^^^ reminds me of the old saying that if you owe the bank $1,000,000 and can’t pay, you’ve got a problem, but if you owe the bank $100,000,000 and can’t pay, they’ve got a problem.
She’s a teacher, with a PhD and 1 1/2 years of Law School. She’s no dummy! What the heck was she thinking?
I don’t think she has the PhD.
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Ms. Kelley has one possible escape route: a federal loan forgiveness program that caps her payments as a percentage of her income and erases her debts if she logs 10 years of service in the public or nonprofit sector. (For today’s students, income-based repayment systems are helping lift the burden of debt.) But that would still mean a decade of what she describes as “futile” payments that won’t even cover her monthly interest expenses, leaving nothing to put away for retirement. President Obama has proposed capping the amount of debt that can be forgiven at an amount far below Ms. Kelley’s outstanding balance, which would cut off future debtors in her situation from full relief.
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What is the % of income???
I don’t know why she thinks the payments for this forgiveness program is futile. If she pays for 10 years, and works in an approved job, then her fed loans erase.
I don’t think the Plus Loans fall under this forgiveness program.
One of my coworkers continues to take out Plus loans for his kids. He has two in college and the third one will go next year.
He just intends to work until he dies. He has no hope of getting out of that debt. Ever. And he won’t even try. He will plod along but seems to intend to die with the loans not paid off.
He also has a large mortgage and recently bought a new car. From the many conversations I’ve had with him, I think he is very likely up to his eyeballs in debt.
It’s a weird approach to life.
@mom2collegekids: PLUS loans are eligible for PSLF loan forgiveness. As a teacher she can also go for the teacher loan forgiveness, but that’s relatively paltry.
To be more specific: Federal Direct PLUS Loans. See http://www.finaid.org/loans/publicservice.phtml
Now that I see the article, I can see what all she did to get herself in such a big hole.
W/O making any payments, the principal she borrowed totaled $143,436, but from the start (1990) to Sept 2015 had the interest add up to $266,564 with the whole ball of wax at $410,000. They have set her up with monthly loan payments of $2,750 stretching for 30 years (and she is 48 now). “Over the next 11 months, Ms. Kelley will accumulate more in interest charges than she borrowed for her entire undergraduate degree. She would like to go bankrupt, but federal law all but precludes that method of discharging student loans.”
The 3 semesters of law school after finishing her degree in English ($26,000), $37,000 for the law school, had her debt at that point principal and interest $68,518 at 8.25% interest. So between 1994 and 1999 when she finished her teaching degree after the law school attendance, she continued with graduate school/child care costs 1999 to 2004 (for higher salary, the additional graduate work - she didn’t realize that for 14 years she wasn’t paying on her loans at all and her delay built up more to pay off, even with graduate degree pay). By 2004, she had borrowed $123,978 principal, but with interest, by 2005 her total was $194,603. YIKES! Way more than probably her home value! She was about 32 at that time if she started college in 1990 at age 18, and with four children.
You would think the huge numbers would bother her - somehow I think she thought she and her H in Laredo TX with construction industry could ‘catch up’. No, they had home foreclosure with the recession and they lost their home in 2008 (I wonder how much their home loan was?)
The brief enrollment in the PhD program ($7,458 loans) - but didn’t finish that either - I guess she saw she wasn’t capable to have that pay off due to her financial situation and needing to work FT? Her move back to MO? Divorce and contentious child care fight with ex-husband.
The $2,750/mo loan payment would probably take a very high percentage of what she would make as a teacher take home pay (if at about $50,000/year pay).
She can never retire unless she becomes totally disabled and the debt is ‘forgiven’, but if her social security is garnished…
With UG, there are student loan caps - that keeps most students out of this big trouble.
All the graduate/law school and deferring payments Ms. Kelley did for 25 year had the principal and interest get way, way, way out of control. If in 2004 she started aggressively paying on the loans (at that point $194,603), and she could have stayed married, if they didn’t take out a home mortgage, lived lean, and had most of her paychecks going to the student loan - say $40,000/year, she could get out over time. Her ex-husband had student loans too. Instead, the principal and interest grew from 2004 to 2015, an additional $215,397!
I am sure there are worse situations out there, and many in the same boat.
Articles I have seen written with student taking out a lot of loans with private university through graduate degree, then realizing how much out of their paycheck the payments will be on the $200,000 principal and interest. Young enough people end up working extra jobs.
Hope her Ph.D. isn’t in math or business…
lol ^^^ not likely…and she doesn’t even have the PhD. She left the program.
She left law school. she left grad school, and she lefty her checkbook behind… for 25 years. Not sure I want her teaching young minds.
^^^ at least I hope she’s not teaching “personal finance” or Econ.
