Income-Based Repayment of Federal Student Loan Debt Starts July 1st

If you have a student loan debt balance that is close to or exceeds your annual income, this is for you. Income-Based Repayment (IBR) is a new way to lower your federal student loan payments starting July 1, 2009. It caps monthly payments and forgives remaining debt and interest after 25 years. And if you’re a teacher or work in government, nonprofit, or other public service jobs, you could have your federal loans forgiven after just 10 years.

Here’s an animated video about the topic from IBRinfo.org:

Under IBR, most borrowers will have a monthly payment that is less than 10% of gross income. This includes single borrowers with less than $50,000 in income and married borrowers with two children who have less than $100,000 in income. This is only available to federal student loan programs, so those with private student loans are not eligible.

An example from this USA Today article:

Suppose you have $30,000 in student loans, and you estimate that your 2009 income will be $25,000. Assuming your loans have a fixed interest rate of 6.8%, your monthly payment under the income-based repayment program would be $110, vs. $345 under a standard 10-year repayment plan. [...] If your income rises in the future, your payments will, too. [...] However, any amount you owe after 25 years of qualifying payments will be forgiven.

To see if you qualify for a lower payment, enter your info into this IBR qualification calculator. To enroll, you’ll have to contact your lender directly about income-based repayment once it become available July 1st, 2009.

Comments

  1. Baughman says:

    Wow. This is interesting. Too bad I was frugal in college and graduated debt free. I could have had the gov’t subsidize (and eventually forgive) financial imprudence, like trips to jamaica for spring break. Where’s the accountability?

    Headline in the WSJ today: “Obama Aspires To ‘Light Touch’”. This policy very much seems to contradict this “light touch” goal of Obama. Perhaps he’ll veto?

    Seems like there would be a big potential for abuse here and that there would be many unintended consequences of this policy (i.e. jamaica sees a surge in vacations from students and avg student debt load increases).

    All frustration aside, it sounds like a better use of money than the cash-for-clunker idea presented earlier this week. I just don’t like the forgiveness portion of the proposition.

  2. pharmboy says:

    Wow. Another nail in the coffin of the America that I was lucky enough to grew up in. I feel sorry for my kid, due to enter this world November 30th.

  3. Patrick says:

    Really excited about this. With debt forgiveness program, and being in a public sector job I will pay about 30k of my 90k over 10 years. One important thing to note, in order for your payments to count towards loan forgivness you must be on Income Contingent or Income Based repayment. You can also be on a standard payment plan for them to count, but, that is a 10 year plan and at that point you would have no benefit from the public sector loan forgiveness program. Also if you have been making standard or income contingent payments since 2007 (not sure of the exact dates it started) those payments count towards your 120 payments for the loan forgiveness program.

  4. Wow, if I had known about this I would have gone to a super-expensive private university instead of the equally good (and cheap) state school that I could afford without taking any loans.

    I wish someone would have told me the government would end up subsidizing me if I wasn’t careful.

  5. please stop giving my money away!!!!

  6. This is very interesting. I am a student but I took out loans that do not accumulate any interest until 6 months after I graduate. I believe they are called Federal Stafford Loan. Would this still apply?

  7. yeah, seriously. The responsible folks never get a break from the government.

  8. @baughman yeah, because you can finance spring break trips to jamaica with federal student loan money. i couldn’t even finance a spring break trip to germany (a trip full of business meetings…part of a CLASS i was taking) with federal money. had to get a private loan.

    but hey, according to you guys i’m probably just some slacker who’s not working hard enough to pay off my student loans. probably didn’t work during college either (wait, i did). probably miss payments (never).

    so frankly, if i’m finally going to be a beneficiary of the government’s giveaways, i say bring it on! i appreciate every little bit of help i can get.

  9. WTF?… So I SHOULDN’T have bothered trying to pay off my student loan faster than expected while the people who have no job get a free ride?

    That doesn’t seem fair…

  10. I think this is fair. It only caps the interest that most people will pay, so that you can continue to make the payments. Student Loans are the one thing that people can’t get out of — they can’t declare bankruptcy. People who go to school, spend a lot of money and then can’t make 50K a year (after 10 years!) are unfortunate, and IMO I doubt any of them enjoy making so little after spending all that time (and money) paying for school. And think about it — they are forgiving college-educated state workers who earn less than 50K for their federal loans. Why are they paying them so little in the 1st place? And the forgiveness doesn’t kick in for 10 years. That’s a long time.

    I don’t know about you — but I sure wouldn’t want to qualify for this.

    I don’t think you can take vacations to Jamaica on student loans anyway. All the money has to be documented to be used to pay for school, room and board, or books.

  11. mimi – why would you go to college racking up all kinds of debt for a job/career that pays less than you could get with just a high school diploma? You could have been working all those years and off to much better financially sound start in life.

    For educational/personal reasons it could be worth it, but as far as financial reasons go, college can be a very poor choice for a lot of people.

    Note: I absolutely loved college and would not give up that experience for anything. However, there is a smart way to go about college, and a dumb way, and lots of Americans are brainwashed into thinking the dumb way is the right way.

  12. I have a question to anyone who has any insight. I have student loans (federal and private) but it doesn’t seem like I can find anywhere to consolidate them. I don’t have a problem paying back the debt that i incurred in college on my own, without gov’t help, but I cant seem to find anywhere that will consolidate these loans. Does anyone know anyway to consolidate, or where to find information on it? All the Google searches return the same from sites, and the same few lenders (Chase, Wells Fargo: which are both only offering variable rates which could get scary with what the gov’t may have to do to fight inflation.

    Thanks.

  13. Baughman says:

    I’m 2 months away from starting a full time masters program. I have no need for a student loan, but I’ll qualify for and receive a federally subsidized loan; especially b/c my income drop will promptly drop to zero.

    Sure, the loan must go towards school, but that loan essentially frees up the cash that I should have (and was able to) used to pay for tuition. In other words, I could use the federally subsidized tuition loan as an interest free loan to go to jamaica. And if i land a really crappy job out of school, the gov’t would end continue (b/c federally subsidized loans are interest free until after 6 months after graduation) to subsidize my trip to jamaica through this new program or eventually forgive the loan all together! Unintended consequences…

  14. I borrowed about 70K by the time I got out of grad school in 1986. Within a couple years, the interest on student loans was made non-deductible on income taxes. It was a number of years before that deduction returned.

