Another reason not to do IBR and why student loans matter!!!

[Aznfarmerboi]

Here is another reason why paying off student loans (after credit card loans and emergency funds) as soon as possible is important,

The federal government recently changed mortgage under-writing guidelines to include the principle student loan balances verse as before, they looked at your monthly payments which can be low due to programs like IBR.

So now, if you owe 300k, they calculate your monthly payment as 3k... Which can disqualify most new grads from a mortgage...

Student loans are not dischargable even if you file for bankruptcy which makes student loans one of the worst loans to have! Use it wisely!


page 233 of the USDA HB-1-3555 handbook.



 Student loans. Lenders must include the greater of one percent of the outstanding loan balance or the verified fixed payment as reflected on the credit report. Exception: Monthly payment amounts listed on the credit report, which are less than one percent of the outstanding balance may be used when evidence from the loan servicer is obtained indicating; 1)the applicant is on a fixed repayment plan not subject to change under the terms of the current agreement and 2) and the monthly payment amount due. Fixed payments have a monthly amount that is not subject to change through the fixed repayment time frame. Income Based Repayment (IBR) plans, graduated plans, adjustable rates, interest only and deferred plans are examples of repayment plans that are subject to change and do not qualify for the exception. No additional documentation is required if a credit report is obtained and the lender can confirm the payment represented is a fixed payment as noted in this paragraph.



FHA's rule states



4) Calculation of Monthly ObligationThe Mortgagee must use the actual monthly payment to be paid on a deferred liability, whenever available.If the actual monthly payment is not available for installment debt, the Mortgagee must utilize the terms of the debt or 5 percent of the outstanding balance to establish the monthly payment.For a student loan, if the actual monthly payment is zero or is not available, the Mortgagee must utilize 2 percent of the outstanding balance to establish the monthly payment.

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[BMBiology]

Do you have a link to this?

 

[Amicable Angora]

Uncle Sam always gets the last laugh

 

[confettiflyer]

These are FHA loans...most pharmacists will not use FHA and will choose conventional lending, which have different standards.

 

[confettiflyer]

Also...why did the OP post guidelines for USDA home loans? No one uses that...seriously.
Check the FHA guidelines...if we're gonna talk GSE/gov't backed home loans.

http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

If a payment can't be established (credit report reads zero payment, or in grace/deferred), then you use 1-2% of the total balance.

Most servicers know this and have mortgage verification letters handy. My student loans on IBR report the IBR payment on the credit report. Only if UW can't establish a payment.

So this is really a non-issue.

 

[confettiflyer]

Edit: I see the FHA paragraph and that info is not of consequence if you can establish a payment.

 

[pezdispenser]

These are FHA loans...most pharmacists will not use FHA and will choose conventional lending, which have different standards.

Fannie Mae (a conventional loan) says the same thing. https://www.fanniemae.com/content/guide/selling/b3/6/05.html

Student Loans
For all student loans, whether deferred, in forbearance, or in repayment (not deferred), the lender must use the greater of the following to determine the monthly payment to be used as the borrower’s recurring monthly debt obligation:

• 1% of the outstanding balance; or
• the actual documented payment (documented in the credit report, in documentation obtained from the student loan lender, or in documentation supplied by the borrower).

If the payment currently being made cannot be documented or verified, 1% of the outstanding balance must be used.

Exception: If the actual documented payment is less than 1% of the outstanding balance and it will fully amortize the loan with no payment adjustments, the lender may use the lower, fully-amortizing monthly payment to qualify the borrower.

 

[confettiflyer]

Fannie Mae (a conventional loan) says the same thing. https://www.fanniemae.com/content/guide/selling/b3/6/05.html

Student Loans
For all student loans, whether deferred, in forbearance, or in repayment (not deferred), the lender must use the greater of the following to determine the monthly payment to be used as the borrower’s recurring monthly debt obligation:

• 1% of the outstanding balance; or
• the actual documented payment (documented in the credit report, in documentation obtained from the student loan lender, or in documentation supplied by the borrower).

If the payment currently being made cannot be documented or verified, 1% of the outstanding balance must be used.

Exception: If the actual documented payment is less than 1% of the outstanding balance and it will fully amortize the loan with no payment adjustments, the lender may use the lower, fully-amortizing monthly payment to qualify the borrower.

Doh my bad, I looked at my docs and realized I had a portfolio jumbo loan, portfolio loans don't have to follow Fannie guidelines.

So $230k student loan balance yields $2300/mo, which means if there's no other debt in play, a pharmacist making $13,700/mo gross can afford a $620k-ish house w/ a 20% down payment at 4% and have room to spare. Assuming that jumbo lender is following fnma.

I fail to see how buying a house > $600k is such a hardship/big deal. Even if you make less, you can mitigate by bringing more cash to the table. This is a DTI issue through and through.

 

[awval999]

You and your California salaries confetti... $13,700/month gross LOL!
$164,000/year. Only in California

 

[steveysmith54]

You and your California salaries confetti... $13,700/month gross LOL!
$164,000/year. Only in California

Not really.... I wish every CA rph can make that much.... If that's the base salary without ot or bonus that's 79 dollars per hour, which is what kaiser rph make essentially. I believe he mentioned that he has a perdiem job, so prolly not just from one job. Most CA rph that I know who work full time are pulling in 125 to 140k in California

 

[SmallCapPharma]

My loans didn't affect my Mortgage loan app from two weeks ago. Was told I could get a 450k house if I wanted. Just graduated in May/2015.

What you should be worrying about is when you are putting every penny towards your loans, but get laid off in 3 years and have nothing to show for it.

