How to save over $100k on your student loans

[SHC1984]

It is much different than stealing or bankruptcy. IBR is an acceptable repayment method which the lender is 100% comfortable with considering the fact that the program is official. If you pay a lender back according to reasonable terms which the lender has set - then you have fulfilled your obligation and have repaid your debt. Who are you to say how the lender wants, or should, get paid back. That decision is up to the lender.

I would agree that bankruptcy is a very shady move, except in the case of crushing necessary medical debt. Maxing out credit cards and then claiming bankruptcy is just dirty, and could be comparable to stealing I guess. But there is a huge difference between bankruptcy and IBR. In one case, you did not fulfill the terms of repayment. In the other case, you did fulfill the terms of repayment.

IBR is not unethical. The ONLY REASON IBR came out was to give people more "wiggle" room in making payments. Instead of having to pay 2K or 3K a month you have the option of paying less per month. It's a nice way of giving people an option to pay less a month. It's mainly for people that have a hard time finding a good paying job or someone that chose to do a residency and can't afford full payment etc. That was the REASON WHY IBR came out.

Ethical people use IBR b/c 1) it is taking them longer than planned to find a good paying job. 2) They are doing a residency or 3) They just want more wiggle room in making payments. They will most likely pay the loan off in 2 to 3 years...but they choose IBR so they won't be LOCK into paying 3K a month.

Ethical people HAD FULL INTENTIONS of paying ALL their loans off when they borrowed them.

I borrowed as little as possible (less than 100K) because I had the FULL INTENTION of paying my loans off in full. Why? b/c that's the ethical thing to do. The ONLY reason I would choose IBR is b/c of reason 3) getting more wiggle room...but I most likely will just pay my loans off in 2 years and get it over with.

Okay now let me explain why I feel it can be used unethically. IBR itself is NOT unethical. It's just an option given so people can have more wiggle room in payments. It's the PEOPLE'S INTENTIONS on here that are extremely unethical.

So users on this thread are 1) borrowing MORE MONEY then they need NOT b/c they actually need it but for the sole purpose of NOT having to pay it back. Their reasoning is....I'll borrow AS MUCH AS POSSIBLE b/c I don't have to pay it back! I can use IBR! YAY!!! 2) it's UNETHICAL b/c you are borrowing money with the intentions of NEVER making a payment from the very begining! The only reason you are borrowing this insane amount is b/c you think it's going to be all "Forgiven".

SO we both agree bankruptcy is unethical b/c the person went into it maxing out all credit cards, borrowing as much as possible with what????? The intentions of NEVER paying back a penny. They will file bankruptcy as soon as they max everything out.

SOME people on IBR are borrowing an insane amount of money with what????? the same fu*king intentions of NOT making any payments and having it "forgiven" and forcing hardworking people that pay taxes to pay it off for them???

BOTH scenrios with the SAME INTENTIONS of taking a huge loan out with NO INTENTIONS of paying back the debt. To me it's the same thing. SAME intentions of NOT making payments...so the same crime.

If taking something that has been allocated to you (ie a sandwich at a lecture with free food) is stealing, then yeah, I love stealing. Not ashamed!

Dont forget to vote!

Society voted to allocate resources to increase education and the supply of healthcare providers.

Yes you can benefit from government subsidies. We're all doing it every day we live our lives in society.

Dine and dash, tax evasion, these things are illegal because society has deemed them to be immoral. Participating in a financial contract that is beneficial to you is practically the american dream. Every financial instrument benefits someone at a cost to someone else. Lenders and governments support these types of loan programs because they are on the winning end 95% of the time. It just so happens that IBR can be used to the borrower's financial advantage in rare cases. You can't blame the borrower for wanting to benefit in those 5% of cases where they can. In these cases, paying back with the regular repayment would be akin to throwing your money out your window into the street.

Are you suggesting that I basically donate my money to the US government, my lender, and my school? No thanks. I'll pay back what I am obligated to pay. I am not paying an extra $100k simply because it makes other people feel good about their loans. Funny how that sounds similar to the conservative ideology you espouse. I will pay back an extra 100k (ie standard repayment plan) if you donate $100k of your money to the government, after all, it is so ETHICAL!

1) You borrowed it so you should pay it back. It's what ethical people do. Do you ever return anything you borrow? or do you keep everything?

2) I already explained about why I feel it's unethical... the fact that you borrow money in the begining with NO intentions of paying it back is in itself unethical. Ethical people don't borrow anything with the intentions of NOT returning the item...there just aren't any excuses to this.