    Fast forward to 2009, it’s still not paid off. For years I had a lender that quit sending me statements any time I paid the priciple down. And because I was so busy building a practice, I was too dumb and lazy to keep track of it and send in payments without a statement. I finally switched lenders based mostly on the promise that they’d send a statement every month no matter what. The monthly statement always says I owe nothing, but I now pay it anyway.

    I’m down to less than 10K, but like most government programs and a lot of tax deductions, I make just a little too much to qualify for this.

    I too am indeed tired of subsidizing every one else’s life, it’s enough to make you miss George Bush.

  15. Coupon Artist says:

    Don’t forget though- any forgiven amount of debt will be taxed as income! That can be a big tax bill depending on how much is forgiven!

  16. I should add that I am quite grateful that the student loan program existed, because it was a tremendous benefit toward helping me become and educated person with a good income.

  17. Patrick says:

    actually the forgiven amount won’t be taxes as income. Also, suppose you get out of high school and your parents make a modest income and have 3 kids. Then what? Skip a higher education? Maybe just leave college for the wealthy since taking on any kind of debt for an education is “irresponsible”. You can work every weekend and every summer from the time you enter 9th grade and barely make a dent in the education bill. Just because you don’t have any student loan debt doesn’t make you right.

  18. EWEWEW first of all I worked 3 jobs in college and thanks to my parents income I wasn’t able to get federal loans. I went the private loan route… why should people getting fed loans benefit but not the rest??? I worked my tail off and I’m still drowning in debt all so I can get an education and those who were lucky enough to get fed loans can just forget about them??? To bad my parents income allows us to barely scrape by where we live… Totally disgusted… sure let’s have the govt loose more money

  19. The problem with the calculator uses the amount that you owed when you went in to repayment. If you are in repayment now, that is the wrong amount to use. It is the amount you had on 10/1/07. Use the repayment estimator on the direct loans site for a better estimate.

  20. I wish that people would stop being short sighted and see funding for education as “subsidizing someone else’s life.” I agree that the reins should be tighter on how the money is spent, but society benefits from an educated population. Even those who are not highly educated that are “success stories” seek out educated people to work in the businesses that they create. For every person that has created a megacorporation on an 8th grade education, there are 20 college graduates who have done the same.

  21. Baughman, so because there are some that will scam the system you suggest getting rid of the benefit because of the possibility of such scammers? Tighten up the system a bit to ensure that the money is being used for appropriate costs. As for those who have saved enough, use that money to live on. Take out only what you need.

  22. @ Sarah: No one is saying you didn’t work hard to graduate. But, we shouldn’t have to pay or subsidize your student loans. You make your choices in life and need to be responsible for them. You may feel you deserve to be forgiven because you worked a job during school, but there are others out there who maybe didn’t take out as much debt. Maybe they went to a community college first. Why should they pay for your education? It creates a situation where everyone will now take out more loans knowing the government will subsidize them. This also keeps college costs artificially high because they just push students to loans, rather than get more efficient.

    @Patrick. Please don’t make this about the wealthy getting something that the poor or middle class can’t. Class warfare is a weak argument. The bottom line is we need to be responsible for our actions. Maybe it is harder for you or I to pay for school, but it should pay off as you earn a higher salary than those without a degree.

  23. My gut reaction is “wtf did I just pay off my remaining balance for?” coupled with “and why did I go to community college first to minimize the amount of debt I’d have when I would’ve rather gone straight to the four year school?”

  24. The real problem is that these schools are so ridicolusly overpriced.Your young and stupid and don’t think how these loans will affect your life.You also have to pay for a lot of useless classes.I had to take two semesters of bowling when I went to college..BOWLING,FOR PETE’S SAKE! ..I ATE NACHOS IN CLASS!

  25. @josh So you think that the public sector employees who run programs like emergency management should only have to have a high school diploma because they make under 50K? How much a job pays is not the truest indicator of it’s value or the skill set required to do it. Many public sector employees do the same jobs private sector employees do, with the same qualifications, but for much less money.

    These people are there to serve us and someone has to do their jobs. And I certainly hope they are college educated.

    Higher salaries for them means higher taxes for us. I don’t see anything wrong with the forgiveness program when someone has worked for 10 years for the public’s interest.

    Not everyone sees college as an investment, some see it as personal enrichment. Oh wait.. enrichment, that’s the “dumb way” to go to college right? If you are satisfied with making 50K you should just aim for GAP general manager? instead of trying to do something good for the public welfare?

  26. @DCnTN are you sure you were paying down your principal? Student loans are amortized. After paying down a huge chunk of the principal, your monthly payments should have been recalculated because now your interest over the life the loan would be less, and then reflected in your monthly payment. But it sounds like if you get statements w/ $0 owed, that you are in paid ahead mode. You have just paid ahead (with your huge payments) your future payments, you haven’t actually reduced the amount of principal that your interest is calculated on and you really aren’t helping yourself. You are still paying the same amount of interest over the life of the loan, you are just paying it off quicker.

    For example, if you have a 20K loan, and for a 10 year repayment plan, it is calculated at ~230 a month. After 1 year, you will have paid 1446 in principal, and 1315 in interest and your principal balance is now 18554. If you make a 5K payment after 1 year, and it is applied all to the principal, the amortization schedule has had a wrench thrown in it. So it needs to be recalculated based on a 9 year loan of 13,554. Your monthly payments will drop to 168 and if you continue on that payment plan w/o making additional payments you will have paid another 4605 in interest, added to the 1315 from the previous year, makes 5,920 for the 10 year period, vs 7,619 had you not make a 5K reduction to the principal. You save yourself 1,700 in interest. Anyone who overpays their student loans should make sure their extra payments are in fact paying down the principal. Here is a good excel sheet to download where you can calculate how your overpayments (if applied to principal) can reduce the amount of interest paid. http://www.studentloansed.com/calculators/student-loan-amortization-extra.htm

    Someone correct me if i have made errors, this was just explained to me recently.. and I was like, “wow, I guess I’m glad I’ve just made the minimum payments and didn’t overpay w/o making sure it went to principal.” And, if you use an online payment servicer, there is no way to designate on your payment “apply excess to principal,” so you have to have them make a note in your account.