With my PAYE plan I can get laid off and have $0 monthly payments even though I have 6 figures in my bank account.

 

[BMBiology]

I sounded the alarm 3 years ago and I received a lot of heat by telling people this:

This is a common theme of BMB's posts - that people with student loan debt can't get mortgages.

I hate to break the bad news to students but when you own $250,000 in student loans, no bank is going to lend you $400,000 for a mortgage. It just doesn't make sense.

Called it~!

A lot of my predictions are become true....from dumping bonds, avoid buying gold to the pharmacy saturation and student loan crisis. Should I take out my crystal ball and make more predictions?

Oh and I just checked...I am in the top 1% based on my age vs income lol

I am just kidding of course. This is a game changer. You have to marry someone who makes good money and doesn't have much student loans in order to buy a decent house in the coastal city of California.

 

[confettiflyer]

Not really.... I wish every CA rph can make that much.... If that's the base salary without ot or bonus that's 79 dollars per hour, which is what kaiser rph make essentially. I believe he mentioned that he has a perdiem job, so prolly not just from one job. Most CA rph that I know who work full time are pulling in 125 to 140k in California

It doesn't matter though....okay let's take a pharmacist making $130,000 a year ($10,833/mo gross) and if FNMA or FHA takes 1% of the $230k loan balance and no other debt = $2300/mo...

That pharmacist can buy a $500,000 house w/ a 20% down payment @ 4% (DTI goes to 45%, max allowable).

Again....can anyone tell me why being stuck buying, at most, a half a million dollar house on a single income in California is such a huge downside? Boohoo, so much white privilege here...darn, I can't buy the $750,000 house without getting married to someone with income. Boohoo.

And you guys....c'mon, seriously, you can:

1) Save more, put more as down payment.
2) Switch to the extended repayment plan which amortizes over the life of the loan (the FHA requirement) and $230k @ 7% interest extended repayment plan is $1600/mo or so. This ups your max house affordability to $650,000 (same parameters above).
3) Or just go find a lender that portfolio loans the mortgage (conforming or jumbo) and uses common sense/doesn't follow FNMA/Freddie/FHA GL's.


You guys are just ******ed. Run the damn numbers.

 

[confettiflyer]

I sounded the alarm 3 years ago and I received a lot of heat by telling people this:





Called it~!

A lot of my predictions are become true....from dumping bonds, avoid buying gold to the pharmacy saturation and student loan crisis. Should I take out my crystal ball and make more predictions?

Oh and I just checked...I am in the top 1% based on my age vs income lol

I am just kidding of course. This is a game changer. You have to marry someone who makes good money and doesn't have much student loans in order to buy a decent house in the coastal city of California.

Dude, no you didn't. I have a ****load of debt and I got a mortgage. So did my colleagues. You're not an underwriter, you're taking the OP's post like gospel... you sound like Donald Trump, lol.

 

[confettiflyer]

You and your California salaries confetti... $13,700/month gross LOL!
$164,000/year. Only in California

I'm like in the lower third tier of hourly rates at my hospital, and I'm in an expensive location... c'mon!

 

[BMBiology]

Dude, no you didn't. I have a ****load of debt and I got a mortgage. So did my colleagues. You're not an underwriter, you're taking the OP's post like gospel... you sound like Donald Trump, lol.

Yeah I can be obnoxious at time but it is a way for me to get my message across. How am I going to stand out?

I am sure some people avoided pharmacy school after reading my posts. I saved their career! I didn't gain anything from it. It is just my way of contributing to our society. Just remember to name your first kid after me. Let's name him or her "BMB" or just "B".

 

[BMBiology]

Why are you so adamant about this? I don't know why a bank would treat these two borrowers the same:

- borrower A who has $100 k in student loan and is on the standard 10 year plan with $900 monthly repayment
- borrower B who has $250 k in student loan and is on IBR 25 year plan with $900 monthly repayment.

Obviously borrower B is not as credit worthy as borrower A.

 

[confettiflyer]

Why are you so adamant about this? I don't know why a bank would treat these two borrowers the same:

- borrower A who has $100 k in student loan and is on the standard 10 year plan with $900 monthly repayment
- borrower B who has $250 k in student loan and is on IBR 25 year plan with $900 monthly repayment.

Obviously borrower B is not as credit worthy as borrower A.

It doesn't. Borrower B is treated using the 1% rule as having a $2500/mo payment. Creditworthiness has nothing to do with income and cash flow, but i guess that's semantics.

But that's not my point. See my detailed post above why a) it doesn't matter unless you're trying to buy a $700k house not a $500k house, b) this is privileged people whining, c) there are ways to mitigate.

My point is all this fear mongering and misinformation that "oh no! you're on IBR! no house for you!" more like "oh no! you're on IBR! you'll have a half million dollar house not a 3/4 million dollar house, boohoooooooo."

 

[Aznfarmerboi]

It doesn't. Borrower B is treated using the 1% rule as having a $2500/mo payment. Creditworthiness has nothing to do with income and cash flow, but i guess that's semantics.

But that's not my point. See my detailed post above why a) it doesn't matter unless you're trying to buy a $700k house not a $500k house, b) this is privileged people whining, c) there are ways to mitigate.

My point is all this fear mongering and misinformation that "oh no! you're on IBR! no house for you!" more like "oh no! you're on IBR! you'll have a half million dollar house not a 3/4 million dollar house, boohoooooooo."

My point to this is 1. The government can and will always change the rules. Up until mid of 2015, it was based off monthly payments.

And 2. Even if it is for FHA, they set precedents for conventional loans, and thus regulate banks directly and in directly as a tool of the government...

