<p>LongPrime,
Your posts have been so cryptic and unspecific that even after several of us have asked for clarification, it has been impossible to decipher what your DS’s situation is. This post (also nearly undecipherable) indicated to me that you agreed with the idea of never paying off student loans: </p>
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<p>We understand taking advantage of the interest-rate spread. It makes sense, so long as you are confident that your investments are secure indefinitely. I’m happy to hear that you/DS do in fact, plan to pay off the loans. I would really like to hear about JA’s plans for paying off his.</p>
<p>">>It makes him look like an entitled ingrate.<<</p>
<p>"Yeah, the tone comes across as “I played the system for all it was worth. And my life has turned out great. I got a great education and, except for this trivial monthly spare change that I toss them, I don’t have to pay the loan back. (You taxpayers probably do, but that’s of no concern to me.) Isn’t it all great?”</p>
<p>See, so either some of you are reading too much into this, or I’m reading too little. I don’t see that he is saying that at all. And he’s not saying that he won’t repay his loans. It sounds like he is on a temporary 0% interest rate program that he’d like to extend another year, that doesn’t last forever, it is just a brief respite. Whether he should be extended will be up to the bank. He says:</p>
<p>“I have not repaid my loans. I have approx. $90k remaining. My point in letting you know where I am now is that I have put myself in a position to be able to pay the loans off whereas most students with large amounts of loans are having trouble just putting themselves in a position to pay them off.”</p>
<p>I haven’t read about the testimony, so I don’t feel acrimonious about that, and I hate any hint of entitlement. But just based upon what he has written, it seems to me that he is doing the responsible thing for his family, it was probably a great investment, that he will soon start to pay down. But it doesn’t sound to me like this guy is trying to ditch them. Our current president and his wife (multi-millionaires of course) claim to still be paying off their student loans, and they’re 50 or so? Student loans shouldn’t last forever, there should be a quicker repayment plan/lower interest rate required so we taxpayers get our investment back.</p>
<p>Presumbaly they are paying taxes on an income of $150K and that’s
something. They’ve also paid sales taxes on the furnishings and
appliances and property taxes for the house so it’s not a scot-free
thing.</p>
<p>Did he really play the system for all it was worth?</p>
<p>Our two kids are enjoying public educations which are subsidized by
the state where they go to school. If their parents were in similar
economic positions to the person of interest in this thread, they
would have had the state subsidy and the zero-interest deal and less
overall debt. Which is playing the system more?</p>
<p>The state school approach would also work for wealthy parents that
could pay full fare at privates.</p>
<p>The US higher education system is a maze of subsidies (grants, loans,
tax credits, tax deductions, private companies that receive grants)
and, as individuals, we try to take advantage of what we can. In the
aggregate, it may or may not benefit society or other college student
that need aid or taxpayers.</p>
<p>I personally don’t like debt, even at 0%. I’m getting near 0% for my
interest investments in the US and I’ve had to adapt to that
environment by moving a bunch of things out on the risk curve. All of
the Fed low interest rate stuff is to try to get the banks healthy
again and to encourage risk-taking by savers and investors. Bubbles
are good for the economy. At least the left-half of the bubble.</p>
<p>This person has taken on a risk profile and it may or may not work
out. It probably seems unfair to many of us unwilling to assume that
kind of risk profile but we do have benefits available to us in other
ways too.</p>
<p>It seems to me that the biggest potential hand grenade for the
original poster is if he loses his job. I had a look at his company
and it looks like a private money management company and they usually
don’t tell you any really useful information on their web page as far
as their financials go. The economy is recovering and so are the
markets so he might have a very good career ahead of him with this
company. There are a ton of global economic risks too and a 7-sigma
event could always result in a hiccup with say, counterparty risk,
that sinks a few of these kinds of company. Or there may be MF-Global
type risks. Or they could be the next Fidelity Investments.</p>
<p>Luck is frequently a factor for those that take big risks and you
just may be one of the lucky ones.</p>
<p>I prefer to take smaller risks and am comfortable with smaller
returns. A good nights sleep is a factor in financial returns.</p>
<p>So far, it looks like JA and LP are the lucky ones. The problem, as you and others pointed out, is that there are risks in allowing a $100K or $150K debt hang over your head indefinitely. Losing a job, divorce, a major medical issue, not to mention our volatile financial markets that could wipe out in one day, all the benefit of delaying loan payoff. If you’ve got the equivalent of your $150K loan balance sitting in an account earning a guaranteed rate, say 1% higher than your loan balance, you are probably ok. But you will only be ahead about $15K after carrying the debt and the risk for 10 years.</p>
<p>“These statements are not consistent with having a plan to pay down his loans. Many of us asked JA for more details, but he stopped posting.”</p>
<p>I don’t think many people would pay off their low/0% interest rate student loans before buying a house. Especially since these student loans can go on for decades, and sometimes buying a house makes financial sense. Sure, there are risks having a large debt hanging over you, but as long as the interest rate is low, I’m paying down the higher rate loans or investing the money (if I can get a better payout). But certainly the job market is always a risk. I hate debt, it makes me uncomfortable, and we generally only carry mortgage debt. Which is at such a low rate, it’s hard to consider paying extra on it.</p>