  27. @greg did you try: http://www.loanconsolidation.ed.gov/ (if the link gets removed, google direct loans consolidation.)

  28. mimi – It’s not a matter of being unfortunate that puts people into those circumstances. These people made a choice by choosing a field where the pay can be low…yet they took huge loans to get that degree anyway.

    This program does nothing but teach people that there are no consequences to their actions.

  29. Patrick says:

    @kirk

    Not making it about the poor, my family is
    Far from it. What I’m getting at is that many aren’t able to afford college without loans. Not everyone has the means that some on this board appear to have.

  30. Eliminate educational debt entirely as a category that can be securitized and get the government out of it. Then, watch what happens to the cost of college tuition. There’s a reason college is too expensive for all but the super rich. Subsidies in the form of loans do not lower prices. They raise them.

  31. @mari – Yes I want those public service employees to have a college degree. However, I think it is an extremely dumb financial move to go to a college that costs $30-$50k per year for a low paying job when their are colleges with just as good as programs that only cost $5-$10k per year. People get brainwashed into thinking paying more = better education. In fact, when colleges raise their tuition, they actually see their number of applications INCREASE even if they don’t change a single thing about their academic program — people don’t research colleges to see which ones are good, they tend to base the quality of education based on price alone (although I would agree there is a general correlation).

    Good point about the forgiveness program to help make up for a lower salary for those in the public sector — although government employees also tend to have better benefits, such as more vacation and a pension when they retire.

  32. @Strabo

    “These people made a choice by choosing a field where the pay can be low… yet they took huge loans to get that degree anyway.”

    I didn’t realize that Marketing & Graphic Design were fields that paid low.

    Look, I spent two years at a state school. It was free. I HATED it. I wasn’t getting an education, I was wasting my time. So I came back home and transferred to a private school. I took out loans. I worked 30+ hours a week. I lived at home to save on room & board. The education I received there was AMAZING. It was enriching and my professors knew what they were teaching and wanted to make sure we were actually learning. They helped us make contacts in the local business community. I wasn’t receiving any of that at my “frugal school.”

    But it’s really difficult for recent graduates to find quality jobs right now. I spent a year working my college job before I found the more career-oriented job I’m at now. What I’m trying to say is that sometimes we take huge loans to earn a degree that SHOULD pay well…and it doesn’t work out that way. Or it hasn’t YET.

    Everyone seems to be mad that people like me aren’t learning about consequences. We are. I am. But if someone offers help I’m not going to deny it on principle. Sometimes you’re in the right place at the right time and sometimes you’re in the wrong place at the wrong time. That’s just life.

  33. @Sarah: But you took those loans knowing you’d pay them off, right?

  34. The real issue is that programs like these keep the astronomical increases in the cost of education in place.

  35. This program is pretty much only beneficial for those who make really low income or work for government/nonprofit (which you would have to do for 10 years total) AND have a large amount of debt or a lot of dependents. If you’re unemployed, you can already get your loans deferred for three years without this program.

    Problem is that if you have a large amount of student loan debt (think $40k+) you’re probably making decent money because you borrowed that money for an education to get you a good job, which would make this program unhelpful. Also, if you’re making a good amount of money working for government/nonprofit, with this plan you might pay your debt off within 10 years.

    To me a beneficial payment plan is one that lets you pay the smallest minimum payment possible (especially great if you locked your loans at a low rate) because you can always pay more than the minimum if you want. Lower minimum payment = more flexibility. With this program, you’ll only get a lower minimum payment if you have a low income or a lot of dependents AND a large amount of student loans.

  36. @Anon

    Yes. And if this plan didn’t exist, I’d continue to pay my monthly amount due until they were eventually paid off.

    I don’t think anyone takes these loans out counting on something like the IBR to come along and help them out. But, like I’ve said before, if someone comes up to me and says, “Hey, I want to help alleviate some of your debt,” and it’s legit, I’m not going to say no.

  37. Great…another program I can’t take advantage of because I paid my loans off early.

  38. grimrealist says:

    Not everyone should go to college. We should be ashamed that higher ed has become about the “experience” rather then the education – it has diminished the value of a degree. Soon you will need a bachelors to work at McD’s.

  39. “Better to keep your mouth shut and appear stupid than to open it and remove all doubt.”

    Bush signed it into law.

    http://www.washingtonpost.com/wp-dyn/content/article/2007/09/27/AR2007092700958.html

    Plus, the forgiven amount is then taxed as personal income.

  40. look at it this way says:

    Listen do not be mad at the people who went to school to get an education and because of the economy are not able to find decent jobs. It is about time individuals who attempt to be productive members of society get a break. After 10 or 25 years our original loan will be paid off, they are just cutting some interest back. Go complain on a blog where the government is giving people who are sitting on their behinds doing nothing money.

    I am one of these people that this is really going to help. I’m a hard working person, wife, and mother. My husband works for the auto manuf industry and because of the economy his hours have been cut big time. One of my major bills (besides my mortgage, which I pay on time every month) is my student loan. This regulation is going to cut my student loan bill down some for now, but when my husband goes back to full time it will bring the payment back up. Keep in mind everyone this is a fluctuating payment depending on your income.

    This plan is not helping the irresponsible, it is helping the deserving.

  41. @look at it this way: I feel for you. I grew up in Michigan so I know the pain you are feeling with your husband in the auto field. And, I don’t think people are mad at those who are being helped. We are mad at a government that just hands out our assets to others.

    Again, I feel for you, but why should someone who paid their student loans back early pay, through taxes, for you to reduce your loans. Rather than have the government decide who gets money, why not let us keep our dollars through reduced taxes and then we decide how to spend our assets. Maybe you would find someone like your family to help you with your loans. With reduced taxes they could do that. And, I may help my family.

