http://www.nytimes.com/2015/08/15/your-money/revised-program-will-reduce-student-loan-repayments.html?smid=fb-nytimes&smtyp=cur&_r=0
NY Times Article link in case you missed it, states that the plan known as Repaye, for “revised pay as you earn” is based on the “pay as you earn” repayment program. But it’s been revised to be capped at 10 percent of discretionary income and “any loan balance remaining after 20 years of payments will be forgiven, if the students have only undergraduate loans. If they borrowed money for graduate school, the forgiveness comes after 25 years.”
Sounds to me like you can possibly get away with making interest only payment if the loan just goes away after 20 years? That’s as close to debt forgiveness as I’ve seen to date notwithstanding public health and teaching programs.
Yes…but read the fine print…the student will owe taxes on any amount forgiven at the end of that period.
Really…not a free ride.
These are for Federal loans, right? Undergrads can get only a limited amount of Federal loans directly by themselves.
But this program would be a bailout for people who get costly useless grad degrees.
@thumper1 hadn’t thought of that, but yes that’s logical, no one rides for free.
Yes there are taxes, but it is still taking the money from the department of education and the taxes will be paid to the general fund.
Do I understand it correctly that working people make the loans, that is to say it comes from government taken taxes, but then the government forgives much of the loan?
Yes younghoss, that is this government works
The government either directly loans the money to the student or guarantees the money if loaned from the schools. In this program, you sign up to pay a % of your income over a term of 10-20 years, and whatever remains is forgiven by the government. The amount forgiven is usually taxable, so the borrower would pay the taxes on that unearned income.
I don’t know how that is being reported on credit reports either. Usually, forgiven debt is a pretty bad mark on a credit report, because you didn’t pay as agreed, but here you are paying as renegotiated. Still, I bet it doesn’t look good.
This is nothing new. All this particular program does is extend income driven repayment plans to a group of students that did not have qualifying loans for the other 2 income driven plans (PAYE and IBR). It’s not a free pass … payments are based on discretionary income. As income increases, so does the repayment amount. 20-25 years is a long time … if someone earns so little over that number of years that they need to have a significant amount of debt forgiven, the chances that they would have defaulted without this repayment option is pretty darn good. 20-25 years of payments is better than dealing with all the costs associated with default.