Public loan forgiveness program to be capped at $57,500 under new budget proposal

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coolslugs

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Whoever made the petition didn't even get the name right.
 
Before this change, I didn't think the programs could last because they didn't seem like they can be sustained for a long time. Given the fact that dentists and physicians have relatively high incomes even though most of them are balls deep in student loans. With this new change, I feel like these programs can be sustained but they are no longer attractive.
 
I feel bad for fools who actually believe the government would forgive their student loans.
 
coolslugs said:
What do you think? Sign this petition if you care about public service loan forgiveness programs!

http://abovethelaw.com/2014/03/changes-to-government-loan-forgiveness-that-totally-miss-the-mark/

https://petitions.whitehouse.gov/pe...orm-forgiving-all-qualifying-student/wkqnqBCH
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I predicted this many years ago. It makes sense right? Government bankrupt and nixing promises to pay off loans for people who earn > 200k.

When I was choosing a medical school people tried to say that the loan forgiveness program should factor in to your decision - I always said to not count on the government to forgive hundreds of thousands in loans to the top income earners.

The humorous thing is, this is an anti medicine bill. Many areas won't be affected much by the 57k cap, but the 300k in debt from medical school - this is huge for that person.

Sad? Yes. Predictable? Also yes.
 
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sylvanthus said:
Likely will be a grandfathering in of those already working on IBR PAYE.
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Likely __________ *fill in whatever costs the government less*

This is a funny bill because it basically negates the entire program.

A student borrowing 250k @ 7.5% will pay back the original principle of 250k + 304k in interest over a 25 year period. After a 10 year period it is 170k in interest. I don't remember the terms of these sham forgiveness programs, but I can tell you that waiting to pay off a huge loan to save 57k in loan forgiveness is ridiculous. A 250k loan essentially builds 20k in interest every year - so if you take just 3 years longer to pay for it - you've already eaten up your forgiveness savings in extra interest (obviously this math is tricky because it's counting the entire principle, regardless it would still be ~ 4 years or less to lose your savings).
 
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Relying on the government to honor it's word 10 or 25 years down the road is one of the worst investment strategies I have ever heard.....if a doctor lived on a residents salary for just 2-3 years after they are outta residency, 95% would have their student loans paid off or almost paid off.

My wife and I were able to pay 26k dollars of our undergrad student loans while making ~60k in our gap year....don't mess around with debt---get rid of it
 
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From the article:

You want a “safeguard”? I have one. After ten years, if a student owes more than $57,500 in outstanding debt, the SCHOOL that charged the ridiculous prices in the first place has to pay the government back. How about that? How about making the schools financially responsible for their willingness to saddle students with debt that they won’t be able to manage? Maybe the school should have an interest in charging people what they can afford, or, you know, EDUCATING THEM so they have the practical skills to make good on their payments.
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hahaha, I like this idea. Now granted, I realize it would never work (why would any student pay back their loan, if they knew the school would have to do it after 10 years?) But its still a funny idea, because there I no doubt schools are taking wicked advantage of students & taxpayers.

Obviously, the best idea is to get the government out of the loan business completely. If students had to go to banks and convince the bank to give them a loan, then students would be forced to take realistic majors, because banks aren't going to make willy-nilly through out loans for Romance majors. Oh wait......they DID do that with subprime housing, and expected the government to bail them out. Hmmmm, once again, government involve caused bad loans to be made. Government MUST stay out of the loan business, for the good of everyone.
 
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It is my understanding that this change would only affect people who funded their first loan after July1 2015.

Does anyone understand differently?
 
SLC said:
It is my understanding that this change would only affect people who funded their first loan after July1 2015.

Does anyone understand differently?
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I hope this is true! Either way, right now this budgets got a snowball's chance anyway. It does go to show though: don't trust the government to be there for you.
 
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Yea I think that you should always plan to pay back the money you borrow and never count on these programs. If they are there and they work out, great.
 
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NurWollen said:
I hope this is true! Either way, right now this budgets got a snowball's chance anyway. It does go to show though: don't trust the government to be there for you.
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It shows the agenda though. Certainly they will implement caps.
 