3) Donating????? OMG. YOU BORROW the money to use for yourself. Giving it back is call RETURNING. Donating is actually giving your own hard earn money to someone else. People on IBR will NEVER donate anything. That's a guarantee...they only take. They will never give..so no you will never be donating. That's a save bet.

I have been on IBR since I graduated. Thanks for insulting me and calling me a criminal!

In your case it's 100% fine. You said yourself you are only doing it b/c of residency and you will be paying it all off shortly afterwards which is what the POINT of IBR was for...it's for people doing residencies to LOWER their payments while they are not making full salary to get a small break.

IBR is NOT for people to get ideas of borrowing tons of money they don't need ONLY b/c it will be "forgiven" 25 yrs down the line. That is NOT what the lenders want at all. The lenders TRUST that people would be ethical and pay them back ASAP when they get full time jobs...but unfortunately people are not very ethical.

I'm fulfilling the contract that I signed years ago...how is that criminal?

Read above. Your intentions are wrong if you borrowed the money with NO intentions of paying it back.

It's wrong to borrow anything from anyone with no intentions of returning the loan or item in the end...

I think this should be very obvious...

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[confettiflyer]

I still don't see the problem here:

1) I sign a contract to borrow money in 2008
2) I fulfill the contract while I'm in IBR in 2012-2022
3) I fulfill the contract in 2022 by working 10 years at a 501(c)3 organization and have the remainder of my loan balance discharged

We all agreed to the terms in 2008, both people/entities who signed the contract in 2008 seem to be fine and happy.

Why are y'all who were not party to this contract suddenly coming out of the woodwork and calling this unethical?

tl;dr version: I borrowed money, I followed the terms to the letter, y u mad bro/sis?

 

[type b pharmD]

IBR is not unethical. The ONLY REASON IBR came out was to give people more "wiggle" room in making payments. Instead of having to pay 2K or 3K a month you have the option of paying less per month. It's a nice way of giving people an option to pay less a month. It's mainly for people that have a hard time finding a good paying job or someone that chose to do a residency and can't afford full payment etc. That was the REASON WHY IBR came out.

Ethical people use IBR b/c 1) it is taking them longer than planned to find a good paying job. 2) They are doing a residency or 3) They just want more wiggle room in making payments. They will most likely pay the loan off in 2 to 3 years...but they choose IBR so they won't be LOCK into paying 3K a month.

Ethical people HAD FULL INTENTIONS of paying ALL their loans off when they borrowed them.

I borrowed as little as possible (less than 100K) because I had the FULL INTENTION of paying my loans off in full. Why? b/c that's the ethical thing to do. The ONLY reason I would choose IBR is b/c of reason 3) getting more wiggle room...but I most likely will just pay my loans off in 2 years and get it over with.

Okay now let me explain why I feel it can be used unethically. IBR itself is NOT unethical. It's just an option given so people can have more wiggle room in payments. It's the PEOPLE'S INTENTIONS on here that are extremely unethical.

So users on this thread are 1) borrowing MORE MONEY then they need NOT b/c they actually need it but for the sole purpose of NOT having to pay it back. Their reasoning is....I'll borrow AS MUCH AS POSSIBLE b/c I don't have to pay it back! I can use IBR! YAY!!! 2) it's UNETHICAL b/c you are borrowing money with the intentions of NEVER making a payment from the very begining! The only reason you are borrowing this insane amount is b/c you think it's going to be all "Forgiven".

SO we both agree bankruptcy is unethical b/c the person went into it maxing out all credit cards, borrowing as much as possible with what????? The intentions of NEVER paying back a penny. They will file bankruptcy as soon as they max everything out.

SOME people on IBR are borrowing an insane amount of money with what????? the same fu*king intentions of NOT making any payments and having it "forgiven" and forcing hardworking people that pay taxes to pay it off for them???

BOTH scenrios with the SAME INTENTIONS of taking a huge loan out with NO INTENTIONS of paying back the debt. To me it's the same thing. SAME intentions of NOT making payments...so the same crime.



1) You borrowed it so you should pay it back. It's what ethical people do. Do you ever return anything you borrow? or do you keep everything?

2) I already explained about why I feel it's unethical... the fact that you borrow money in the begining with NO intentions of paying it back is in itself unethical. Ethical people don't borrow anything with the intentions of NOT returning the item...there just aren't any excuses to this.