There is a complex formula which calculates your affordability which factors your total monthly payments and requires you to have a certain amount remaining so that they are not taking on too much risk.

Using any monthly affordability calculator, based on payments (2500+ Misc expenses), at 1k misc expenses can afford 360k, and at 1.5k misc expenses 280k.

If one idiotically preaches or themselves pay minimum in IBR and allows that balance to go up because you are barely scratching the interests on the principle in hopes of getting loans forgotten and dealing with the tax time bomb, can look at their student loans going up to 300k, 400k, and upwards in a few years... Which will most definitely not qualify them for much housing (based on Affordability calculator).

And affording it is not the same as the bank approving it which always have stricter requirements... Despite what the loan officer tells you because their job is to sell loans...

 

[Aznfarmerboi]

It doesn't. Borrower B is treated using the 1% rule as having a $2500/mo payment. Creditworthiness has nothing to do with income and cash flow, but i guess that's semantics.

But that's not my point. See my detailed post above why a) it doesn't matter unless you're trying to buy a $700k house not a $500k house, b) this is privileged people whining, c) there are ways to mitigate.

My point is all this fear mongering and misinformation that "oh no! you're on IBR! no house for you!" more like "oh no! you're on IBR! you'll have a half million dollar house not a 3/4 million dollar house, boohoooooooo."

My point to this is 1. The government can and will always change the rules. Up until mid of 2015, it was based off monthly payments.

And 2. Even if it is for FHA, they set precedents for conventional loans, and thus regulate banks directly and in directly as a tool of the government...

There is a complex formula which calculates your affordability which factors your total monthly payments and requires you to have a certain amount remaining so that they are not taking on too much risk.

Using any monthly affordability calculator, based on payments (2500+ Misc expenses), at 1k misc expenses can afford 360k, and at 1.5k misc expenses 280k.

If one idiotically preaches or themselves pay minimum in IBR and allows that balance to go up because you are barely scratching the interests on the principle in hopes of getting loans forgotten and dealing with the tax time bomb, can look at their student loans going up to 300k, 400k, and upwards in a few years... Which will most definitely not qualify them for much housing (based on Affordability calculator).

And affording it is not the same as the bank approving it which always have stricter requirements... Despite what the loan officer tells you because their job is to sell loans...

This is to warn future students to choose wisely on their paths....

I paid off my student loans in 4 years and never regretted it. To have a six figure sum that is not dis-chargeable is bad. Even if you are disabled, the government will garnish the crap out of it. It stays with you until you die.

I'm happy I graduated during the end of the golden years... 30k sign on bonus, lots of over time with free hours if I pick up extra shifts, low tuition (Average was 100k)... Great stock market run from 09 to now... And making 180-200 k without trying now.

But I'm bragging. Don't mind me.

 

[BMBiology]

It doesn't. Borrower B is treated using the 1% rule as having a $2500/mo payment. Creditworthiness has nothing to do with income and cash flow, but i guess that's semantics.

But that's not my point. See my detailed post above why a) it doesn't matter unless you're trying to buy a $700k house not a $500k house, b) this is privileged people whining, c) there are ways to mitigate.

My point is all this fear mongering and misinformation that "oh no! you're on IBR! no house for you!" more like "oh no! you're on IBR! you'll have a half million dollar house not a 3/4 million dollar house, boohoooooooo."

You are not going to find too many decent houses in a decent neighborhood for < $500 k within 30 miles of the coast in California.

I have always said it before - IBR is a crappy deal. It encourages students to over borrow. It encourages the schools to keep on raising tuition. It encourages graduates to take it easy when they should be aggressive and pay it off while they are still young and don't have a family to support. How are they going to pay it off when they are 35 years old and have two kids to feed? That window of opportunity is gone and they will have this debt around your neck well until their late 40s/early 50s, just when their own kids are about to start college.

If my monthly repayment goes up if I work overtime or if I made money from the stock market, then why would I do it? It is like the government taking his share of everything I do. It doesn't matter that I don't have to pay anything if I got laid off. It doesn't stop the interest...does it?

Look, someone with 300 k in student loans shouldn't be buying a house anyways. If you are smart, you would refinance your loans to a lower rate and pay it off within the first 5 years. Get this monkey off your back and move on with your life. And if you don't? I will lend you my crystal ball and let you see your future.

 

[steveysmith54]

You are not going to find too many decent houses in a decent neighborhood for < $500 k within 30 miles of the coast in California.

I have always said it before - IBR is a crappy deal. It encourages students to over borrow. It encourages the schools to keep on raising tuition. It encourages graduates to take it easy when they should be aggressive and pay it off while they are still young and don't have a family to support. How are they going to pay it off when they are 35 years old and have two kids to feed? That window of opportunity is gone and they will have this debt around your neck well until their late 40s/early 50s, just when their own kids are about to start college.

If my monthly repayment goes up if I work overtime or if I made money from the stock market, then why would I do it? It is like the government taking his share of everything I do. It doesn't matter that I don't have to pay anything if I got laid off. It doesn't stop the interest...does it?

Look, someone with 300 k in student loans shouldn't be buying a house anyways. If you are smart, you would refinance your loans to a lower rate and pay it off within the first 5 years. Get this monkey off your back and move on with your life. And if you don't? I will lend you my crystal ball and let you see your future.

IBR is an example of everything that is wrong in the country. People who are capable of paying back their loans and have great income potential are getting their loans "forgiven"....I pray that somehow we get a republican president who can put a stop to this.