  42. careerminded says:

    For the rest of us that don’t really qualify for this, I would really like for Congress to enact a bill that would allow us to payoff student loans with pre-tax money. This would be exactly how the pre-tax commuter, healthcare and dependent care benefits work through company’s like WageWorks. Why wouldn’t they want to get paid off faster?

  43. I totally agree wtih you careerminded. In fact, I would like it to go a step further. I would like to section out a piece of my 403b retirement and send it to my daughter’s college fund. Why can’t this be done? I’m allowed to contribute pre-tax (at least pre-state tax) to her fund anyway. And if the federal govenment allowed pre-tax 529 contributions (and why not?), it could just be a simple transfer from one pre-tax fund to another.

    I’d have her college funded in no time, and with no stress. I actually e-mailed one of my senators about this over a year ago, but haven’t heard anything.

    By the way, regarding this stuff, I briefly researched federal loans and saw somewhere there was a limit of $130K (and probably the limit was lower a few years ago), so that’s the max any state worker is getting in return, and I would guess the average is probably a lot less. Average that out to 10 years and that’s 13K a year — and that’s probably under the amount that state workers are underpaid in general, so again, I think this is fair.

  44. This is beautiful!! For people who have gone on to do a public services like teachers and healthcare professionals this would be a godsend!
    When we are paid so little to begin with and our debt to income ratio is offensive due to school loans …the only thing we end up paying out to SallieMae is interest. So in terms of the forgiveness part that is beautiful, especially when you consider that by the time 10-25 years go by you will have paid back what you borrowed essentially without interest.

  45. Danielle says:

    Gee, I wish it were so simple…………
    After living out of my car with my husband and one year old, while pregnant……I have have now managed to find a employment position which allows me to have a roof over my children’s heads….
    I only now am receiving harassing phone calls saying I am a criminal and deserve to be in prison from my private financial loan creditor…..to the extent that they are calling my work and have spoken with an other employee with a similar enough first name, swearing at her and giving away my private information. How can I cope? I’m not worried about my federal loan, they know what I make annually for income, they’ll understand, not the private loan company whose employees make in a day what it takes me weeks to take home…………

  46. I think it’s awesome! I thought I would never get out of my student loan hole. And my wife who is a teacher in a low income district will gain forgiveness if she continues to work there for 10 years. I think most of the people on this sight bitching about this probably had parents or a trust fund that could help them with college, because even at a state school there is no way someone could pay for 4 years as a full time student, pay rent and everything else and come out debt free. If you already had a job that could pay for that, why go to college? I worked my ass off delivering pizza in college and I still have 32,000 in student loans with interest accruing. Screw all of these fear induced bloggers who are convinced that our country is falling into some kind of Marxist, bankrupt, black hole. I’m going to Jamaica.

  47. To all the haters, a little background on this legislation.

    The original purpose of developing a plan to assist students was established for a very specific purpose, and the legislation was voted in YEARS ago – in fact many student are already ‘benefiting’ from the ICR (Income Contingent Repayment) plan that became available last year.

    The purpose of the legislation was to solve the problem of surmounting student indebtedness require to complete law school. Students that were coming out of school and wanting to work for the state or work at non-profit or other public sector positions found themselves entirely unable to live according to their ideals. As a result Washington and New York saw their roster of public defenders dwindling as talented and well-meaning people were forced to work for firms and corporations that were not centered around philanthropic or otherwise noble and socially beneficial causes.

    It may be no shock that generally speaking, people who enter into these professions with a background in being either a bootstrap family member or otherwise disconnected socially from benefactors or other sources of cash are often asked to sell-out their humanitarian and philanthropic hopes because although they came from under-served areas and wish to go back, or perhaps they wish to defend types of people who generally could not afford the kind of quality service they provide – well essentially this meant that top talent was being recruited not on the basis of what the legal professionals wanted to to defend, but what they could afford to defend on account of their $100k+ student loan debt.

    This also applies to doctors and medical professionals who wish to work in non-profit clinics, teachers who want to specialize in understanding children with special needs, etc. etc. Pastors/ministers, etc.

    Specialists have effectively been priced out of the job market by their educational costs, and it is simply too expensive to pass that cost on to the recipient without either significant government subsidy or else the student taking a hit.

    I didn’t hear any bankers or student loan officers complaining when they made the student loan process so easy that it caused a terribly unjust tuition bubble – and those university development officers loved seeing those fat loan checks come in so they could build their state of the art rec centers and sports arenas while their students got wasted and played out extra innings of high school. The people in charge of this mess should go to jail. But I digress…

    The ICR and IBR are both calculated based on a 10-year repayment plan! This is NOT free money. A person needs to have their loans consolidated with the Federal Government DOE Direct Loans program. Thankfully this can be done even if you have reconsolidated once before. However it means that if you were previously on a 20-year or 30-year payment plan, the basis payment that gets reduced is quite large. There is no ‘interest-only’ option that you work ‘UP’ from… they start you with the normal 10-year plan payment and work DOWN from that.

    In my case, when I switched to ICR, my payment went up $250 (to $700). I work for a non-profit, making about $30k less than what I would make in the private sector. The calculations do not take into account any business losses from work done on the side or any other deductions – generally speaking your NPO paystub is the documentation they use for calculation.

    ICR and IBR do not work for you if you have no job. You have to be able to pay and it is NOT free unless you make a very small income or have a family. You have to essentially be very close to the poverty line and obviously the point is that if your income increases your payment increases to compensate.

    Also I think the debate is still raging as to whether the balloon forgiveness payment becomes taxable income for you on that year… I think that for the standard 25 year forgiveness payment it IS TAXABLE, and for the MPO 10-year forgiveness payment it is NOT. However last time I checked this was a part of the plan being hashed out.

    The increased payments anticipate that when you are able to afford the full payments, you AGREE to pay on the loan as if you would pay it off in 10 years. This is why there is a 10-year cut off for individuals who make 10 years of payments ON THE ICR or IBR plan… and it does NOT work on retroactive payments that were made BEFORE the consolidation. So even though I have worked at the same non-profit for 5 years, none of those previous loan payments count because they were outside of the plan.

    If you do NOT work for an NPO, then the odds are very low that you will have much left for the government to pay off at the end of 25 years. The EXCEPTION would be someone with, say $100k in loans to start and is making $25k a year not working in the private sector. For myself, I calculated it out that my loans would be paid off in 14 years if I did not work for an NPO – assuming no raises over the next 10 years.