3) Donating????? OMG. YOU BORROW the money to use for yourself. Giving it back is call RETURNING. Donating is actually giving your own hard earn money to someone else. People on IBR will NEVER donate anything. That's a guarantee...they only take. They will never give..so no you will never be donating. That's a save bet.




In your case it's 100% fine. You said yourself you are only doing it b/c of residency and you will be paying it all off shortly afterwards which is what the POINT of IBR was for...it's for people doing residencies to LOWER their payments while they are not making full salary to get a small break.

IBR is NOT for people to get ideas of borrowing tons of money they don't need ONLY b/c it will be "forgiven" 25 yrs down the line. That is NOT what the lenders want at all. The lenders TRUST that people would be ethical and pay them back ASAP when they get full time jobs...but unfortunately people are not very ethical.



Read above. Your intentions are wrong if you borrowed the money with NO intentions of paying it back.

It's wrong to borrow anything from anyone with no intentions of returning the loan or item in the end...

I think this should be very obvious...

Well, for us IBR users, I think it would be fair to say we borrowed with the intention of paying back what is expected and required of us under the contract we signed with the department of education. We never borrowed with the intent of paying back MORE than is expected, that's for sure.

 

[SHC1984]

I still don't see the problem here:

1) I sign a contract to borrow money in 2008
2) I fulfill the contract while I'm in IBR in 2012-2022
3) I fulfill the contract in 2022 by working 10 years at a 501(c)3 organization and have the remainder of my loan balance discharged

We all agreed to the terms in 2008, both people/entities who signed the contract in 2008 seem to be fine and happy.

Why are y'all who were not party to this contract suddenly coming out of the woodwork and calling this unethical?

tl;dr version: I borrowed money, I followed the terms to the letter, y u mad bro/sis?

I am not mad at any one person at all.

It's just very frustrating that Obama is elected into office and taxes are going up from 28% to 36% starting Jan 2013. MOST of my future paycheck will be going into taxes already....it doesn't sound very comforting to hear about people discharging loans so future tax payers (like myself) will end up with the bill.

It might sound happy for the folks that get to discharge large loans but it does not sound happy for future tax payers (ME).

 

[type b pharmD]

I am not mad at any one person at all.

It's just very frustrating that Obama is elected into office and the marginal tax rate for the highest income earners is going up from 28% to 36% starting Jan 2013. MOST of my future paycheck will be going into taxes already....and it doesn't sound very comforting to hear that my tax dollars may be given to other people.

It might sound happy for the folks that get to discharge large loans but it does not sound happy for future tax payers (ME).

Fixed that for you.

It's surprising to hear that you will be paying more taxes than everyone else. What does "MOST" mean? >75%?

You might be surprised to learn that the average federal tax rate for a pharmacist is in the 20% range.. adding 6% fica and 8% effective state tax , and you come out <35%

So if 'most' of your money is going to taxes, I could see why you'd start from a point of being upset when you are paying basically double on taxes compared to your peers and also all of your loans.

 

[confettiflyer]

I am not mad at any one person at all.

It's just very frustrating that Obama is elected into office and taxes are going up from 28% to 36% starting Jan 2013. MOST of my future paycheck will be going into taxes already....it doesn't sound very comforting to hear about people discharging loans so future tax payers (like myself) will end up with the bill.

It might sound happy for the folks that get to discharge large loans but it does not sound happy for future tax payers (ME).

Yah you should complain to that damn socialist in 2007 who passed the forgiveness law I intend to use.

I think his name was George W. Bush.

 

[pezdispenser]

Was using the default finaid.org discount rate of 5.8% .. which all things considered seems like a reasonable 'wash' given an expected increased future rate of inflation, current treasury 30 year rate, and risk premium.

I would hope that someone smart and motivated enough to become a PharmD, could generate a 2-2.5% return over inflation with some elbow grease and some investment capital saved by not paying full loan repayment.

If you are only expecting to break even on inflation, then saving the money up front and delaying loan payback doesnt make as much sense. Personally I am hoping to start/expand a business and buy a home with the money saved from IBR

Careful, that discount rate and all the assumptions that go into it can make or break your entire argument... But I don't care about this issue as much as other posters do, or take it personally enough to argue about it...

 

[SHC1984]

Fixed that for you.

It's surprising to hear that you will be paying more taxes than everyone else. What does "MOST" mean? >75%?