 

[confettiflyer]

My point to this is 1. The government can and will always change the rules. Up until mid of 2015, it was based off monthly payments.

And 2. Even if it is for FHA, they set precedents for conventional loans, and thus regulate banks directly and in directly as a tool of the government...

There is a complex formula which calculates your affordability which factors your total monthly payments and requires you to have a certain amount remaining so that they are not taking on too much risk.

Using any monthly affordability calculator, based on payments (2500+ Misc expenses), at 1k misc expenses can afford 360k, and at 1.5k misc expenses 280k.

If one idiotically preaches or themselves pay minimum in IBR and allows that balance to go up because you are barely scratching the interests on the principle in hopes of getting loans forgotten and dealing with the tax time bomb, can look at their student loans going up to 300k, 400k, and upwards in a few years... Which will most definitely not qualify them for much housing (based on Affordability calculator).

And affording it is not the same as the bank approving it which always have stricter requirements... Despite what the loan officer tells you because their job is to sell loans...

Misc expenses don't count for BE DTI, only proven credit report #'s. Never has counted, ever. If trade lines are an issue, pay off your car before you buy a house, simple. Sell to a relative, whatever.

Gov't changes rules? I guess. But that's such a cop out answer. The Fed can raise fed funds to 150 bp's if it wants. Trump can EO all the Muslims to camps.

The rule was never monthly payments only, the rule had flexibility and total balance could be used depending on level of deferment.

Basically...choosing whether to go pursue medical or pharmacy school and taking out loans based on an obscure mortgage rule that can change that might affect someone 10 years after they start a program, and is generally defeat able, is such a minor consideration it's laughable to even discuss it.

I'm pretty much the biggest debtor here and I managed to get a loan no problem. But n = 1, so I give you that.

 

[confettiflyer]

IBR is an example of everything that is wrong in the country. People who are capable of paying back their loans and have great income potential are getting their loans "forgiven"....I pray that somehow we get a republican president who can put a stop to this.

It was a republican president who signed it into law. God Bless George W. bush!

I'll send you my PSLF Bill.

 

[confettiflyer]

You are not going to find too many decent houses in a decent neighborhood for < $500 k within 30 miles of the coast in California.

I have always said it before - IBR is a crappy deal. It encourages students to over borrow. It encourages the schools to keep on raising tuition. It encourages graduates to take it easy when they should be aggressive and pay it off while they are still young and don't have a family to support. How are they going to pay it off when they are 35 years old and have two kids to feed? That window of opportunity is gone and they will have this debt around your neck well until their late 40s/early 50s, just when their own kids are about to start college.

If my monthly repayment goes up if I work overtime or if I made money from the stock market, then why would I do it? It is like the government taking his share of everything I do. It doesn't matter that I don't have to pay anything if I got laid off. It doesn't stop the interest...does it?

Look, someone with 300 k in student loans shouldn't be buying a house anyways. If you are smart, you would refinance your loans to a lower rate and pay it off within the first 5 years. Get this monkey off your back and move on with your life. And if you don't? I will lend you my crystal ball and let you see your future.

You're not gonna find a decent house for <$1MM in coastal California...even the pharmacist with no debt can't afford on Newport Coast or La Jolla.

IBR works for people who know how to maximally take advantage of Gov't programs and for those where the #'s work...it isn't for everyone.

People just need to run their numbers, which is what I've said all along with home loans...not take the OP as gospel that IBR = bad for loan. IBR is bad for loans the way having a car payment is bad...in that, it's usually not a big deal, has minor effect, and is defeatable (example for the car loan: sale-leaseback).

 

[confettiflyer]

This is to warn future students to choose wisely on their paths....

I paid off my student loans in 4 years and never regretted it. To have a six figure sum that is not dis-chargeable is bad. Even if you are disabled, the government will garnish the crap out of it. It stays with you until you die.

I'm happy I graduated during the end of the golden years... 30k sign on bonus, lots of over time with free hours if I pick up extra shifts, low tuition (Average was 100k)... Great stock market run from 09 to now... And making 180-200 k without trying now.

But I'm bragging. Don't mind me.

:slow clap:

You're like those annoying baby boomers that wonder why student loans even exist and why a few hours a week waiting tables doesn't pay for tuition. Hahah.

 

[BMBiology]

You're not gonna find a decent house for <$1MM in coastal California...even the pharmacist with no debt can't afford on Newport Coast or La Jolla.

I am not talking about buying a decent house within a mile radius of the beach. I am talking about within 30 miles of the beach. That is hardly a "coastal" city.

If you want a decent house within a decent school district (not good, just decent) and within a low crime neighborhood, expect to pay more than 500 k. Look it up in Zillow.

 

[confettiflyer]

I am not talking about buying a decent house within a mile radius of the beach. I am talking about within 30 miles of the beach. That is hardly a "coastal" city.

If you want a decent house within a decent school district (not good, just decent) and within a low crime neighborhood, expect to pay more than 500 k. Look it up in Zillow.

Okay I know you're talking about 92612-92618 (but IUSD is one of th besr school districts)...then fine, our fictional pharmacist can't buy one of the most sought after zip codes in OC.

Boohoo.

But you know my example using stevey's conservative salary numbers assumed no mitigation strategies for the 1% rule, this isn't grounded in reality, right?

So reality is I can totally be your neighbor with this level of debt.

Plus million dollar home = jumbo loan = no secondary market = no GSE = portfolio loan and thus no 1% rule with most investors. Done and done.

Hello neighbor!

* I just realized this is another incentive to over borrow...over borrow = jumbo loan = Less stringent student loan requirement on loan guideline.

 

[BMBiology]

^ we just come from a different school of thoughts.