  48. Gotdebt says:

    All I ask for is an interest rate deduction on my Federally Guaranteed loans with Sallie (hi. We also are corrupt) Mae. When I graduated with my 100k in loans my interest rate was 8/10. Jumped at the chance to consolidate at 7. Three years later people are locking in at 2.25. And now? A cap? I made 30k my first two years out of law school and my 600 monthly payment was more than my rent. 10 yes later I ain’t making 100k a year. And I still haven’t bought a house. The Feds have guaranteed my nondischargeable debt why not just lower my interest to 3? That would save me 300 a mo and help me stimulate the economy or by a house. I’m not the only doctor, lawyer or grad school grad hosed by the 8/10 loans. Guess it just is luck of the draw and when you graduate school or heck let me refiance them at a lower rate. My credit is great. Why should be a slave to freaking Sallie Mae?

  49. FrugalButInDebt says:

    News flash – graduate school is expensive and increasingly necessary to get even average-paying jobs. I went to a private school for my first year because that is the only school that I got into. I promptly transferred to an in-state school for my second and third years. Considering that I had to pay rent and live (NOT “take trips to Jamaica”), I still had to take out a good chunk of loans, resulting in $120,000 of debt when I came out of school during one of the worst recessions in history. I now work in the public sector, representing indigent clients who cannot afford a lawyer, and I do not make anywhere near enough to cover my monthly loan payments. Until you have lived it, quit making ridiculous comments about the state of our country – these loan forgiveness programs are a godsend to people who step up and get involved in government directly rather than sit on blogs and complain….

  50. I have applied to nearly 100 jobs in my field, and yet nothing… Without this there would be no way for me to repay my loans in the beginning.

    And no, I never went to Jamaica or any other exotic places and I saved money that I made, but there’s more to life than the repayment of student loans. Maybe now I can afford health insurance too.

    Thanks Obama!

  51. this is an incredible thing. finally i feel something is being done for my generation and this debt for diploma program that has long ensued with the yearly exorbant tuition hikes over the past 10 years
    we shall wait to see and keep our fingers crossed for minimal changes and a withstanding policy 10-25 years from now.

  52. This is not about accountability and it’s not about anything, but hurting borrowers. I went to law school and the federal ceiling was lowered so you had to borrow from private lenders. They charge 11%. ACCESS GROUP IS THE DEVIL!!!! This law doesn’t affect the private lenders AT ALL! It is a total smoke screen. So all of you accountability clamorers- Don’t worry. I am still getting it in the end until I die and welcome the debt free solitude of the grave.

  53. shujobear says:

    “Too bad I was frugal in college and graduated debt free. I could have had the gov’t subsidize (and eventually forgive) financial imprudence, like trips to jamaica for spring break. Where’s the accountability?”

    lucky you for coming from such a wealthy background that frugality is all it took.

    trips to jamaica… puhleeze. the only trips i took were with the local greyound back to my parents’ town to stock up on next month’s food supply.

  54. I love all the outrage about providing a tiny benefit to people struggling with huge student loan debt. To anyone who thinks this is unfair, please send a letter of complaint to the George W. Bush Presidential Library. He was the decider on this one.

    Also, please organize a series of marches to protest the tax benefits given to homeowners, employers and investors. Seriously, why should my tax dollars go to support people who feel the need to own a home? I bet all those homeowners are vacationing in Jamaica as I type this, paid for with the tax deductions I subsidized. After all, I’ve been frugal and lived as a renter all these years! Where’s my federal rental tax deduction?

    While you’re at it, please refuse any Social Security, Medicare, police, military, emergency care, library, post office or other federal government benefits you and your family might enjoy. After all, why should my tax dollars pay for an ambulance crew to help you in an emergency? I take care of myself, I’m in good health, I take that on as my responsibility. Why should the government bail out all these folks eating red meat and dairy? I mean, where’s the personal accountability?!!! If we don’t make them crawl to the nearest private hospital emergency room, they’ll never learn that exercise and a healthy diet are an essential part of being a responsible person!

  55. When I started school, I was married and had three kids. I was trying to improve my quality of life and that of my family. My goal was not financially lofty, however, to teach was something I had always wanted to do. Teaching requires a four-year degree. I went to a local state university to get the remainder of my degree. About half-way through, my husband decided he was against me going to school (that was the straw…) and we eventually divorced. I suddenly became a single mother of three, going to school while my own kids were in school and working a minimum wage job at a daycare where they could also attend while I was there. In order to take care of my kids, I required much more financial support than I had ever anticipated, and I do not regret at all using those resources (none of which were welfare). Recently, my ex has decided to adopt two kids, enevitably cutting the child support I recieve in half. I am a teacher now, and I love it. My state is in a financial crisis and the pay of teachers has just decreased for those who were fortunate enough to keep their jobs. I had every intention of repaying my student loans, when they were not in forebearance or deferrment. I count this as a blessing, and am so greatful that my decision to follow my heart instead of my wallet, and choose a career where so many wonderful and amazing things happen each day will financially pay off as well.

  56. music student says:

    All of you who are complaining about this program obviously don’t understand what some of us had to do to pay for undergraduate and graduate degrees! I was forced to take out loans for grad school even though I was given a full T.A. from the university I attended. With 6 to 8 hours a day in the practice room, 10 hours a week teaching, my own graduate school work, teaching private lessons on the side, professional playing gigs outside of school and only making $250 from the University every two weeks, I was in need of every penny I could get just to live. My paycheck for teaching didn’t even pay my rent. I spent more time practicing than most of you ever spent working…at least 48 hours a week at a minimum. (And for those of you who do work, that’s more than a full time job.) I am in need of this program in a serious way, as are others who are in the same boat, and maybe you should think about how this will actually benefit our economy as opposed to damaging it. If my loan payments were reasonable, our family wouldn’t have to use subsidized programs to get by. I have a master’s degree and I’m definitely not making enough at this point to make ends meet and I’ve been out of grad school for three years. So get off your high horses and think about the good of someone else besides yourselves. Congratulations if you graduated debt free, but some of us didn’t have parents who covered every bill.