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sylvanthus said:
Likely will be a grandfathering in of those already working on IBR PAYE.
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So the class of 2015 and before gets tax free loan forgiveness soon after residency and fellowship are complete, while the class of 2016 and beyond get shafted with 25 years of onerous loan payments?

Oh hell no.
 
Our government is a joke! They're great at self perpetuation fueled with other people's money. Forget left or right, red or blue... We need something new.
 
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as an incoming student about to realize the full force of being in debt, I hope this isn't right. but they def won't make tuition any cheaper.
 
SLC said:
It is my understanding that this change would only affect people who funded their first loan after July1 2015.

Does anyone understand differently?
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I posted about this in another thread, but my understanding is that if you took out loans prior to 2015, you will still be able to keep the existing options of repayment plans. The problem, however, is that PSLF is not a repayment plan, so I don't believe that the proposal implies that unlimited PSLF forgiveness must still be available to us.
 
TheWeeIceMan said:
I posted about this in another thread, but my understanding is that if you took out loans prior to 2015, you will still be able to keep the existing options of repayment plans. The problem, however, is that PSLF is not a repayment plan, so I don't believe that the proposal implies that unlimited PSLF forgiveness must still be available to us.
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So what exactly would it mean for us who are getting loans before then?
 
wjs010 said:
So what exactly would it mean for us who are getting loans before then?
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If I'm correct (which I very well might not be) it would mean that the gov't can institute the 57k PSLF cap without grandfathering anyone in. As far a repayment plans, it would mean that you could still choose from the plans that are currently in existence. That is my best guess.
 
Its ok, I've grown fond of the prison diet I'm currently on. I can definitely keep it up another 30 years.
 
Good, I'm all for it. I know a few people that are driving around in new BMWs and living in brand new houses banking on the fact that they are going to have their 200+K in debt forgiven. Gonna be a rude awaking for them!
 
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Someone should merge this with the other thread on this topic.

I just thought of something -- if the proposal is adopted wholesale (unlikely, but let's pretend), it actually would result in a 33% drop in monthly payment for those using the old IBR (15%) program that didn't qualify for the newer PAYE (10%) program.

On a month to month basis, that opens up borrowers to be able to buy more stuff (beamers and houses). Obviously, over the time periods of 10 and 20 (and even 25) years, borrowers pay more (especially public service people under the less generous PSLF)...so this kicks the can down the road.

Will we then get to a critical mass of student loans at that point? I figure the average student/graduate thinks in terms of 6-18 months and not strategically over 20-25, so this proposal improves short term finances and leaves the hard decisions for another time.
 
The question is whether you would still be taxed on the amount that is left over after 20 or 25 years. But like you said there won't be anything left over to be forgiven anyways. Who knows what the government will decide to change in the next 20-25 years?

Regardless I don't see how PAYE and IBR are good ideas assuming you can afford the standard 10 year repayment. It is like your bank changing your mortgage from 2 k a month for 15 years to 1.5 k for 30 years. So you can spend the "saving" on a new car or whatever, just as long as you are OK with still being in debt and paying ridiculously high interest rate by the time your kid starts college.
 
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Im gonna have to read up more on this as this is the first time I'm catching wind of it. But with that said, I'm on a 20 year, not a 25 year, repayment plan. Which tipped me off to a lot of the subtleties that *might* (or might not) be in this since most med school graduates are on a 20 year pay-as-you-earn program, not the 25 year income-based-repayment plan. There is a small glimmer of hope that this may be targeted more at the undergraduate loan takers.

But if it is broad-spectrum this would super suck. The difference between a 10 year and 20 year repayment is well over $100k for me. welll over that.
 
These students going to expensive schools like USC and University of Pacific are getting 300k+ loans are in for a rude awakening. The 10year payment on 300k is $3452/month. That is more than most pharmacists can afford to pay-- which means these students either go on a 25-year extended payment plan or they go on PAYE or IBR.
Ouch!

I try to pay around $3500 a month on my student loans but I work a lot of overtime and a extra shifts to do it. This plan allows me to pay off my big loan in 4 years. These students on 300k+ are kind of screwed because they don't really have any options to pay off the loan early.
The banks play people, not the other way around. Just remember that before jumping into something like this and thinking you are ripping off the government.
 
I feel these repayment plans are very misleading. For example:

(1) the word "forgiveness". It is not forgiveness when you have to pay income tax on it.

