But this thread isn’t about undergraduate debt. It’s specifically about the law school debt crisis. Why would we divert our attention to discussing undergraduate loan default in a thread in the Law School forum about the law school debt crisis?
No. Prevalence in and of itself doesn’t make something more worthy of resources or more important. The common cold is a lot more prevalent than the flu or HIV, but more resources go into preventing and treating those because the consequences are far more severe.
On topic,
The people who are making the decisions to borrow the money are not lawyers at the time they make the decision. Often, they are 21-year-old undergraduates. Does that mean that they can’t be held responsible for their actions? Of course not; by the time you’re 21 and have a BA, you should be able to understand what $150K in debt means - and be able to read the ABA statistics now published by every law school.
What? Grad PLUS loans are indeed designed to be repaid. The loan forgivenness is new, and the vast majority of borrowers will have repaid their debt before they even hit 20-25 years. People who benefit from loan forgiveness are people with a very small salary and very large debt, which is really just a small fraction of borrowers. Let’s take a borrower who borrowed $150K of loans and takes a job out of law school making $75K. Under the old plan, his repayments are capped at 15% of his discretionary income and he has 25 years to forgivenness. Well, IBR projections have him paying off his loans after 20 years and 8 months. Even if he only makes $65K to start out with, the program has him completely repaying his loan (plus $206K of interest) in the 299th month
Under the new rules, his payments are capped at 10% of his discretionary income and he has 20 years to loan forgiveness. Now under that plan, the entire principal balance of the loan is forgiven, but he’s also paid $204K in interest, which is more than the original amount of the loan anyway.
And, most borrowers don’t borrow $150K+ or have such low salaries relative to how much they borrowed.
Still, it’s one of the reasons I’m not a huge fan of the new IBR/PAYE programs as is. I think they encourage students to borrow too much knowing that their monthly payments won’t be affected by the total amount. I think IBR programs should be capped at a certain upper limit, with exceptions for medical and allied health programs.
