<p>How much higher, $400,000 vs $200,000–if you are going to med school, $400,000 over 25 years should still be manageable.</p>
<p>Because the value of a person who works one job (teacher, police officer, etc.) isn’t greater than the value of a person who works at any other job (retail, health care, landscaping, construction, etc.).</p>
<p>Then why are some jobs deemed important enough to be paid for by state/federal & local taxes and others…not?</p>
<p>Some people think teachers are so important that although they are already paying for public school, they pay additional money to send their kids to private school.</p>
<p>I have a former colleague who had a professional degree (with loans) who went back to school for a PhD and became a professor. No way does he have the salary he used to as a professional. (A lot of us in higher ed aren’t very well paid). The income-based repayment barely covers interest. So, while I admit it should be unlikely that someone can’t pay in 25 years, it can happen.</p>
<p>It sounds like both of the individuals in the article may have private loans which are not eligible for IBR or loans forgiveness. I think the idea behind the 25 year loan forgiveness is that if you still have loans after 25 years then you’ve obviously had low income, perhaps disability, and it’s going to affect that person’s ability to help educate their own children, save for their own retirement, etc. In the end, the government would likely have to step in via some other, likely more expensive, program. </p>
<p>I view PSLF as a delayed signing bonus. It may not be common knowledge, but many government agencies still have student loan repayment programs which they offer to attract employees. One young guy I know receives $7K/year loan repayment from his federal employer with no strings attached. A decade or so ago, my neices were offered signing bonuses and some annual loan repayment for teaching elementary school in underpriviledged districts. These days they don’t seem to extend this to teachers, although I think the TEACH grant is still in place. Non-profit agencies usually can’t afford to offer such programs and also need to attract health care and other professionals, often at rates that are not as high as they could be making elsewhere and with fewer benefits. But the work they do is essential and is done more cost-effectively than the government could hope to do themselves.</p>
<p>Since only federal student loans are eligible for these loan forgiveness programs, and the borrower must make consistent payments for a number of years and meet other conditions, I just don’t see this as attracting the “free lunch” crowd. My guess is that these programs will prove to be less expensive than budgeted, just as the ACG/Smart grants were.</p>
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<p>Stafford loans for grad students are around $20,500/year and GradPlus loans (up to COA) are also eligible. Under IBR, which many lower paid professionals like teachers would qualify for, payments are capped at 10% of income and can be as low as $0. Remember, loan payments cover the interest portion of the loan first so it can take a long time to amortize the principal.</p>
<p>Just curious…what about the teacher, police officer, etc. who struggled and chose to work to help put themselves through a more affordable school or scrimp and use their savings to pay for their education – they graduate without debt and still are in a low-paying service-based professions whereas the teacher/police officer who took out loans that are “forgiven” somehow manages to come out financially ahead. Am I missing something?</p>
<p>There seems to be a misunderstanding about the way the Income based Repayment plan works.</p>
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<li><p>It is only for your government backed loans. So for an undergrad that is $2700.</p></li>
<li><p>You consolidate the loans, under the IBR plan. AT that time you sign an agreement that the loan servicer will pull your federal tax return every year. </p></li>
<li><p>The loan servicer will use your tax return information to set your payment for the next year. That payment can and will flucuate with your income.</p></li>
<li><p>You MUST make payments for 25 years,although you can pay off the balance early. You can also jump back to the standard repayment plan at anytime.</p></li>
<li><p>At the end of 25 years any remaining balance is forgiven.</p></li>
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<p>This program allows for a number of things to happen. It does allows for the student who goes into a low paying public service job to make payments over time. It also allows for the student who starts a career at a slower pace to have payments that match their current income. </p>
<p>It does not lower your indebtness, and in the long run students on the IBR will pay more in interest than the standard plan (due to the long repayment period).</p>
<p>sk8rmom–so if you qualify to pay “$0” over the life of the loan, does that still mean you are making “payments”? One example they used on that website posted above was a woman making $40,000/year paying off loans for $100,000. Her payments were just shy of $300/month increasing at 4% each year as her salary increases…after 10 years she had $123,898 forgiven in principal and interest. Seems to me the issue isn’t the amount people are taking but how the interest in compounded if you can pay $300/month for 10 years, so $36,000 and still owe more than you took out?? </p>
