowers - the point at which schools are on the hook is far and above what most people are borrowing.
I was reading an article and someone mentioned in the comments that it would be illegal for them to apply this retroactively, but I have no idea if that is true. Someone mentoned that the PSLF portion was in our direct loans consolidation promissory note, but I have no clue where that is (or whether that is true).
And yeah, I think would create a mess if they tried to reverse it retroactively. They induced people to work for the government by offering you a benefit if people worked for ten years. People relied on that promise, and accepted offers with the government. People have begun to perform, so the government would need to give them something.
That said, that *something* might not have to be full foregiveness at the 10 year mark, but perhaps partial forgiveness reflecting time put in. Eg to throw out a unhelpfully simplistic solution, it may be something along the lines of "you owe $100k, you worked for 3 years. We'll forgive $30k to acknowledge the years you worked for the government based on our promise to forgive something. From this point forward, you are electing to work for the government for reasons other than our promise to forgive everything."
Post by illgetthere on Mar 7, 2014 11:10:33 GMT -5
Part of my problem with PSLF is that student loan money does not have to be spent on tuition, fees, books, etc. Someone could easily get massive amounts of money to subsidize a lifestyle while in school then have the government pay for it after 10 years. There should be a cap at what is forgiven.
Part of my problem with PSLF is that student loan money does not have to be spent on tuition, fees, books, etc. Someone could easily get massive amounts of money to subsidize a lifestyle while in school then have the government pay for it after 10 years. There should be a cap at what is forgiven.
Well, there is a cap on how much money you can take outside beyond tuition. And believe me that cap barely paid for rent for the entire year in DC soo...i am not sure how luxurious of a lifestyle I could have. But my tuition alone was about 100K so I can see just forgiving for tuition.
I think it's unlikely to apply retroactively, nor do I think it should.
BUT I do think it needs to change. The idea that someone can spend $200K on school (I'm thinking law school in particular since that's my story), and have that cost covered by the tax payers is not good policy. It doesn't encourage law schools to think critically about what they're charging and it doesn't encourage students to think critically about the cost of their education. Upfront eduction about what it means to take out 200K in loans in an environment where the jobs that allow you to pay those back relatively easily are shrinking rapidly is still badly needed. It was non-existent when I went to school. I got lucky that I picked the less expensive school, but didn't have a full appreciation of what that meant until after I graduated.
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).
Part of my problem with PSLF is that student loan money does not have to be spent on tuition, fees, books, etc. Someone could easily get massive amounts of money to subsidize a lifestyle while in school then have the government pay for it after 10 years. There should be a cap at what is forgiven.
Well, there is a cap on how much money you can take outside beyond tuition. And believe me that cap barely paid for rent for the entire year in DC soo...i am not sure how luxurious of a lifestyle I could have. But my tuition alone was about 100K so I can see just forgiving for tuition.
Agreed. We barely get by with my full time job and H's loans - he's in grad school and like karinothing we are in DC where just rent alone sucks us dry so fast. I feel horribly guilty if we ever go out to dinner or do anything that costs any money. I'm working as hard as I can to try to make it that we don't have to use his loans for anything other than his tuition, I got a job at the university so that this semester we (finally!) got a lovely discount on his tuition, but we are still already in massive amounts of debt. Six figures, and he has another year to go. PLUS it's all accruinginterest already as I type this - that's what really drives me crazy.
I do know a girl in a grad program who buys all kinds of stuff with her loans - I remember her telling me how much she wanted a new DSLR but had to wait until her loans came in - it makes me crazy to listen to. I think she is not the norm, especially among graduate students. Most of them understand the crazy amounts of debt they are getting into and aren't looking to add to it. Then again, perhaps it's worth noting that this particular girl is getting a library studies degree, I think. Perhaps she is counting on some sort of repayment plan?
I think it's unlikely to apply retroactively, nor do I think it should.
BUT I do think it needs to change. The idea that someone can spend $200K on school (I'm thinking law school in particular since that's my story), and have that cost covered by the tax payers is not good policy. It doesn't encourage law schools to think critically about what they're charging and it doesn't encourage students to think critically about the cost of their education. Upfront eduction about what it means to take out 200K in loans in an environment where the jobs that allow you to pay those back relatively easily are shrinking rapidly is still badly needed. It was non-existent when I went to school. I got lucky that I picked the less expensive school, but didn't have a full appreciation of what that meant until after I graduated.
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).
I think it's unlikely to apply retroactively, nor do I think it should.
BUT I do think it needs to change. The idea that someone can spend $200K on school (I'm thinking law school in particular since that's my story), and have that cost covered by the tax payers is not good policy. It doesn't encourage law schools to think critically about what they're charging and it doesn't encourage students to think critically about the cost of their education. Upfront eduction about what it means to take out 200K in loans in an environment where the jobs that allow you to pay those back relatively easily are shrinking rapidly is still badly needed. It was non-existent when I went to school. I got lucky that I picked the less expensive school, but didn't have a full appreciation of what that meant until after I graduated.