<p>Note that as long as the $ he puts into the IRA is a small enough amount to qualify as a deduction of his adjusted gross income, it reduces his income and thus isn’t included for purposes of calculating his repayments. Maybe 529 plans get similar protections --I’m not sure. </p>
<p>Please understand that I believe people should pay back their loans. </p>
<p>Until October 2005, if you went bankrupt, private student loans were discharged. Now, they aren’t. In most respects, they are treated like federal student loans. If you don’t repay them, your salary will be garnished. </p>
<p>Lets say you borrowed money for college. You defer making payments until you finish medical school. Then you go for a plan like JA’s because while you’re doing your residency, you can’t make those loan payments. Finally, when you are 10 years out of college, you start paying down those loans. </p>
<p>re. comment #182: our president is NOT currently still in repayment for his student loans, nor is his wife. they repaid them while in their late 30s/early 40s. during the 2008 campaign, they mentioned that the revenue from his best-selling autobiography enabled them to pay off the debt. so no, YOU’RE not on the hook for their student loan debt. </p>
<p>more college confidential misinformation that gets trotted out as though it’s a fact.</p>
<p>Ah, that’s good to know calimami. The campaign talk starts running into a blur from year to year. Though it is sad that people are having to pay off student loan debt into their forties. Of course, I’d much rather be on the hook for their student loan debt than the trillions of dollars of national debt from spending more than we bring in, but that’s an entirely different argument :)</p>
<p>Apparently I was off by a couple of years on the presidents repayment plan. Is that really such a high level of misinformation?</p>
<p>I’m all for allowing people to make their own decisions about how they spend their money, so long as they are responsible.</p>
<p>In JA’s case we are talking about a $78K unsecured, non-dischargeable loan that has ballooned to $150K in 5 years (interest + wife’s debt). He is not currently paying down any of the principal, and it looks like he’s got a temporary deal on the monthly payment. As Jonri pointed out, it is unlikely that the principal has stopped accumulating interest. At 3%, he needs to be paying $1450 per month to pay off the loan in 10 years; otherwise at that rate, the balance will continue to accumulate to the tune of $4500+ per year.</p>
<p>On the one hand, JA claims he has put himself in the position to pay off the loan, but then he says he cannot afford to pay it off, even though he has a great job, has purchased a home, and has a child (which means either his wife quit working or they need to pay for childcare).</p>
<p>I think he owes it to us to explain his plans for paying off the loan, in part because it includes federal taxpayer funds. If the truth is that these huge student loans are not a big deal, then that needs to be addressed, so that we can put to bed the Student-loan-crisis falsehood.</p>
<p>Well, it was not my intention to say something factually incorrect by a couple of years, but one year blends into the next and into the next, and before you know it twenty years have passed. I realize there is all sorts of misinformation floating around on all sides, on every issue. But in this case, I seem to remember it was just a little while ago that the president was commiserating on the difficulty of paying off student loans and remarking that him and his wife still had theirs. Seem like just yesterday. Then again, seems like just yesterday my oldest was curled up on my lap, the size of my little dogs. But today he is legal to drink.</p>
<p>I had my 4% federally guaranteed loan as long as they told me I could have it on THEIR advice that I just make the minimum $90 payment every quarter so that I could build a credit history. At the time, I had a well-paying full-time job offer in hand that would start as soon as I wanted it to, the amount of the loan in my savings account, and low to no living or moving expenses.</p>
<p>It seemed ridiculous to me, but they told me I could save off the higher interest in my savings account while I built a credit history. It took many years paying off the loan on a quarterly basis that they told me to do, but it made some sense and I was able to sleep well at night knowing I had the funds in the savings account to pay it off in full whenever I chose.</p>
<p>It is one thing to say that, for existing debt, the lowest interest rate debt should be the lowest priority.</p>
<p>It is quite another thing to say that one should take on more debt (even low interest debt) by buying things that may be unnecessarily expensive, such as going to a school which is a lot more expensive in net cost than a “state school” that is as good or better (BU’s list price for four years is $224,000, while University of Minnesota’s out of state list price for four years is $116,000; it would take a lot of grants and scholarships to bring BU’s net cost down to UMN’s net cost).</p>
<p>Bay, I am giving important leads for people to investigate and explore. Currently some parents who are participating/reading this thread have taken out student loans and no idea on the outcomes when payback comes. They need to know. </p>
<p>This is important for everyone. JA’s and DS student loans are costing YOU a lot of money and more than the loans are costing us (How’s that for being cryptic.) I want you to do some background reading so that you have some understanding on where I am coming from. If I told you the answers directly, I run the possibility in that you won’t believe me or what I said applies to everyone and everytime-It doesn’t.</p>
<p>Ok, LongPrime, if we assume that JA can extend his loan payments over 30 years at the favorable terms you found available - 2.125% (was this fixed or variable?), then he still needs to start paying $564 per month to pay off the loan.</p>
<p>My takeaway from all of this is that the huge loans are really not that big of a deal, so people need to quit complaining. The colleges are in a good place with their tuition rates.</p>
<p>Quit focusing on what JA, DS, and takers of Stafford/PLUS/consolidation loans, 2001-2006.</p>
<p>It is not what we are paying but what YOU, Taxpayer are paying for us to maintain these loans. Figure out why the law was change at the end of 2005, first of 2008, and first of 2010.</p>