I’m surprised she felt it was fine to self-finance for a PhD program. Even back in undergrad Profs and older alums who were PhD students felt it was necessary to warn us to NEVER self-finance for a PhD. If one gets no funding…treat it like a “soft rejection” and move on.
I’ve even had a Professor who was partially funded warn us undergrads to not attend the university where he got his PhD from because even with that funding he ended up with a large amount of debt because that department didn’t have the finances necessary to fully-fund more than a tiny minority of the PhD students it admitted each year. And the U in question is a highly regarded public U which was at least within the top 15 programs in his subfield.
The vast majority of folks I knew who did PhD and/or finished either were fully funded by the department/outside grants or had employers footing the entire cost.
I wonder if it was an EdD. Not sure if those are funded or not.
It is likely to be an EdD considering she was already a teacher when she started the program. As for funding, it varies by university and the Ed school’s finances.
However, most folks I knew who did EdD or sometimes even M.Eds were funded by the school…half or more…
An older college classmate received a 50% scholarship to attend a top 3 Ed school for an M.Ed and a former roommate/friend received higher levels of funding for the same degree from the same Ed school.
She probably was attending a TAMU campus near her home (there are 7 campuses total) - and in-state was probably a bargain compared to what she had taken out. I got my Master’s at TAMU - earlier when it was even cheaper - 1980 to 1982, and the most I paid for 4 graduate classes (12 hours) including all fees for a semester was $212. I had a graduate assistantship (paid $500/mo for the part time work). She may have been trying to take courses towards a EdD while teaching, while trying to maintain her household including 4 kids and a H in construction.
Returning to MO and working for a Catholic school - she could be higher paid at public. Plus by that time she was ‘awake’ by the depth of her debt, but now feels ‘helpless’ and w/o hope. They will garnish everything they can at this point.
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They will garnish everything they can at this point.
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I suspect things like income tax refunds will be “garnished,” but have we heard that regular income gets garnished for unpaid student loans? I’m not saying they do or they don’t. I’m just not familiar at all with this. I only casually know of a girl who graduated around 2010 with full Stafford loans, and she’s not made any payments. She was offered some sort of reduced payment options around 2013, but she told me that she doesn’t earn enough to even make those income-adjusted payments since (in her words) all of her take-home pay is already needed for current expenses. I don’t think her wages have been garnished even though she hasn’t paid in 5 years and has had not returned to school to delay payment as this teacher repeatedly did.
BTW…I don’t understand how this teacher managed to go 25 years without ever paying. Even with her undergrad, law school, PhD efforts, there still should have been a number of years when she wasn’t going to school. Was she actually “in school” for more than 10 years?
If the story is correct, she’s never been in default, just constant deferments. They won’t garnish anything until she’s been in default, and that will take at least 9 months from when she misses her first payments. I assume she’ll go to a PAYE, or a REPAYE program (that includes loans taken before 2007), pay 10% of her above poverty level income (so really a lot less than 10%) and have the government loans forgiven (but not her daughter’s Plus). That will leave her with the private loans, which she could default on.
I get the impression the government loan amount can be forgiven but not the interest?
Ms. Kelley has deferred her payments for the max time the law would allow (article says up to three years allowed).
The article says her final forbearance would expire in 16 months - and “…when you have the Internal Revenue Service. It is both difficult and illegal to hide money from the federal government, which can and will follow you as long as you live.”
I don’t think the IRS is working as well as it use to, but I am sure the enforcement provisions when you owe them money is working very well. And you better respond to their letters when they say you owe them money.
IDK about the government backed Parent Plus loan being bankrupted away - no private lender would let her borrow w/o the gov’t guaranteeing. So that would be added to what the government includes in her forbearance amount.
For the student described in post #35 - the interest is continuing to climb, and eventually she will end up in forbearance too.
Maybe some of these people think the laws are going to change - however I think enough people are sick and tired of paying their own bills and not have to pay for the folly of others. And some of the depths of student loans is ‘folly’ - a lot of it is for graduate school. Yes, some get in to it naively, but many people pay for things because they have been naive - time shares for example. I think the majority of people understand that our federal government already is operating in debt, and IMHO student loans are not a debt we as a nation can absorb.
In the forgiveness programs, interest is forgiven too. Private loans (from banks) are not part of the program. Paretnt Plus loans are not part of the program.
The woman in the original story should have been in a repayment status and then her payments (even if they were $0 per month based on a 10% income repayment plan) would have been counted toward a teacher loan forgiveness plan. I think some of her loans were from prior to 2007 so may not have been eligible (although they are now).
But she didn’t do that.
I don’t really see a problem. She was not paying off and (as far as I can see) she is not planning to repay these money.