You might be surprised to learn that the average federal tax rate for a pharmacist is in the 20% range.. adding 6% fica and 8% effective state tax , and you come out <35%

So if 'most' of your money is going to taxes, I could see why you'd start from a point of being upset when you are paying basically double on taxes compared to your peers and also all of your loans.

Well it's going up to 36% starting Jan 2013. <30% was in the past.

36% is MOST of my money...that's money I could be using for me, but instead it's going to medicaid babies and people that didn't pay back their student loans.

Yah you should complain to that damn socialist in 2007 who passed the forgiveness law I intend to use.

I think his name was George W. Bush.

Why on earth did he do that? I don't get it. He never had to take out a student loan in his life.

 

[confettiflyer]

Why on earth did he do that? I don't get it. He never had to take out a student loan in his life.

No idea. Not questioning it now.

It's ok SHC, I'll take the money I saved with loan forgiveness and take you around town with it.

 

[type b pharmD]

Careful, that discount rate and all the assumptions that go into it can make or break your entire argument... But I don't care about this issue as much as other posters do, or take it personally enough to argue about it...

Yes, a lot of assumptions are being made. Having a spouse that is employed, having any substantial level of taxable assets, not getting married, not having tax shields, any one of those would assuredly wreck the profitability of my IBR model.

I do think that a 3% discount rate is exceedingly conservative though.

 

[SHC1984]

No idea. Not questioning it now.

It's ok SHC, I'll take the money I saved with loan forgiveness and take you around town with it.

I think I'll be less bitchy and cranky when I finally land a job...but before than I'll be pissy. LOL....

Target interview tomorrow. Wish me luck.

 

[SHC1984]

No idea. Not questioning it now.

It's ok SHC, I'll take the money I saved with loan forgiveness and take you around town with it.

Nah, you need to take that money and save it for a down payment for a house in San Franciso!!! It's gonna cost you at least 800K.

Start saving boy!!!!!!!!!!!!!!!!

 

[pezdispenser]

At this stage, it looks like we might even go over the fiscal cliff and ALL of the tax brackets will go up around 3%:

10% -> 15% (eliminated)

15% -> 15% for singles this is for income $0-36k. Married $0-61k, which is not double the singles because the marriage penalty relief has been eliminated.

25% -> 28% Singles $36k-88k. Married $61k-146k

28% -> 31% Singles $88k-183k. Married $146k-223k

33% -> 36% Singles $183k-398k. Married $223k-398k, very bad marriage penalty here.

35% -> 39.6% +398k+

Also the 2% Social Security tax cut will be canned (4.2% -> 6.2% on $0-$110k).

So I'm preparing for a roughly 5% tax increase if we go over the cliff.

But, hey I'm thinking of having a "cliff party" at my place on 12/31/2012. Don't forget to bring your food stamps!!!

 

[confettiflyer]

But, hey I'm thinking of having a "cliff party" at my place on 12/31/2012. Don't forget to bring your food stamps!!!

I'm cutting back on Starbucks.

Also, us Californians face a sales tax increase of 0.25% as well. Statewide sales tax rate is now 7.5%. Double squeeze!

Beats shoveling snow, though.

 

[BMBiology]

I still don't see the problem here:

1) I sign a contract to borrow money in 2008
2) I fulfill the contract while I'm in IBR in 2012-2022
3) I fulfill the contract in 2022 by working 10 years at a 501(c)3 organization and have the remainder of my loan balance discharged

We all agreed to the terms in 2008, both people/entities who signed the contract in 2008 seem to be fine and happy.

Why are y'all who were not party to this contract suddenly coming out of the woodwork and calling this unethical?

tl;dr version: I borrowed money, I followed the terms to the letter, y u mad bro/sis?

So what are you going to do if you can't get a job working for a 501(c)3 organization? It's already hard to get one of those jobs. Now, I am sure it is even more difficult. What is your plan b?

 

[BMBiology]

So true! We are good at keeping ours down, but I'm not giving away my secrets!

I will give it away: http://www.kiplinger.com/columns/ask/archive/2008/q1124.htm

What's a big deal? How are you going to put money away for your retirement when you don't make enough? Need to take out your money before you retired? You are going to get taxed and have to pay penalty!

Buy equipment for your "business"? Sure, what you gotta spend money first though.

 

[BMBiology]

1) $75,000 - AGI .. you cant calculate IBR payments without an AGI. Let's just assume a 90k gross income, which is pretty much 75k AGI after usual and customary deductions (ie HSA, IRA,).

2) Separately, spouse's income is $0

3) No children , family size of 2

4) 265k , 7.4% interest.