<p>Moral of the story, don’t take out loans that are more than double what your expected starting salary will be when you graduate from college…</p>
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<p>Yes…but remember to qualify for a $0 repayment amount, your income would have to be MIGHTY low…and to pay nothing it would have to STAY mighty low for the full duration of the repayment period.</p>
<p>Seriously…there are NO free rides. A person who qualifies for $0 repayment is living at or near the poverty level. I’m not sure anyone should be considering getting a college education, taking a lot of loans, and PLANNING to live at the poverty level for 25 years.</p>
<p>PLUS…listen up…that is the way it is NOW…but things could change. Student loan repayment is considered very often. I don’t want to say more because I do NOT want this to turn into a political discussion.</p>
<p>Bottom line…sure…if a person plans to live at or near the poverty level for 25 years, they COULD have all of their loans forgiven. I know my 20 somethings did not want to consider that option at all.</p>
<p>I agree that people would not want to be living at the poverty level but someone else posted that example so I was just wondering how that would be viewed, payment or not??</p>
<p>Like I said in another post, I am not a math person, it still doesn’t make sense for me without looking at a full amortization schedule how the numbers crunch out. I think I will have DH run one for me tonight so I can see the math behind this.</p>
<p>Opps. In my post above I meant an undergrad can rack up $27,000 not 2,700. Forgive me, I am digitally challenged.</p>
<p>At 6.8% interest for unsub Staffords and 7.9% interest for GradPlus loans, compounding interest can be more than the 10% IBR payment (but isn’t always). I don’t think a required payment of 0 would qualify as one of the 120 required monthly payments but would act more as a deferral/forbearance on the loan so that those with incomes at/below the federal poverty limit aren’t forced into default. It wouldn’t matter for PSLF because if there’s no payment required then one probably wouldn’t have had eligible, full-time emplyment during those years. No one has actually qualified for PSLF yet as the 10 year clock has only been ticking since late 2007, so who knows if it will still be around in 2017? Also, the 10% IBR level is also just starting this year (must actually have a loan issued in 2012) so those currently paying under IBR are capped at 15%.</p>
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<p>There are many factors that are included in the IBR calculation including AGI and family size of the debtor (including income from debtor’s spouse if they file jointly), federal poverty limits, etc. so not everyone can qualify for IBR as it won’t always result in a lower payment than the standard 10-year payment plan. But I think the most important part you’re missing is all the years of payments that are required under PSLF and what’s happening there. For example, if the debt-taking student had an IBR payment of $300 a month they still would have made $36K in payments by the time their PSLF kicked in…and that’s assuming they never got a raise which would increase their payments and worked continuously in a qualifying job. But, depending on the initial debt level, most or all of those payments may have been directed toward interest. Finaid.org has loan calculators that show the payments required under IBR and the potential loan forgiveness. </p>
<p>At any rate, it seems that few students can actually manage to put themselves through their own instate public school these days and many of the jobs that qualify for PSLF would also require graduate degrees in order to obtain state licensing. While so much attention is focused on the shrinking affordability of undergrad education, almost none of the spotlight goes to grad school costs. If a student manages to get through all of that schooling by borrowing only 1/4-1/3 of the total cost of their education, they could easily still have loans above $50K range simply because there is very little funding out there for masters level programs other than loans. </p>
<p>And let’s not forget about those who work in positions that require even more of an investment, such as our prosecutors. Or the healthcare professionals who work with our veterans, elderly, and disabled citizens in the non-profit sector? What incentive do they have to take or stay in public service jobs at a significantly reduced rate of pay once they’ve made that investment in their education? Is it really in our best interest to have them leave in order to be able to repay their student loans? Do you want to gamble on there being enough qualified, fully funded candidates for those jobs who are also amenable to public-service? IMO, we need to be able to attract and keep good, experienced public servants and forgiving what amounts to a relatively small amount of loan debt when viewed on an annual basis is not too high a price to pay.</p>