BMB: keep debt low, save and wait for opportunities!

Confettiflyer: keep debt high, let the government take the risk and spend, spend, spend!

 

[confettiflyer]

^ we just come from a different school of thoughts.

BMB: keep debt low, save and wait for opportunities!

Confettiflyer: keep debt high, let the government take the risk and spend, spend, spend!

I love you, man!

 

[owlegrad]

I love you, man!

It's time to update the avatar. Please.

 

[pezdispenser]

^ we just come from a different school of thoughts.

BMB: keep debt low, save and wait for opportunities!

Confettiflyer: keep debt high, let the government take the risk and spend, spend, spend!

I think you're spot on. I'm in the debt averse camp. I wouldn't be able to stand the thought of being $230k student loans + $400k mortgage = $630k in debt! That level of debt is pretty much unprecedented. But I'll try to paint a picture:

$6,000 typical RPh monthly take home pay

$1,000 IBR. This doesn't even cover the $16k+ interest per year, so your loan balance will keep going up until you're 50 years old and get hit by the $150k+ tax bomb.
$2,500 mortgage, taxes, insurance
$500 utilities, TV, internet, cell phone
$500 car, insurance, gas, maintenance, repairs
$500 groceries, household consumables
$1,000 401k (net reduction on take home pay). Won't quite max out the $18k.
=====
0

And that doesn't even include any eating out, entertainment, vacations, gifts or anything fun. So yeah, I know the banks probably would approve you for a mortgage. But as you can see, you're falling into a debt trap where all of your income is going straight out the door in payments and basic expenses. You'll be stuck on the hamster wheel and will never be able to get out of debt.

 

[Trent Steele]

Government is becoming more and more anti-education with policies like this. People that get educated and contribute to making the country great are being penalized. Student loans need to be manageable for highly educated people. Horrible idea.

Well I say that I don't mind my tax dollars going to help for IBR (even though on IBR with PSLF, the government gets back their initial investment anyways, just may not make a killing on the interest). I think its a great program and I wish i knew about it before.

That said, if you arent for IBR, i guess you dont believe in investing in America's future, you wouldn't see the value of tax payer subsidized education and see it as screwing you over. There are 21 nations on this planet where higher education is completely FREE, and only one of those countries is communist. If you want to continue to watch american jobs get exported overseas, and other countries surpass us in math and science, then you should definitely oppose IBR.

 

[steveysmith54]

Government is becoming more and more anti-education with policies like this. People that get educated and contribute to making the country great are being penalized. Student loans need to be manageable for highly educated people. Horrible idea.

Well I say that I don't mind my tax dollars going to help for IBR (even though on IBR with PSLF, the government gets back their initial investment anyways, just may not make a killing on the interest). I think its a great program and I wish i knew about it before.

That said, if you arent for IBR, i guess you dont believe in investing in America's future, you wouldn't see the value of tax payer subsidized education and see it as screwing you over. There are 21 nations on this planet where higher education is completely FREE, and only one of those countries is communist. If you want to continue to watch american jobs get exported overseas, and other countries surpass us in math and science, then you should definitely oppose IBR.

Newsflash. The country is in 19 trillion dollars of debt. Money doesn't grow on trees. I'd rather see the money go to veterans who protect our country than pharmacist who make an excess of 11k per month but only want to pay 1.1k instead of the 2k that they should be. Sorry I don't feel bad for them nor do I think that they need to be helped. Yeah they are plenty of countries that offer free education. How many of them have 50k tuitions from the same schools that use to charge 37k just four years ago?

 

[Trent Steele]

Newsflash. The country is in 19 trillion dollars of debt. Money doesn't grow on trees. I'd rather see the money go to veterans who protect our country than pharmacist who make an excess of 11k per month but only want to pay 1.1k instead of the 2k that they should be. Sorry I don't feel bad for them nor do I think that they need to be helped. Yeah they are plenty of countries that offer free education. How many of them have 50k tuitions from the same schools that use to charge 37k just four years ago?

Veterans receive lots of money from the government. They are on a totally separate budget so your point is moot. Again, a student that takes out 100k loan will still pay back the full principle 100k on a professional salary with IBR as they pay a fixed percentage of their income over 10-25 years, so I don't see your point. The only difference is now they may have some additional income to put into the economy instead of living as a pauper dumping their entire check into loans. Do the calculation and see for yourself. The only corporation with higher profit margin (until very recently) than the fed loan was Exxon Mobil. The feds aren't losing a dime. Do you really think the feds need to be ripping massive profits from student loans? Isn't paying the principal back enough?

Without the highly educated and the scientists, there is nothing to govern. Society grinds to a halt.

I too am a conservative, but I don't have a knee jerk reaction to anything perceived as a "handout" from the extreme right like you seem to. Look a bit deeper into this and you see both the fed and citizens benefit from Student loan relief like IBR.

 

[steveysmith54]

Veterans receive lots of money from the government. They are on a totally separate budget so your point is moot. Again, a student that takes out 100k loan will still pay back the full principle 100k on a professional salary with IBR as they pay a fixed percentage of their income over 10-25 years, so I don't see your point. The only difference is now they may have some additional income to put into the economy instead of living as a pauper dumping their entire check into loans. Do the calculation and see for yourself. The only corporation with higher profit margin (until very recently) than the fed loan was Exxon Mobil. The feds aren't losing a dime. Do you really think the feds need to be ripping massive profits from student loans? Isn't paying the principal back enough?

Without the highly educated and the scientists, there is nothing to govern. Society grinds to a halt.