Try it out for yourself ! And let me know what income growth rate you used. I was generous and used the expected COLA/CPI growth rate.

Edit: Just ran these numbers for you. NPV paid is 71k .. NPV savings is 215k .. Total Savings is 275k versus standard repayment.

You have never explained how you are planning to reduce your AGI from 90 to 75 K?

What a crappy deal. Borrowed 265 K in student loans just to get a pharm.d? A job that usually only pays $120 k a year?

Sure, marrying someone who doesn't work help! Might as well have 10 children! That would also reduce your monthly payment.

So, tell us how are you not going to pay taxes on your loan forgiveness.

Hey, I got a better plan for you. Move to Canada and don't pay back your student loan. That's a much better way.

 

[All4MyDaughter]

I will give it away: http://www.kiplinger.com/columns/ask/archive/2008/q1124.htm

What's a big deal? How are you going to put money away for your retirement when you don't make enough? Need to take out your money before you retired? You are going to get taxed and pay penalty!

What are you talking about?

 

[confettiflyer]

So are you going to do if you can't get a job working for a 501(c)3 organization? It's already hard to get one of those jobs. Now, I am sure it is even more difficult. What is your plan b?

Plan b = negotiate $10k more with a private employer as I've pegged the forgiveness benefit to be worth approximately this much to me (using my wizard SWAG).

But at this point, my employment prospects at a 501(c)3 hospital isn't really an issue.

plan c = hobble together per diem jobs at 501(c)3's to = 32hrs/week

plan d = suck it up and hope inflation kicks in

 

[confettiflyer]

I will give it away: http://www.kiplinger.com/columns/ask/archive/2008/q1124.htm

What's a big deal? How are you going to put money away for your retirement when you don't make enough? Need to take out your money before you retired? You are going to get taxed and pay penalty!

...this came out of left field....

EDIT: not to mention this article is wholly out of date....there are no income limits on Roth conversions anymore.

Wait...when the hell were we talking about roth conversions?

EDIT x2: and what the hell...withdrawals from roths aren't always taxed/penalized, you're confused with other tax-advantaged accounts.

 

[All4MyDaughter]

...this came out of left field....

Right?! I think he's losing it.

 

[BMBiology]

...this came out of left field....

EDIT: not to mention this article is wholly out of date....there are no income limits on Roth conversions anymore.

Wait...when the hell were we talking about roth conversions?

EDIT x2: and what the hell...withdrawals from roths aren't always taxed/penalized, you're confused with other tax-advantaged accounts.

Give me a break. Most people can't reduce their AGI except 401 k not because they don't know how but simply because they don't have the money to spend. It's that simple.

 

[BMBiology]

Plan b = negotiate $10k more with a private employer as I've pegged the forgiveness benefit to be worth approximately this much to me (using my wizard SWAG).

But at this point, my employment prospects at a 501(c)3 hospital isn't really an issue.

plan c = hobble together per diem jobs at 501(c)3's to = 32hrs/week

plan d = suck it up and hope inflation kicks in

Right C: keep me updated.

 

[confettiflyer]

Give me a break. Most people can't reduce their AGI except 401 k not because they don't know how but simply because they don't have the money to spend. It's that simple.

Okay so we're not talking about old ass Roth IRA tax advice, glad we cleared that one up.

But anyway, not my problem if people don't know how to take advantage of tax deductions. Yes, salaried people who don't itemize get screwed for most deductions out there. Business owners (like me and A4M) usually have more tools to play around with when it comes to AGI reduction. Just how the game is played.

 

[confettiflyer]

Right C: keep me updated.

oh don't worry, i shall have a grand thread in 2022 highlighting the success or failure of my plan, complete with document scans and deidentified tax documents.

I figure I've been on SDN for 8 years, I can handle another 10.

If I forget, A4M, SHC, and rxlea know me offline so bug them to bug me.

 

[BMBiology]

What are you talking about?

Buy equipment for your "business"? Sure, you gotta spend money first though.

 

[BMBiology]

Business owners (like me and A4M) usually have more tools to play around with when it comes to AGI reduction. Just how the game is played.

Business owners? Anyone can start a business. Join market american and you too can be a "business" owner. That hard part is actually making a profit. If you are so lucky, then your AGI is going to go up and your monthly payment will go up too.

 

[All4MyDaughter]

Buy equipment for your "business"? Sure, you gotta spend money first though.

I am really having trouble understanding you. But that's fine, because I don't need to explain anything to you. And I don't need your advice about financial matters. Thanks anyway, kiddo.