(2) 10 or 15% of your salary. Some people think 10% means if they make 125 k a year and bring home (after taxed) 81 k then they just have to pay $81 k x 10% = $8,100 a year. It is based on AGI and income above the poverty level so expect to pay about 13% of your after taxed salary for most new grads, not 10%.

If you are graduating with more than 150 k student loan in this saturated job market, you are in trouble.
 
BMBiology said:
The question is whether you would still be taxed on the amount that is left over after 20 or 25 years. But like you said there won't be anything left over to be forgiven anyways. Who knows what the government will decide to change in the next 20-25 years?
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I believe the ne" white house proposal that includes this $57,500 cap also says that forgiveness at the end of 20-25 years would become tax free (ie no tax bomb). It effectively cuts the PSLF gravy train, but pours the gravy someplace else on the plate.

(which is why I don't think this will pass - it'll actually cost more money IMO, but I'm waiting for an actual analysis before I say that outside of these parentheses :ninja:)

The other weird thing is the length of this legislation. It maybe made sense in 2007 when George Bush passed the original PSLF since 2017 is at least within the realm of possibility. But all these 20-25 year plans being floated would be like if President Reagan passed a law in the late 1980's that really didn't kick in until recently.

Regardless I don't see how PAYE and IBR are good ideas assuming you can afford the standard 10 year repayment. It is like your bank changing your mortgage from 2 k a month for 15 years to 1.5 k for 30 years. So you can spend the "saving" on a new car or whatever, just as long as you are OK with still being in debt and paying ridiculously high interest rate by the time your kid starts college.
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I think it'll be a personal/emotional decision vs. a straight financial one. You're correct, the "best" financial outcome when the priority is to minimize debt and interest paid is to pay the student loan down ASAP. Your example of the mortgage is also spot on.

The psychology of economics comes into play (it's been a while since I took this course in college, the only thing I remember is the bending of the supply/demand curve on lotto tickets). The "best" financial outcome is shaped by overriding priorities.

Do people who just labored through 8 years of school really want to postpone buying their first house as their families (already delayed from graduate school) start to grow? Probably not. So, that borrower example you mentioned who just got their loan changed from $2000/mo for 15 years vs. $1500/mo for 30 years will absolutely take the extra $500 and fulfill other priorities.

There was a recent Pew survey that backed up this sort of optimism, if you take my word for it (can't find the link), there was another recent article that students/graduates weren't willing to concede that their future incomes might not be able to support this level of debt servicing + lifestyle costs.
 
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confettiflyer said:
There was a recent Pew survey that backed up this sort of optimism, if you take my word for it (can't find the link), there was another recent article that students/graduates weren't willing to concede that their future incomes might not be able to support this level of debt servicing + lifestyle costs.
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Hah! I would love to find and read this. IMHO this is the elephant in the room that nobody is talking about, with regard to the whole higher ed shenanagin. Nobody (NOBODY!) wants to recognize that the average starting salary for new graduates is ~$35,000, and that college itself is not typically a good value in general, let alone whether it is worth taking out loans for.
 
Another piece, from the perspective of those in my camp (ie: "screw the govt, never pay back anyway") ... is that really, for some people, there is no way this loan money is ever going to be paid back.

The govt and banks are the ones who will be on the hook. Why? Because they can't reasonably garnish your wages past 10-20% , or tie debt payments to income beyond a certain level, because people will just get lower paying jobs or, if you take directly from their paycheck, they will go bankrupt, ruining the economy and politicians' futures. Or, in my case, leave the country eventually. This is a damned if you do, damned if you don't situation, for the GOVT and BANKS. They cant forseaably raise the payment levels for existing debtors, because it is likely most people are living paycheck to paycheck anyway.. and no politician would make a move that would seriously financially endanger large numbers of people. Of course they can raise the standards for future lending and require higher payback amounts. But it doesn't change the fact that there are thousands of people with partial college / no degree, making minimum wage and $40k of loans, thousands of people with bachelor's degrees making $35k and $100k loans .. and a lot of people with $300-400k loans working in public service of some kind. The money is just not there. Someone is going to have to eat it.