  57. To music student: congrats on working hard to achieve your degree. You should be proud of your efforts. However, you made the choice to pursue that avenue. So you should be the one to deal with the consequences for that lifestyle. Just because you decided to pursue grad school as a T.A. doesn’t mean I should have to pay for it. Furthermore, when the government “bails out” or subsidizes student loan programs, it just further enables the whole silly student loan process. The reason school is so expensive is the universities know they can charge excessive fees and just tell the students to get loans. If the loans weren’t there, then the schools would suddenly become much more cost effective as competition would emerge.

    Another point you brought up was how you are helping the economy and society so you should be helped. I am sure this is true that you are helping, but there are millions of people that can make this case. Do we subsidize everyone? Rather than that, why don’t we each take responsibility for our actions, as America was founded, and then subsidies aren’t needed. And, they won’t be controlled by spineless politicians who hand money out for votes.

    To KB, I am glad to hear you enjoy teaching. My parents were teachers and loved it. I think teachers and other public servants should get some debt forgiveness, but it is really a pay increase, not a subsidy. Each state needs to do this to attract teachers. So, the taxpayers of the state pay for it as they are the recipients. I have some heartburn when someone from Montana has to pay for a teacher in New York when the Feds throw money out.

  58. To Kirk Kinder,
    I understand your general sentiments, but you must realize that we subsidize an awful lot in this country. Farmers, for one, often who function as huge corporations. Bankers, quite famously, as another. Should we have not given a penny to any of the major banks or AIG? I would be fine with that. Let the entire banking system collapse and sift through the wreckage. While we’re at it, why are the American people subsidizing FDIC guarantees?

    Honestly, those of us struggling to pay our student loans don’t have a lot of money in the stock market or banking system. I, personally, would be fine with the collapse of both of those entities. If you had money in the stock market, it’s gone. If you had money in the bank, that too is gone. A few regional banks would survive, but the old economic system would be over as all of the majors failed and took 90% of our citizens’ money with them. Then we could start over. The dollar would be worthless, even here in the U.S., and we’d build a new system from scratch. Maybe go back to bartering or become a nation of survivalists. I could live with that. Could you?

    If not, you might want to think before you complain about subsidies. If you or your family has any ties at all to: home-ownership, the military, police, fire & rescue, farming, banking (including money in accounts), a large business, the post office, etc, then you are actively taking advantage of subsidies.

    I sure think that home values are inflated by the current tax refund system and banking subsidies. We should take those away and let home values plummet. If you chose to buy a house — to pursue that homeowner “lifestyle” — well, that was your choice, right?

    Anyway, this is coming off a little more directed than I’d like. All I’m trying to say is, take it easy on the subsidies argument unless you’re prepared to make it across the board. You’re probably right that college prices are inflated because of the existence of the student loan system and now this income based repayment program, but of course one could certainly say this about home values, as well as many other factors of modern life.

  59. To DM: I am prepared to take it across the board. Farmers shouldn’t get subsidies and neither should homeowners. Let the big banks fail. It won’t be as bad as they say cause the healthy banks, which are 85% of the banks in the US, will be able to buy BofA and Citi’s assets for pennies on the dollar. This is how capitalism is suppose to work. The unwise lose and wise win. The fact the government and Fed claimed the world would end if we didn’t bail them out was preposterous.

    However, it isn’t right to call military, police or fire fighters subsidies. One of the few jobs the government should undertake is the protection of its citizens so those services do need to be funded with tax dollars. Paying farmers not to farm their land shouldn’t.

    If the subsidies stopped, then we would get natural prices for all items including farm products, homes, etc. Sure, homes would drop if the tax writeoff went away, but they would also become much more affordable for all people. This natural prices would lend itself to education as well. You would see the price of college drop if they didn’t have the student loan system propped up by the government.

  60. To Kirk Kinder;
    I appreciate your consistency. It’s a rare quality these days. I’ll grant you a continuance of the military (but the corporate welfare that gets distributed through armed services contracts must be stopped), police and fire and rescue services, but we’ve got to throw universal health care in there as well. If one of government’s roles is to protect its citizens, then health care is obviously part of that mission.

    You must agree that health care and capitalism are a very bad mix. The stakes are too high, and the opportunity for exploitation too obvious. It is equivalent to making police protection a private enterprise. “You don’t want to be beaten unconscious and robbed as you walk down the street, here’s the going rate for police protection … What’s that? Yes, prices have gone up. Now that you mentioned it, they just went up again!” You can see how that would work out.

    It would be wonderful to see those trillions of corporate subsidy dollars put back in our citizens’ wallets. Until that happens, it’s hard to see why a few million can’t serve to help out folks who educated themselves in a genuine attempt to both earn and generate income. If the giants are going to keep getting their generous share, maybe us cogs in the wheel can get a few scraps ourselves.

    I’m not sure anyone is proud of scrounging for scraps, but until corporations return their many trillions in free money our economic system can hardly be referred to as capitalism. This isn’t a new thing. We’ve been subsidizing corporations for many decades, including almost all of those banks you’ve referred to as healthy. They might be healthy, but I’d like to see them prove that without any tax breaks and other forms of corporate welfare.

  61. To DM: We don’t have capitalism in the US. We like to say we do, and it sure is nice to blame business folks when the economic environment is down. But, we don’t have it. We have a centrally planned monetary system with the Fed – clearly not a capitalist structure. The government has over 58,000 publications produced by the various cabinents (labor, interior, agriculture, commerce, HHS, energy, transportation) that intervene in the markets directly.

    Now, most would say that these groups are necessary to keep those evil business folks in check. But, this has created the very system you are rightfully railing against. The corporations then lobby their representatives in Congress who then push the leaders of these cabinets to provide benefits to the corporations. Or, they get fat, juicy contracts where they charge the government double cause the government has too big of a bureaucracy to monitor it. Plus, it isn’t their money so they aren’t as careful as to how it is spent.