 

[BMBiology]

I am really having trouble understanding you. But that's fine, because I don't need to explain anything to you. And I don't need your advice about financial matters. Thanks anyway, kiddo.

sure, grandma!

 

[All4MyDaughter]

sure, grandma!

Some of my friends are grandparents. Lame insult. And anyway, you should respect your elders.

I'm not trying to hurt your feelings, but if you think I want or need financial advice from a 20-something who lives with Mom and Dad, you're just naive. Especially because you don't seem to understand some of the things you're talking about.

 

[confettiflyer]

Business owners? Anyone can start a business. Join market american and you too can be a "business" owner. That hard part is actually making a profit. If you are so lucky, then your AGI is going to go up and your monthly payment will go up too.

I don't understand what's going on here either.

 

[xiphoid2010]

I still don't see the problem here:

1) I sign a contract to borrow money in 2008
2) I fulfill the contract while I'm in IBR in 2012-2022
3) I fulfill the contract in 2022 by working 10 years at a 501(c)3 organization and have the remainder of my loan balance discharged

We all agreed to the terms in 2008, both people/entities who signed the contract in 2008 seem to be fine and happy.

Why are y'all who were not party to this contract suddenly coming out of the woodwork and calling this unethical?

tl;dr version: I borrowed money, I followed the terms to the letter, y u mad bro/sis?

No problem there bro.

I think it's fair game to use forgiveness as an incentive to encourage public service /undeserved area. The exact year of service might differ by people but 10 years doesn't sound too far off the ball park to me.

My question is why incentivize for others who work max pay in for procit/private sector? If I charge up my credit card for goods or school, do minimum payment, I don't get a forgiveness after 20/25 yr payment. If you can pay, then they should. What's the rational for forgiveness at tax payers expense? For these IMHO should only be when their income drop below a certain level, which may or may not be 150% poverty.

 

[xiphoid2010]

I'm cutting back on Starbucks.

Also, us Californians face a sales tax increase of 0.25% as well. Statewide sales tax rate is now 7.5%. Double squeeze!

Beats shoveling snow, though.

Chit, I miss the snow here. But at least no state tax yo!

 

[All4MyDaughter]

No problem there bro.

I think it's fair game to use forgiveness as an incentive to encourage public service /undeserved area. The exact year of service might differ by people but 10 years doesn't sound too far off the ball park to me.

My question is why incentivize for others who work max pay in for procit/private sector? If I charge up my credit card for goods or school, do minimum payment, I don't get a forgiveness after 20/25 yr payment. If you can pay, then they should. What's the rational for forgiveness at tax payers expense? For these IMHO should only be when their income drop below a certain level, which may or may not be 150% poverty.

I think that's how the programs work, right?

PSLF - loan forgiveness for those who work in public sector/underserved, etc. We all agree that's legit and a good thing, yes?

IBR - can get loan forgiveness after a certain time period, but ONLY if you qualify by virtue of having lower income. If someone is truly working "for max pay" in the "for profit/private sector" - would they even qualify for IBR? I don't know what the income limits are, but I would guess that most high compensated workers would not qualify.

 

[BMBiology]

This is getting too silly (even for my standards).

I will say this:

(1) If you are interested in IBR, punch in your numbers in the IBR calculator and see if you really benefit from it.

(2) It feels f*cking great paying back your student loans early.

 

[confettiflyer]

No problem there bro.

I think it's fair game to use forgiveness as an incentive to encourage public service /undeserved area. The exact year of service might differ by people but 10 years doesn't sound too far off the ball park to me.

My question is why incentivize for others who work max pay in for procit/private sector? If I charge up my credit card for goods or school, do minimum payment, I don't get a forgiveness after 20/25 yr payment. If you can pay, then they should. What's the rational for forgiveness at tax payers expense? For these IMHO should only be when their income drop below a certain level, which may or may not be 150% poverty.

See that's a good argument to make. People are unable to separate out ethics from contracts, intent from obligation. In my financial life, there are no ethics or intent, only clauses and rational decisions with consequences at either end.

The political side of me sees your point, it doesn't make any sense for there to be taxpayer support for people like me who are essentially rewarded for doing the exact same thing they were going to do. It's not an "incentive" for me anymore, it's a reward for just doing what I'm doing, which is a waste of taxpayer money.

But financially...I have a fiduciary duty to my own self/family/future, much like a corporation has towards its shareholders. So I reduce the decision making process down to numbers and go with it.