I too am a conservative, but I don't have a knee jerk reaction to anything perceived as a "handout" from the extreme right like you seem to. Look a bit deeper into this and you see both the fed and citizens benefit from Student loan relief like IBR.

1. if you think veterans receive a ton of money from the government, you are clueless.
2. you are also clueless with your #'s. "Again, a student that takes out 100k loan" What student is this and from which century? Tuition is close to 50K in most schools in CA and continues to go up. It was 37k just short 4 years ago, as i mentioned. Most students come out with 300K in loans. The reality is that most graduates will not find full time jobs and will be making under 100K per year and the longevity of the profession is questionable at best. Most students will not pay back even close to the 300K borrowed, meaning the govn't and tax payers pick up the tab and schools profit.

 

[PharmtoCS]

Veterans receive lots of money from the government. They are on a totally separate budget so your point is moot. Again, a student that takes out 100k loan will still pay back the full principle 100k on a professional salary with IBR as they pay a fixed percentage of their income over 10-25 years, so I don't see your point. The only difference is now they may have some additional income to put into the economy instead of living as a pauper dumping their entire check into loans. Do the calculation and see for yourself. The only corporation with higher profit margin (until very recently) than the fed loan was Exxon Mobil. The feds aren't losing a dime. Do you really think the feds need to be ripping massive profits from student loans? Isn't paying the principal back enough?

Without the highly educated and the scientists, there is nothing to govern. Society grinds to a halt.

I too am a conservative, but I don't have a knee jerk reaction to anything perceived as a "handout" from the extreme right like you seem to. Look a bit deeper into this and you see both the fed and citizens benefit from Student loan relief like IBR.

We already have more than enough educational resources for those who want it. The culprit is the government that is willing to hand over a blank check to anyone who wants money to pay for higher education, which is why schools can effectively charge as much as they want. We might not even need IBR if the government didn't flood higher education with student loan money that falls on the students and society to pay back.

We need more people to go into computer science, the trades, and other fields that are in demand and fewer people to go into art, law, pharmacy, etc. that will set you back six figures and only land you a job that will not allow you to ever pay off your student loans.

 

[confettiflyer]

It's time to update the avatar. Please.

Ask and you shall receive.

 

[owlegrad]

Ask and you shall receive.

So much better, thanks

Sent from my SAMSUNG-SM-G920A using SDN mobile app

 

[confettiflyer]

^ we just come from a different school of thoughts.

BMB: keep debt low, save and wait for opportunities!

Confettiflyer: keep debt high, let the government take the risk and spend, spend, spend!

So I have to expand on this a bit, speaking of school of thought. My school of thought and philosophy about money has always centered around the idea that each of us has to "act like a corporation." Seriously, people act with so much emotion and fail to act in a rational manner....and I'm talking about taking this to the next level, conducting decision tree analysis, etc...

It's so easy to get caught up in dogma/simple ideas, i.e. "You should never have debt, ever," or "Debt is slavery," or the opposite like "You only live once (YOLO)," or "Live like you're going to die tomorrow." The truth is, the answer lies in between.

I could go on forever....but the closest examples I can think of where corporations maximally take advantage of current laws/tax conditions are a) corporate inversions, b) failure to repatriate overseas profits back to the U.S., and c) corn/commodity subsidies.

Can I pay more for student loans? Of course I can. But my reading of current/future laws & tax law yields a higher expected value over time by overleveraging and dumping off as much cost to the federal gov't as possible. That's no different from U.S. companies, given the current repatriation tax, holding retained earnings overseas because they made the same strategic calculation that laws will change to allow favorable repatriation. I make the same argument except in reverse (that current laws will stay the same).

Same with corn/commodity subsidies...do they really need it? Doesn't the free market work? Eh, who cares...so if I act like a corn grower, I'm going to do things like plant corn when I don't need to, only because the gov't is subsidizing it. Is it right? Is it a good value to the country? I don't care, because I act like a corporation, and think of it mathematically.

Anyway, you get my point, I'll stop typing.

tl;dr = act like a corporation!

 

[Trent Steele]

We already have more than enough educational resources for those who want it. The culprit is the government that is willing to hand over a blank check to anyone who wants money to pay for higher education, which is why schools can effectively charge as much as they want. We might not even need IBR if the government didn't flood higher education with student loan money that falls on the students and society to pay back.

We need more people to go into computer science, the trades, and other fields that are in demand and fewer people to go into art, law, pharmacy, etc. that will set you back six figures and only land you a job that will not allow you to ever pay off your student loans.

1. if you think veterans receive a ton of money from the government, you are clueless.
2. you are also clueless with your #'s. "Again, a student that takes out 100k loan" What student is this and from which century? Tuition is close to 50K in most schools in CA and continues to go up. It was 37k just short 4 years ago, as i mentioned. Most students come out with 300K in loans. The reality is that most graduates will not find full time jobs and will be making under 100K per year and the longevity of the profession is questionable at best. Most students will not pay back even close to the 300K borrowed, meaning the govn't and tax payers pick up the tab and schools profit.

Amazing. Saying that tuitions are so high DUE TO IBR??? Ok for the record, it has been determined that only 2-3% of borrowers utilize this great resource for debt relief. (SOURCE: http://bit.ly/1V51fIT). Most borrowers aren't even aware of these plans. I sure as hell wasn't.

Second, higher education tuitions have been on the rise for decades, long before IBR was even implemented! In fact, tuition was hiked on a larger percentage during the decade between 1985-1995, WELL BEFORE income driven plans were initiated! (SOURCE:http://bit.ly/1nvzRsR) IBR plans were instituted to deal with the rising cost of higher education, NOT THE OTHER WAY AROUND. If you think college is too expensive, lobby to have the government regulate costs of both public and private schools- but that would also go against the Ayn Rand mentality. So in your world, only those that come from wealth or go to the most inexpensive schools have the right to try to make something of themselves.