Well I can tell you one thing.. if it's not the debtor.. it's probably not going to be the banks (as we saw with foreclosure crisis). It's also probably not going to be the politicians (both parties are pushing to constantly loosen student loan lending). So who will eat these costs? there's only about 3 options... treasury, fed, or taxpayers. (Ok maybe we can force scam schools or for profit schools to eat some of this .. but that is pie in the sky thinking)

In this world we're living in with trillion dollar student loan issues.. it's important to remember the old adage (adapted for student loan picture)

If you owe the bank $3,000 and can't pay ..it's your problem.

If you owe the bank $300,000 and can't pay ... it's the bank's problem.

Case Example:
My loans are accumulating ~$2,500 in interest per month, which I can't really easily pay. Let's say I stop paying... one year later, my principle has grown $26,000 .. the company contemplates suing me .. let's say they sue me and win a 15% garnishment of my wages. That still isn't even going to cover the interest.

Ok so say they garnish 25% of my wages .. still wouldn't even cover the interest payment. Either way, someone is going to have to eat the ~$500,000 principal at the end, regardless of whether I pay 20% of income for my entire life, the loan expires or is forgiven, or I leave the country. The end result is the same.. and it's the same for the underemployed college grad with $50,000 in loans, and the unemployed or minimum wage worker who got scammed by a for profit college for $25,000 and is never going to make more than minimum wage.

Just saying, the collapse and catastrophe of student loans is mostly inevitable. Someone will need to eat the cost associated with all of these bad decisions like escalating tuition, overpaid faculty and school administrators, high interest rates and free lending. I just am not going to volunteer to pay that up front.
 
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B Wong said:
Good, I'm all for it. I know a few people that are driving around in new BMWs and living in brand new houses banking on the fact that they are going to have their 200+K in debt forgiven. Gonna be a rude awaking for them!
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More like a rude awakening for the treasury and/or the banks. That money is gone, to the realtor/mortgage bank, car dealership, restaurants, airlines, etc.

Maybe we should make it illegal for people to lease cars and buy houses when they have student loan debt. That would teach a lesson to all those unethically greedy schools! Nobody would attend anymore!
 
Type b - you hit it on the head too, we're passing around the hot potato.

Reminds me of China and T-Bills -- the US keeps borrowing money, China keeps lending it to the US, now we borrowed too much, but if China stops buying T-Bills or tries to dump them, they end up screwing themselves with the resulting financial consequences.

I think this is where we are headed with student loan debt. Someone's gotta pay, and when you're faced with a no-win situation, it becomes a taxpayer/societal problem.

  • If you make the student pay, like 10% of income for LIFE...you just screwed over society/taxpayers/the entire economy by essentially depressing the economic buying power of your most educated population.

  • If the government eats it (i.e. bailout), you just dumped the cost on to society/taxpayers.

  • If banks eat it, you just dumped the cost on to institutional shareholders/taxpayers.

Either way, my decision to borrow a **** ton of money affects people who didn't, in some way/shape/form. On a microeconomic level, it doesn't bother me if I'm stuck giving up 10% of my income for the next X # of years. Just know I probably won't be buying your house when it comes time to sell it. Multiply me by millions and millions and you see the macroeconomic problem brewing.

It's already contributed to the primary care shortage on the physicians side...so student loan debt might literally kill someone other than the borrower!
 
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confettiflyer said:
Type b - you hit it on the head too, we're passing around the hot potato.

Reminds me of China and T-Bills -- the US keeps borrowing money, China keeps lending it to the US, now we borrowed too much, but if China stops buying T-Bills or tries to dump them, they end up screwing themselves with the resulting financial consequences.

I think this is where we are headed with student loan debt. Someone's gotta pay, and when you're faced with a no-win situation, it becomes a taxpayer/societal problem.

  • If you make the student pay, like 10% of income for LIFE...you just screwed over society/taxpayers/the entire economy by essentially depressing the economic buying power of your most educated population.

  • If the government eats it (i.e. bailout), you just dumped the cost on to society/taxpayers.

  • If banks eat it, you just dumped the cost on to institutional shareholders/taxpayers.

Either way, my decision to borrow a **** ton of money affects people who didn't, in some way/shape/form. On a microeconomic level, it doesn't bother me if I'm stuck giving up 10% of my income for the next X # of years. Just know I probably won't be buying your house when it comes time to sell it. Multiply me by millions and millions and you see the macroeconomic problem brewing.