I figure I have better than Las Vegas house odds on IBR/PSLF surviving until 2022 to give me a benefit, and the only potential downside is paying a bit more than I thought I would.

 

[All4MyDaughter]

I don't understand what's going on here either.

That post you quoted was particularly mystifying. What is market american?

 

[confettiflyer]

That post you quoted was particularly mystifying. What is market american?

i don't know...tupperware?

 

[joetrisman]

See that's a good argument to make. People are unable to separate out ethics from contracts, intent from obligation. In my financial life, there are no ethics or intent, only clauses and rational decisions with consequences at either end.

The political side of me sees your point, it doesn't make any sense for there to be taxpayer support for people like me who are essentially rewarded for doing the exact same thing they were going to do. It's not an "incentive" for me anymore, it's a reward for just doing what I'm doing, which is a waste of taxpayer money.

But financially...I have a fiduciary duty to my own self/family/future, much like a corporation has towards its shareholders. So I reduce the decision making process down to numbers and go with it.

I figure I have better than Las Vegas house odds on IBR/PSLF surviving until 2022 to give me a benefit, and the only potential downside is paying a bit more than I thought I would.

The first trap in ethics is rationalization

 

[confettiflyer]

(1) If you are interested in IBR, punch in your numbers in the IBR calculator and see if you really benefit from it.

It's only a "benefit" if you can discharge a balance at the end of a term (10 or 25 years). Otherwise, it's a stop gap measure that's somewhere between a fully amortized 10 year payment and a temporary deferment/forbearance that ends up increasing the total amount owed.

(2) It feels f*cking great paying back your student loans early.

It will probably feel even better paying less than the amount owed and not being taxed on the discharged balance. Heck I'll even buy you a beer if I get 1 of those 2.*

*pending legislative action as per your prediction

 

[confettiflyer]

The first trap in ethics is rationalization

I forcibly removed ethics from my financial decision making a long LONG time ago...I pulled him out like a rotten tooth!

 

[xiphoid2010]

I forcibly removed ethics from my financial decision making a long LONG time ago...I pulled him out like a rotten tooth!

I don't fault you for doing what is legally allowed. Th whole democratic system is baed on everyonr doning whats right for himself = what's right for the whole. More reasons why I don't have much faith in our political system.

 

[Its Z]

Y'all aren't happy unless y'all are arguing...

 

[confettiflyer]

Y'all aren't happy unless y'all are arguing...

SDN... serious discussion network?

 

[pezdispenser]

I'm cutting back on Starbucks.

Also, us Californians face a sales tax increase of 0.25% as well. Statewide sales tax rate is now 7.5%. Double squeeze!

Beats shoveling snow, though.

It's more than just a few Starbucks.

I calculated for a single pharmacist with taxable income of $90k (after all deductions and exemptions), that if we go over the cliff and the Bush tax cuts expire for everyone, and the 2% Social Security tax cut expires, then taxes will increase about:

$360 per month!

That's almost an Escalade!

 

[SHC1984]

It will probably feel even better paying less than the amount owed and not being taxed on the discharged balance. Heck I'll even buy you a beer if I get 1 of those 2.*

*pending legislative action as per your prediction

I thought you DO get taxed on the discharge? Is there a scheme to get out of that too? lol

And what the hell is AGI? Sorry I have no idea what it is.

Last question...exactly HOW MUCH do someone need to borrow in order to "benefit" from IBR? obviously if you borrow only 50K or 80K it will be better to pay it all off ASAP b/c if you wait 25 yrs...the interest you will be paying on those loans will be much more than if you just pay it off ASAP.

What's the amount you have to borrow in order to actually benefit from IBR?

NO, I am NOT asking so I can borrow more money. I borrow almost 90K now...I do NOT want to borrow more. LOL..I am just curious. That's all.

 

[SHC1984]

It's more than just a few Starbucks.

I calculated for a single pharmacist with taxable income of $90k (after all deductions and exemptions), that if we go over the cliff and the Bush tax cuts expire for everyone, and the 2% Social Security tax cut expires, then taxes will increase about:

$360 per month!

That's almost an Escalade!

Well, there are tons of medicaid babies and lazy asses with no jobs in this country.

In order to support those people hardworking people have to pay taxes.

Gotta love it.

 

[pezdispenser]

I thought you DO get taxed on the discharge? Is there a scheme to get out of that too? lol

There is the Public Service Loan Forgiveness program where you work for a non-profit, make payments for 10 years (under IBR), and get the remaining balance after 10 years forgiven. The amount forgiven under PSLF is not taxed.