    Now, as to your point about health care. We do need reform, but it isn’t a discussion of adding a government plan to the mix. We need to get back to making it true insurance. Just as you don’t call your homeowners insurance when the toilet backs up, you shouldn’t use health care for a flu or cold or strep. Insurance is used to protect against a catastrophe that you could not afford to pay yourself. And, we need to get back to where the consumer pays for the expenses until they meet the larger deductible.

    I am self-employed so I have an HSA policy. My family has to meet a $5,000 deductible each year before insurance kicks in. We do get an annual well visit that only requires a small copay though. When we visit the doctor, you can bet your house that we are very thrifty consumers. We question every test, medication, procedure, etc. If we don’t feel like something is necessary, we refuse to partake. We also negotiate with doctors and dentists.

    If everyone does this, then we would see medical costs drop. Competition would become wide spread. The problem now is the consumer of the medical services doesn’t pay or has any idea what things cost. It is akin to going to a restaurant and having someone else pay. You might buy steak and lobster if that were the case. If you were buying, you might get the soup and sandwich. The problem is we are paying through the back door. Our wages are smaller since corporations pay for health care.

    We hear this 40 million uninsured number a lot, but that is a misleading soundbite. About 10 million of these folks make over $75K a year, but choose to not get insurance. Twenty million are in between jobs and will find coverage at the next employer. Another 10 million are truly needy.

    I agree that we need to provide for the needy, but I have a friend who runs Maryland MedBank. His nonprofit finds free drugs for consumer who qualifies. And, he says that the needy can find the drugs. However, it is a pain to apply for them, which is where firms like his come in. He can fill out a few entries in a software app and it populates all the required fields for the various pharma company apps for free drugs. There are also companies that do this for health insurance and doctor visits. So there are solutions on the market today for low income folks. But, he says he finds the government isn’t too willing to help get the word out about these services for whatever reason.

    If we get to the point where we all have high deductible policies, it gets more cost effective for insurers to only pay for those who are unfortunately hit with a cancer or other disease. Then the consumers will drive prices down as we will negotiate and shop for the expenses below our deductible. And we will use medical service more wisely. For the needy, we use programs like I mentioned or give refundable tax credits to cover their deductible/insurance premiums.

    Government run systems don’t work. Look at medicare. It has 36 Trillion in unfunded liabilities. That won’t work.

  62. To: Kirk Kinder
    Thanks for continuing this conversation. I like your idea about health insurance being equivalent to homeowners insurance. Like you, I don’t go to a doctor for things I know my body is going to recover from on its own. I also don’t particularly like their way of treating such ailments. I can do better with diet, rest and other natural methods.

    But I do think we need a national health care system, and that the government is the only party who has this kind of reach. We need it to be national, and universal, simply because of the bargaining leverage (and the cost-offset factors you mention) this provides. If it were national, universal, and private — with many competing insurers operating similarly to auto insurance — I might be for it. That would at least allow for genuine competition and a business incentive to make care cheaper and more efficient. As it is private health care is more along the lines of the cable television model. Only a few competitors in any given market, and what seems to many, many of us as a huge amount of collusion between those insurers.

    Look, the reasons I ask for public health care are twofold:
    1) It seems to me that the “life, liberty and property” mission statement that defines this country includes health care (life) just as much as it does military, police, emergency response. To me, that’s obvious. I’m not saying the government will do it super well, but I don’t think the government does military or police very well either. This lead me to my next point.

    2) The private insurers have had many decades to prove that they are dishonest and untrustworthy when it comes to providing care. They have your formulation exactly backwards. They’ll cover the cold and strep, but drop you if you get cancer. One might argue that they’d change their ways if we adjusted to a simple “catastrophic health need” strategy, but I and tens of millions of Americans have lost all faith in them as honest brokers.

    In the end, I think health care is just a basic human right in a civilized society. If Blue Cross cancels you because you’ve got arthritis, and no one else will pick you up for the same reason, then we are failing as a nation. To pawn those folks onto Medicare is of course going to lead to a terrible deficit.

    I do think there’s room for private industry to investigate and prevent Medicare fraud, a huge source of waste in that system … and a disgrace all around. I’d vote for universal catastrophic insurance, with built-in preventative measures to stop conditions from becoming more serious. No treating small ailments for free, but no pawning the sickest into the emergency room either.

    The MD MedBank sounds like a great organization. That’s my old home state. Nice to hear that good things are happening there.

  63. Dont Get It says:

    You guys complain too much. If you were able to pay off your student loans early be happy that you were put in a situation where that is feasible. Some people dont have that option. I was a person who stayed at home for 4 years and put all of my money into my student loans and paying rent. (Yes rent while living at home) Not a new car, not an expensive apartment, and not hanging out. And I am actually happy that other people are getting alittle assistance from the government. People need to stop trying to put others down and complaining about what theyve done to get where they are and start trying to help out others as much as they can. You never know one day you may need alittle assistance on the flip side.

  64. Stephen, PT says:

    I believe you all have good points to a certain point. I have recently graduated with my doctorate in physical therapy and paid for my whole education myself. I was not given anything by my single mother who raised 4 children three out of four with degrees and two including myself with advanced degrees. I have chosen to get into a career i love not because i will make alot, only 60K this year, but because of the difference i make it others lives. I have graduated with 175K going to state schools and one community college! I chose schools that kept the cost down while still filling my needs and helping me achieve my goals. But the costs are ridiculously high! Students are coming out unable to pay for these costs with degrees not being able to cover my monthly student loan bill, which is about 1800 or so. I am going to work my ass off to pay as much as i can over the next few years! I do not believe it is fair for any of you to judge anyone based on something that you know little about their situations. You without sin caste the first stone! Please understand that this may seem as a hand out, but its not welfare, these individuals are most likely at least contributing to society and not just bilking the public of their money. Its a sad day when education is not a priority! We have lost sight of what got us here in the first place! I hope that as you make judgements against others you take a minute to think maybe you do not fully understand what may or may not be going on in their lives. Student loan debt is a huge burden. I cannot afford to own a home for a long time now because i chose to get my degree. It is really frustrating to no end to then read posts that have passed judgement on me as lazy or taking lavish spring break trips during college, which unfortunately is not true! I hope that i have made someone think before posting or at least represent those on this site that clearly have not been represented but have been bashed like the music guy! Cheers to all those that have paid their loans, i cant wait for my last payment someday when im 54!