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).
When the gov't is projected to make a $48 billion "profit" on student loans it's kind of hard for me to "worry about the taxpayers."
But I do agree with the point that tuition will keep going up as long as students are able to borrow more and more.
Maybe that blog post is unintentionally vague, but I don't think it says that all of that comes back to the federal government. The 48 billion figures appears to tie to "student loans" more generally. But also, lending money has always been a profit making venture - that's the point. And I'm not saying have no loan forgiveness ever (even if my post above suggested it). I'm just saying the current system is too broad and too arbitrary.
I have really mixed feelings on all of this. My strongest feeling is that the cost of education is nuts and the interest rates on loans in the last 8 or so years is terrible. It shouldn't cost someone 200k to become a lawyer or doctor and there shouldn't be crazy interest accruing on top of that. It makes me sick that I've been paying on my student loans for about 5 full years - and made almost 20k in loan payments - and I've paid off less than 2k because nearly all of my payment goes to interest. It's nuts that Kari's loan balance has gone up about 25% in the last few years. There is something seriously wrong with that.
However - since that's the environment we live in, I don't really have a problem with people being required to spend 15% of their income on paying loans. It sounds insane when you're talking 2k a month toward loan payments, but if that's only 15% of your income you've got a lot of other money available to cover everything else. I 100% agree that it sucks if things have been a certain way and then they are changed - one could have made different housing choices, gone with a less expensive daycare, etc if they knew they had a smaller budget to begin with. But 15% is a reasonable percentage IMO. My loan payment is about 15% of my income (I'm not on IBR but the difference between IBR and my current payment is about $20 a month) and while I feel it every month and wish I didn't have to pay it, it's just part of my budget and part of my life. I have about 4k less a year to play with because of it, but I make more than 4k more a year because I have the degrees I have. And I still have 85% of my income available for other things, so I'm doing fine. So... I feel like I don't have a lot of room to complain I guess. Though I should probably add that I'm on the 25 year plan right now in case anyone thinks I have an end in sight either...
I also have mixed feelings about the taxpayers potentially paying 200k of peoples' loans. I guess I don't have mixed feelings if that helps struggling families (or singles but it feels different to me for higher earners. I guess my overall philosophy is that if people can pay for things, they should. As much as I hate paying for my loans, I have the ability to do so and I'd rather have someone less fortunate than me bailed out. Of course taxpayers pay for a ton of other stuff I'm more passionately upset about spending money on, so that's where my feelings are mixed because this program at least helps some people and ideally gets better people to work public service jobs. But I'm not sure I'm convinced it's right not to have a cap or to have it based in overall HHI.
When the gov't is projected to make a $48 billion "profit" on student loans it's kind of hard for me to "worry about the taxpayers."
But I do agree with the point that tuition will keep going up as long as students are able to borrow more and more.
Maybe that blog post is unintentionally vague, but I don't think it says that all of that comes back to the federal government. The 48 billion figures appears to tie to "student loans" more generally. But also, lending money has always been a profit making venture - that's the point. And I'm not saying have no loan forgiveness ever (even if my post above suggested it). I'm just saying the current system is too broad and too arbitrary.
Seriously. Sallie Mae does collections for most federal loans. That company is making money hand over fist, and when people default or have their loans forgiven, the government has to pay them.
That said, it's possible to disagree completely with a model where the government profits excessively from student lending, but simultaneously by appalled by a model that distributes those profits in unequal and unfair ways, by incentivizing jobs that don't need incentives, while ignoring much more serious workforce shortages.
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.
Divorcing may not help in this situation because in some jurisdictions if you have kids you have to live separately for a year and all sorts of things so it would be expensive to go through all that. I've thought about it for other financially related situations.
The major problem is obviously what these schools charge for tuition. Is there anything the gov't can do to cap that?
If not, I don't see what the problem is with tax payers either subsidizing students up front with more federal grants (what I would prefer) or forgiving loans on the back end. But students shouldn't be on the hook for six figure education debt. It's just absurd and unfairly advantages people with rich parents. If you decrease aid or cap loan forgiveness, aren't you disadvantaging people who don't come from affluent families? Why should family background determine where you go to school or what you study?
I have a question: does Congress just randomly decide what the interest rate is? I do not understand why it is not tied to market rates somehow.
Pretty much yes. Congress sets the interest rates on federal student loans. That's why some folks have rates like 3% and then bam! 8.25% for grad loans for a few years. I think newer loans are back down some now, but if you graduated from like 2007-2013, sucks for you!
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.
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.
PSLF is tax-free forgiveness. Regular plain 'ol IBR is 25 years of payments with taxable forgiveness.