And what the hell is AGI? Sorry I have no idea what it is.

I'm not one to make like there is some black art to it. AGI is Adjusted Gross Income and is the last line on page 1 of your 1040. On that page you will see all of the ways to reduce your AGI such as:

- Health Savings Account. If you work for a company and have a Flexible Spending Account (for medical expenses) or one for Dependent Care (child care), these are already taken off your paycheck pre-tax.

- Moving expenses

- Self-employment tax (the half of Social Security and Medicare taxes that an employer normally pays).

- Self-employed retirement plans. An employee can contribute up to $17k to a 401(k) plus the employer match, but a self-employed person can make it so the total contribution is $50k. Of course, you can't use this money until you retire.

- Self-employed health insurance. If you are an employee, this is already taken out of your paycheck pre-tax.

- Alimony paid

- IRA. There is a $68k/112k income limit, so generally we are not eligible for this.

- Student loan interest. Again there is an income limit of $75k/150k.

- Also, some lines in the income section can be made negative if you make a loss, such as from a business or investments, which opens up a whole new world of deductions.

These are all known as "above the line" deductions which reduce your AGI, and is advantageous because your AGI is used to determine other things like the IBR payment.

There are many other deductions to reduce your taxable income that you can take on page 2 of your 1040, but these are "below the line" deductions because they do not reduce your AGI.

But the problem of focusing on deductions is that, sure you can get tax benefits by deducting a lot of 'necessary' or 'baseline' expenses, but if you want to have some 'fun money' like to go out and buy a Herve Leger dress or other luxury items, you eventually have to move up to a higher income level, which will disqualify you from some deductions. Well, that's more of my personal opinion, and I'm comfortable paying the taxes I do now. Not oppressive, but still have some social safety net. Being in a state without income tax helps A LOT though, like Texas or Florida. If I were in California or NY, I'd probably have the opposite view...

Last question...exactly HOW MUCH do someone need to borrow in order to "benefit" from IBR? obviously if you borrow only 50K or 80K it will be better to pay it all off ASAP b/c if you wait 25 yrs...the interest you will be paying on those loans will be much more than if you just pay it off ASAP.

What's the amount you have to borrow in order to actually benefit from IBR?

NO, I am NOT asking so I can borrow more money. I borrow almost 90K now...I do NOT want to borrow more. LOL..I am just curious. That's all.

You have to borrow more than roughly two times your expected salary, for anything to be leftover after 25 years. Even if there is something leftover, you are exactly right in that the interest over 25 years, or the tax on the amount forgiven will not make it worthwhile.

 

[BMBiology]

I'm not one to make like there is some black art to it. AGI is Adjusted Gross Income and is the last line on page 1 of your 1040. On that page you will see all of the ways to reduce your AGI such as:

- Health Savings Account. If you work for a company and have a Flexible Spending Account (for medical expenses) or one for Dependent Care (child care), these are already taken off your paycheck pre-tax.

- Moving expenses

- Self-employment tax (the half of Social Security and Medicare taxes that an employer normally pays).

- Self-employed retirement plans. An employee can contribute up to $17k to a 401(k) plus the employer match, but a self-employed person can make it so the total contribution is $50k. Of course, you can't use this money until you retire.

- Self-employed health insurance. If you are an employee, this is already taken out of your paycheck pre-tax.

- Alimony paid

- IRA. There is a $68k/112k income limit, so generally we are not eligible for this.

- Student loan interest. Again there is an income limit of $75k/150k.

- Also, some lines in the income section can be made negative if you make a loss, such as from a business or investments, which opens up a whole new world of deductions.

These are all known as "above the line" deductions which reduce your AGI, and is advantageous because your AGI is used to determine other things like the IBR payment.

There are many other deductions to reduce your taxable income that you can take on page 2 of your 1040, but these are "below the line" deductions because they do not reduce your AGI.

But the problem of focusing on deductions is that, sure you can get tax benefits by deducting a lot of 'necessary' or 'baseline' expenses, but if you want to have some 'fun money' like to go out and buy a Herve Leger dress or other luxury items, you eventually have to move up to a higher income level, which will disqualify you from some deductions.

Wait a minute, I thought only A4M and Type B know about this! Don't give away their secrets!

 

[KARM12]

The funniest thing is that you all assume that these benefits will still exist x yrs down the road...