Of course not every relief program is perfect. income driven plans certainly are far from it eith tons of redtape and also a marriage penalty; but not everyone graduated at a time when they gave 30k sign on bonuses and all you needed was a pulse to get a job. Times have changed, and you both are stuck in the past.

 

[confettiflyer]

People can't think more than one subject....but the rise of federal student loans and IBR w/ forgiveness is a transference of cost from state to federal using a loan mechanism. States have systemically underfunded public institutions, who then raise tuition in response, and the costs are then borne by students...who then take out these loans to cover it, and eventually the federal gov't repays it via whatever mechanism is in place.

So stop whining about taxpayers footing the bill...taxpayers have always paid.

I'm not saying that this single action is the sole fault of tuition outpacing inflation, I'm not that stupid to think it's a one dimensional problem unlike other people.

 

[owlegrad]

Nah I read on FB that tuition increases have little/nothing to do with states under-funding higher education.

 

[BMBiology]

People can't think more than one subject....but the rise of federal student loans and IBR w/ forgiveness is a transference of cost from state to federal using a loan mechanism. States have systemically underfunded public institutions, who then raise tuition in response, and the costs are then borne by students...who then take out these loans to cover it, and eventually the federal gov't repays it via whatever mechanism is in place.

So stop whining about taxpayers footing the bill...taxpayers have always paid.

I'm not saying that this single action is the sole fault of tuition outpacing inflation, I'm not that stupid to think it's a one dimensional problem unlike other people.

That doesn't explain why the private schools are also increasing tuition.

Easy access to student loans is not the only factor but I believe it is the main factor.

If you own a school and you know your students can borrow as much as they want, why wouldn't you increase tuition and take everything? If they can't find a job afterward? Who cares...you already got their money.

 

[confettiflyer]

That doesn't explain why the private schools are also increasing tuition.

Easy access to student loans is not the only factor but I believe it is the main factor.

If you own a school and you know your students can borrow as much as they want, why wouldn't you increase tuition and take everything? If they can't find a job afterward? Who cares...you already got their money.

Public drives private, like union jobs can cause local increases of non-union jobs.

A lot of private schools are competitive in cost with public schools when aid packages are considered. Likewise with grad programs, public schools are sometimes more expensive than private (UCSF, for example, compared to some privates...and don't mention U$C, they're in a league of their own).

But I concede that lack of pressure on students to obtain funding skews the market. But what's worse, over borrowing or having universities be the exclusive domain of rich white kids with trust funds? That's worse for the economy than debt. You can inflate your way out of debt, you can't just magically expand your GDP on a poorly educated populace.

 

[PharmtoCS]

Amazing. Saying that tuitions are so high DUE TO IBR??? Ok for the record, it has been determined that only 2-3% of borrowers utilize this great resource for debt relief. (SOURCE: http://bit.ly/1V51fIT). Most borrowers aren't even aware of these plans. I sure as hell wasn't.

Second, higher education tuitions have been on the rise for decades, long before IBR was even implemented! In fact, tuition was hiked on a larger percentage during the decade between 1985-1995, WELL BEFORE income driven plans were initiated! (SOURCE:http://bit.ly/1nvzRsR) IBR plans were instituted to deal with the rising cost of higher education, NOT THE OTHER WAY AROUND. If you think college is too expensive, lobby to have the government regulate costs of both public and private schools- but that would also go against the Ayn Rand mentality. So in your world, only those that come from wealth or go to the most inexpensive schools have the right to try to make something of themselves.

Of course not every relief program is perfect. income driven plans certainly are far from it eith tons of redtape and also a marriage penalty; but not everyone graduated at a time when they gave 30k sign on bonuses and all you needed was a pulse to get a job. Times have changed, and you both are stuck in the past.

It's not so much that IBR is responsible for the rise in tuition, although it may be a contributing factor to irresponsible borrowing. You are right that IBR was implemented to deal with the rising cost of tuition, although it serves as a temporary band-aid at best. If the government stopped loaning unlimited money to anyone with pulse who wants an education, then tuition costs wouldn't be so high and we might not even need IBR in the first place.

 

[BMBiology]

^ the same argument was made before the housing crisis. Why should only some people qualify for a mortgage? And look at what happened. The government wants everyone to own a house and the bankers got greedy and handed out loans to just about everyone. Prices went thru the roof. We all know what happened after that.

 

[confettiflyer]

^ the same argument was made before the housing crisis. Why should only some people qualify for a mortgage? And look at what happened. The government wants everyone to own a house and the bankers got greedy and handed out loans to just about everyone. Prices went thru the roof. We all know what happened after that.

Yup, and more stringent underwriting standards have benefitted everyone with a more stable housing market and banking sector.

But aye, here's the rub...

1) A case can be made for the reprivitization of student loans, removal of government support (or minimize it, like guaranteeing maximum $57k in case of default, the lender eats the rest...like a conforming loan limit or something). But what you end up doing is the door gets closed too tightly and you have only the elite with trust funds and assets able to obtain loans. Conversely, you can lend to the best students going into the most lucrative majors with the highest ROI's.

You've purchased a house, so you know the rigors involved with underwriting. You're going to lose a lot of people in the process trying to enter college in that way. One can argue they deserve it for not trying hard enough or something, but it doesn't matter, that's one less potential high earning taxpayer in the pool, and one less educated market participant.