  65. @ Stephen PT: I don’t think you should take comments from the blog to mean you are lazy. It is obvious you are a hard working person. I think ultimately what people are saying is we shouldn’t have to subsidize others for their decisions. Just because you chose to become a PT doesn’t mean I should have to pay for your student loans with my tax dollars even if you are helping others. You chose that path.

    No where in the Constitution does it say the government exists to help society. It exists to protect our life, liberty and property. And, it isn’t just education subsidies that most of the posters are upset with. It is the wide range of handouts from the government.

    Also, one of my points is these subsidies keep the costs of education artificially high. The schools know that the students can just go out and get loans or partake in government programs. If that money wasn’t around then schools would be forced to compete and lower prices. The markets will begin to function as they should.

    Also, in your situation, the PT field is out of whack. This is another area the markets would begin working if different choices were made. My wife is a PT assistant, which only requires an Associates. She doesn’t make that much less than a PT who is now required to get a doctorate (use to be a masters). Now, if more and more potential PTs just did PTA school then the industry would be forced to offer higher pay to PTs, which would make the college loans more manageable. But, that hasn’t happened yet. It probably will especially now that the doctorate is required. People like you who enter the field to help others will start to see they can still help at the PTA level for much less upfront costs. So give it some time and you should see your pay rise or so I hope.

    The biggest problem I have is how everyone expects the government to help him or her. That isn’t the government’s job. This goes beyond education into health care and every other aspect of our lives. We all look at our personal situation and feel we “deserve” this or that. This is a natural coping mechanism to justify government help. The only thing we deserve is what we earn. The government’s only job should be to protect the system to allow us to pursue our desired path in life.

  66. Name of the game says:

    I think debt is the name of the game. You get behind to get ahead in America. I hate it but it is the truth. Don’t blame the individuals taking out the loans. Blame a system which is broken. It doesn’t make financial sense-no. I owe 33k and the job market looks bad. This plan will help me for a little bit and then I’ll end up making larger payments once a job situation improves. We all pay our dues. I wish people would quit saying “they are spending all our money.” I don’t want your money. I want to financially secure in a job with a family like many other people do. But when the name of the game is debt debt debt and you do your best to minimize the blow by working three jobs, living in paltry conditions, and eating poor diets to get by in college it is an insult to have someone say it was because I was financially irresponsible. Quite the opposite. I went to a state college. My freshman year cost 11k and my senior year cost 22k. Am I to blame for that too? Quite blaming individuals who are being used, because they can be the most financially responsible individuals and still be put in difficult situations.

  67. Here is where I am at a loss….I got my elementary ed degree in 02 and since then have earned a 3 masters. Curriculum and Instruction, Administration and Leadership, and Classroom Technology. I have racked up over 139,000 dollars in student loan debt. As a 6th grade teacher right now I thought this plan would be great since my meek salary is only 39k. But since I got married, filed jointly, and have to also use my wife’s salary ( but can’t include her student loan debt in the mix) my montly payment is 995? Huh? Does this sound like help?

  68. For those of you saying ‘wow, I wish I would have known about this’: There’s no way you could have… the program is new—less than 36 months old legislatively. For those of you who now regret being ‘frugal’: there’s always graduate school—-a PhD at a good school can run up a nice tab over 5 years….. pay ~$225/mo. for 10 years teaching at a small college, then Uncle Sam wipes out the remainder—then move to corporate for 80K a year and retire in 15 more years.

  69. Tiffany says:

    I wouldn’t have put that gremlin in my purse lol! I’ve been struggling with student loans for awhile now. I have to look into IBR.

  70. haha, this is awesome.

    I’m graduating from med school with 350k in federal loans. Will be entering neurosurgery residency (7 years long) after which I plan to do a spinal surgery fellowship (add a few more years); and won’t be making any loan payments either because I’ll just drawdown my AGI by maxing out my 401k and roth contributions from my residency income (my girl will pay for expenses and she files separately). By the time I’m done with training (at nonprofit hospitals that qualify for public service loan forgiveness), I’ll have all my debt wiped out, and walk right into a sweet job.

    I guess it’s a good thing I maxed out my borrow during med school, to take sprint break trips to Disney and Europe, and to make the mortgage payments on my condo. ;)

  71. Rush,

    Roth IRAs do not reduce your AGI. You would have to contribute to a traditional IRA. Thanks for your post though, it is fantastic advice for anyone who is thinking about IBR or ICR.

  72. The idea that the tax payers pay to forgive the student loans is pure nonsense. It was originated and perpetuated by those who would profit by the feedback from those who believe it.

    If you make payments on your loan and at some point find you can no longer continue making those payments you will need IBR. You have paid a lot of interest on your loan and that money is funny money. It is the profit the lender makes on the loan. If you default the government pays the lender, but, any further payments you make go to the government. They don’t go to the lender. The taxpayers are made whole again.

    If you default the lender will add a 23.8% “collection fee” to your account twice a year. That fee plus the interest added puts your cost at close to 36% a year for the loan. That “collection fee” is nothing but paper work. It is not a fee, it is a penalty. It far exceeds the cost to collect a defaulted loan. It is non-existent money that is pure profit for the lender if they collect the full balance of the loan.

    Those students who have private loans are in a much better situation than those who have federally guaranteed loans. They have far more options and much better protection for their assets available to them.

    Federally insured loans only protect the lender who does and will continue to make huge profits from student loans.

    The cards are stacked against the students.

    The fox is watching the hen house.

  73. I’m a medical student incurring massive amounts of debt, ~300k. By the time I would repay this under the traditional system, I would have paid about 3 times that amount back. Under this system, I can probably expect to pay back only double the amount with the rest being forgiven. My interest is ~25k a year. I don’t really consider this taking advantage of the system. Hey, the government just made 300k off of me to go to school. It lowers my loan repayments (especially in residency when I’m going to be struggling) and it still benefits the government.

    A few points:
    1. Few people who graduate college would want to make so little as to have this program substantially benefit them.
    2. I believe it’s well documented that student loan lenders, now the federal government for many student loans, recoups a net profit on student loans.

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