It's already contributed to the primary care shortage on the physicians side...so student loan debt might literally kill someone other than the borrower!
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Great analogy. That's pretty much what I was looking for. (the china thing)

I see it as being either a write off to the govt and an increase societal-wide tax (in line with future generalized tax increases) , or they will maybe put some people on 10% for life. Which, I wouldn't mind paying really, for the opportunity to work in this field and achieve my dreams.

But any major action will result in bad societal consequences . So with that in mind, we can probably count on standards loosening for the next decade or so until the time comes to pay the piper. Current politicians just want to do everything they can to make sure it doesnt happen until theyve retired. Banks and schools just want to get as much money now as they can before it dries up. Basically *everyone* is incentivized to take as much money as they can (I know I was personally). It's almost identical to the mortgage situation and also the way the UST/FED behaves. The problem being, it will be much worse because there are no assets to cover any of it, so that is an even bigger incentive to kick the can down the road.

I think based on the new loosening of repayment standards that Obama just proposed, as well as proposals from republicans, that this certainly has the possibility of turning into a fiasco as big as social security and medicare.

Which will mean at least several %+ tax increase for everyone once the bailout begins. Either we're going to see european tax rates in our lifetime, or there is going to be some serious social and financial anarchy taking place (ie *actual* class warfare)
 
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confettiflyer said:
Type b - you hit it on the head too, we're passing around the hot potato.

Reminds me of China and T-Bills -- the US keeps borrowing money, China keeps lending it to the US, now we borrowed too much, but if China stops buying T-Bills or tries to dump them, they end up screwing themselves with the resulting financial consequences.

I think this is where we are headed with student loan debt. Someone's gotta pay, and when you're faced with a no-win situation, it becomes a taxpayer/societal problem.

  • If you make the student pay, like 10% of income for LIFE...you just screwed over society/taxpayers/the entire economy by essentially depressing the economic buying power of your most educated population.

  • If the government eats it (i.e. bailout), you just dumped the cost on to society/taxpayers.

  • If banks eat it, you just dumped the cost on to institutional shareholders/taxpayers.

Either way, my decision to borrow a **** ton of money affects people who didn't, in some way/shape/form. On a microeconomic level, it doesn't bother me if I'm stuck giving up 10% of my income for the next X # of years. Just know I probably won't be buying your house when it comes time to sell it. Multiply me by millions and millions and you see the macroeconomic problem brewing.

It's already contributed to the primary care shortage on the physicians side...so student loan debt might literally kill someone other than the borrower!
Click to expand...

The other elephant in the room, as you alluded to, will be the baby boomers dumping their RE. Even as it is now, our generation is nowhere near ready to buy.

Either china takes over our property (not politically palatable), or RE tanks, or maybe they re-loosen lending standards.. 50 year mortgages anyone?
 
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I heard a rumor this morning that the PSLF cap was intended to be broken up between UG and professional school loans. According to the rumor, the cap for those of us with med school loans would be somewhere around 130k. I haven't seen anything to back this up yet, but I'd like to think that whatever passes will differentiate between UG and grad loans.
 
coolslugs said:
Interesting. There is much better discussion on medical forums but all I get is this on the dental forums.
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1. The budget has not been passed and this is only a proposal. Republican House? Good luck.

2. The amount of dentists that go directly into a PSLF qualifying job directly after graduation is next to nothing so no one here cares.

3. The amount of dentists going into a hospital based residency that also qualifies for PSLF then continuing into a PSLF qualifying job is essentially 0.

4. This is discussed in at least 2 other threads on the dental board.

5. Touchy subject but there will be some level of grandfathering to current borrowers. The new changes if passed would affect those starting in 2015.
 
TheWeeIceMan said:
I heard a rumor this morning that the PSLF cap was intended to be broken up between UG and professional school loans. According to the rumor, the cap for those of us with med school loans would be somewhere around 130k. I haven't seen anything to back this up yet, but I'd like to think that whatever passes will differentiate between UG and grad loans.
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That would be nice. Still sucks though. I mean, 130k would make a nice dent in anyone's loans but it's a far cry from having it forgiven.
 
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