2) If you want to keep the solution out of private lender hands, a giant bureaucracy has to be created to underwrite each loan taking into account creditworthiness and future earnings potential. Who's going to supply the data? BLS? Hah! Think IRS and USPS had a baby. A really ugly baby.


One more thing I've mentioned before, good luck getting ANY changes through Congress. There is pretty much a major college campus in every Congressional district in this country, complete with donors, employees, students, alumni, and other faculty/staff. Don't underestimate the lobby power of higher ed. when its funding sources are threatened.

Congress couldn't even get a damn LIST published because of higher ed. opposition. Status quo benefits the power institutions, the moral hazard marches on...

 

[Aznfarmerboi]

So I have to expand on this a bit, speaking of school of thought. My school of thought and philosophy about money has always centered around the idea that each of us has to "act like a corporation." Seriously, people act with so much emotion and fail to act in a rational manner....and I'm talking about taking this to the next level, conducting decision tree analysis, etc...

It's so easy to get caught up in dogma/simple ideas, i.e. "You should never have debt, ever," or "Debt is slavery," or the opposite like "You only live once (YOLO)," or "Live like you're going to die tomorrow." The truth is, the answer lies in between.

I could go on forever....but the closest examples I can think of where corporations maximally take advantage of current laws/tax conditions are a) corporate inversions, b) failure to repatriate overseas profits back to the U.S., and c) corn/commodity subsidies.

Can I pay more for student loans? Of course I can. But my reading of current/future laws & tax law yields a higher expected value over time by overleveraging and dumping off as much cost to the federal gov't as possible. That's no different from U.S. companies, given the current repatriation tax, holding retained earnings overseas because they made the same strategic calculation that laws will change to allow favorable repatriation. I make the same argument except in reverse (that current laws will stay the same).

Same with corn/commodity subsidies...do they really need it? Doesn't the free market work? Eh, who cares...so if I act like a corn grower, I'm going to do things like plant corn when I don't need to, only because the gov't is subsidizing it. Is it right? Is it a good value to the country? I don't care, because I act like a corporation, and think of it mathematically.

Anyway, you get my point, I'll stop typing.

tl;dr = act like a corporation!

I understand your logic... Except you are not a corporation. The rules are different for you.

You can't declare bankruptcy from student loans and start over again like businesses. The rules are not set in your favor. You don't have lobbyists to buy off politicians. You don't have teams of big lawyers protecting you. No one cares about you because you are a little guy.

Your goals are different from a corporation too...

Like getting married, buying a house, and having kids one day. Maybe not... And it's all about the options.

But let's say that you do run your life like a Corp.... What is your return on investment? Return on Risk/ liability? From doing IBR versus paying off student loans faster? For most pharmacists, IBR makes no sense and for most people who have to take out 250k in loans, this profession is not worth it.

 

[confettiflyer]

I understand your logic... Except you are not a corporation. The rules are different for you.

You can't declare bankruptcy from student loans and start over again like businesses. The rules are not set in your favor. You don't have lobbyists to buy off politicians. You don't have teams of big lawyers protecting you. No one cares about you because you are a little guy.

No intention of filing bk, so that point is noted. I have lobbyists by proxy, see my previous post about higher ed. lobby. The key is aligning with other interests to leverage your interests. Policies that are good for colleges at this point are debtor friendly, so it doesn't matter that no one cares about me specifically, as long as my interests are represented and lobbied. It's not just colleges...it's lawyers, physicians, etc...

Your goals are different from a corporation too...

Like getting married, buying a house, and having kids one day. Maybe not... And it's all about the options.

These are personal goals, I'm talking about finances. People intermingle emotions with getting married and having kids, that's how it should be....but emotions and buying a house? Nope...need to approach with a corporate mentality. I suppose you can approach getting married with a corporate mentality (it's a merger! but that's not for me, I pick and choose).

But let's say that you do run your life like a Corp.... What is your return on investment? Return on Risk/ liability? From doing IBR versus paying off student loans faster? For most pharmacists, IBR makes no sense and for most people who have to take out 250k in loans, this profession is not worth it.

Well I'm already in this profession, so I can't build a time machine. As for the IBR vs. pay off.... to distill it down to something simple, it was:

Scenario 1) Pay off loan quickly = guaranteed payment of $X principal + $Y interest, 0% chance of dumping off onto the government.
Scenario 2) Pay off slowly = guaranteed payment of $X principal + $Y+$A interest, greater than 50% chance of dumping off to government (-$G)
Risks taken = legislative changes (forgiveness limits, PSLF retroactive changes, etc...), employment in a for-profit institution, high income such that no forgiveness happened, higher interest payments.

If $A is additional interest paid due to extension of loan program/negative amortization, ($-G) is amount slated to be forgiven after conditions are met, and R is the risk of conditions not being met, then....

(1-R) x ($-G) > R x ($A)

So you analyze the risk and plug in your own numbers, which is really just the expected value given the set of conditions. So someone like BMB, at least a few years ago, would set R = 0.9 or something. You can always build on to the model like expected return on invested savings if paying off early, which would look like:

(1-R) x ($-G) > R x ($A) + [R x ($A x mkt return)]

Which tilts the balance of the equation to the right and requires an outsized expected ($-G) to be worth it.

tl;dr expected return from (-$G) must exceed the risk of paying ($A) and opportunity cost associated with not investing that $A as represented by [R x ($A x mkt return)] for the set time period.

It's not perfect, but this is the sort of crap that jumbles around my brain. It's also how I buy sandwiches and go shopping at Target.[/quote][/quote]