New way To pay off Student Loans

[cheathac]

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So I go to Purdue University and thy are launching this new idea of getting rid of student debt. I believe it will take into place next spring. What are your guys' thoughts?

http://wlfi.com/2015/08/14/purdue-announces-new-way-to-pay-for-an-education/

 

[WildZoo]

To me this doesn't sound too different from a loan that you are paying via IBR but maybe I'm misunderstanding.

 

[cheathac]

Well I believe that no interest accumulates. It's adjusted with income as well.. I'm not sure what the IBR is. Can you enlighten me?

 

[WildZoo]

Well I believe that no interest accumulates. It's adjusted with income as well.. I'm not sure what the IBR is. Can you enlighten me?

Ah that's what i missed. The no interest part would be nice.

IBR is income based repayment, so a similar thing, your monthly minimum payments are adjusted based on your income. After 20 (or 25? I always forget) years whatever is left is forgiven but you have to pay income tax on that amount. So this new plan sounds like they take a certain amount of your income until the full amount is paid off. Since it doesn't accumulate interest that might actually work out well. But i don't know, I'm not that financially savvy (yet).

 

[cheathac]

Me neither.. I know many have shown their displeasure. but to me it's appealing. There are caps I believe, your payments can't exceed 15% if on the shorter plan.. I can't remember the longer plan cap. And if you earn less than 18,000 a year you don't pay the investors at all? Seems interesting to look into. Especially since specializing and doing a residency is what I would love to do.

 

[Gwenevre]

I think the longer term cap is around 7%. I saw this on my feed as well. I think it's a good option for students who know that they will be entering low-income jobs immediately post-graduation, but if I knew that my field averaged 60k post-undergrad, I would not be a fan of only paying %15 if I could feasibly pay a larger amount of loans in a shorter amount of time.