Student loan 10K cancellation

[Redpancreas]

Does this apply to current medical students and residents with unsubsidized federal loans? If so I’ll take it!

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[operaman]

Seems like it would theoretically. Most attendings won’t qualify based on income, but we’ve also benefitted from the long payment and interest pause which at least for me has amounted to a LOT more than 10k.

Not the plan I would have chosen - I think some kind of interest rate reduction that was also retroactive might have been easier to sell, and made things a bit easier on future borrowers as well.

I hope some of the proposed rules on income based repayment plans pass as they would help docs dramatically. One in particular would prevent interest accrual if your income based payment doesn’t cover the interest - could help residents/fellows a LOT, especially those with longer programs.

 

[Rapsidy]

It’s going to get challenged in court, which will take at least 2 years if we assume a fast pace through the system.

Until the legality of the order is hammered out, I’m assuming nothing has changed.

 

[RangerBob]

I believe only undergraduate loans are eligible

 

[OfMiceAndWomen]

Grad loans are eligible. WaPo is reporting that only loans originating before July 1, 2022 will be eligible.

 

[FutureInternist]

It also makes certain provisions for IBR and other things so will help future borrowers too.

 

[CanIBeAnonymous]

20k*

😎​

​

Would be big for me, I entered undergrad during one of the highest interest rates on student loans and they've been ramming me (well before the interest freeze)

 

[Redpancreas]

It’s going to get challenged in court, which will take at least 2 years if we assume a fast pace through the system.

Until the legality of the order is hammered out, I’m assuming nothing has changed.

I was expecting to login today and find my loan balance 10K less.

 

[Redpancreas]

I believe only undergraduate loans are eligible

That’s what someone else told me. Why is this so confusing.

 

[RangerBob]

That’s what someone else told me. Why is this so confusing.

I looked at White House's release after my comment yesterday and it doesn't say anywhere it's for undergrads only. The only thing specific to undergrads is the new IBR program that will halve one's monthly payment is for undergrad loans. I'm not sure how that works if you have a mix of undergrad/grad loans.

I think Pell grants are just for undergrads too right? If so, only people with undergrad loans could get the $20k in forgiveness, but it does sound like if you are under the income limit and have any debt, you should get the $10k forgiveness at minimum, and another $10k if you have the Pell grant.

I'm a bit bummed I'm not eligible--$10k is $10k, but it makes sense not for forgive high earner's debt. Besides, Trump and Biden already "forgave" probably like $25-40k already for me with the interest rate freeze. I'd have to do some math to calculate it as I refinanced quite a bit partway through, but it was certainly quite significant.

I still think the policy is misguided and that the focus should be on stopping/slowing the ever growing cost of college, but if a lot more (mostly young) people will sleep better at night, then I'm happy for them. For people who don't agree, it's probably worth considering a lot of those people getting their debt forgiven were never going to pay it off anyway (a significant portion of those getting their debt wiped away never finished their degree/have been in default on their loans), so it's also sort of the equivalent of my billers just writing off the debt of patients who can't pay.

 

[sloop]

Most attendings won’t qualify based on income, but we’ve also benefitted from the long payment and interest pause which at least for me has amounted to a LOT more than 10k.

I am interested to see the specifics. I just graduated fellowship and started an attending job. Based on my current salary, I wouldn’t qualify. However, my experience has been that there is a generally a “lag” in income when it comes to these things because they go off your most recent tax filing. This has happened with my my income for income-driven repayment (I.e. as an intern, my income was zero dollars because I submitted a tax return with no income as a med student, as a PGY-2 it was based on half my PGY-1 income because that was what was reported for my tax filing as an intern, etc.).

I think there was some indication that this might happen automatically for borrowers who the DoE has income information for, which I took to mean that they might do it based on the most recent income verification. I also assume that if they require new income verification, it will be based on the last tax filing, in which case I would qualify based on my fellow salary.

In any case, I’m pursuing PSLF, so it doesn’t really matter in the end. I won’t be too broken up if I don’t get this, but I won’t turn down the opportunity to get 10K knocked off the top.

 

[Lem0nz]

I looked at White House's release after my comment yesterday and it doesn't say anywhere it's for undergrads only. The only thing specific to undergrads is the new IBR program that will halve one's monthly payment is for undergrad loans. I'm not sure how that works if you have a mix of undergrad/grad loans.

I think Pell grants are just for undergrads too right? If so, only people with undergrad loans could get the $20k in forgiveness, but it does sound like if you are under the income limit and have any debt, you should get the $10k forgiveness at minimum, and another $10k if you have the Pell grant.

I'm a bit bummed I'm not eligible--$10k is $10k, but it makes sense not for forgive high earner's debt. Besides, Trump and Biden already "forgave" probably like $25-40k already for me with the interest rate freeze. I'd have to do some math to calculate it as I refinanced quite a bit partway through, but it was certainly quite significant.

I still think the policy is misguided and that the focus should be on stopping/slowing the ever growing cost of college, but if a lot more (mostly young) people will sleep better at night, then I'm happy for them. For people who don't agree, it's probably worth considering a lot of those people getting their debt forgiven were never going to pay it off anyway (a significant portion of those getting their debt wiped away never finished their degree/have been in default on their loans), so it's also sort of the equivalent of my billers just writing off the debt of patients who can't pay.

How far out from training are you? Its based on 2020 and 2021 tax returns. If in either year you were below 125k you qualify. I make way above the 125k threshold but still qualify because in 2020 I was at like 65k.

Its crazy. I'm not upset and I'll take any help I can get, but that + payment pause for ~3 years + 7 years of training + PSLF, I will have a nearly free medical degree and masters degree. The 10k will wipe out the remaining balance on the masters degree I did in PGY4-5 year and PSLF will nuke the rest.

 

[RangerBob]

How far out from training are you? Its based on 2020 and 2021 tax returns. If in either year you were below 125k you qualify. I make way above the 125k threshold but still qualify because in 2020 I was at like 65k.

Its crazy. I'm not upset and I'll take any help I can get, but that + payment pause for ~3 years + 7 years of training + PSLF, I will have a nearly free medical degree and masters degree. The 10k will wipe out the remaining balance on the masters degree I did in PGY4-5 year and PSLF will nuke the rest.

My fellowship wrapped up in 2018, so that was the last year I made a lose enough income to be eligible.

Oh well. Im happy for everyone that gets forgiveness. I’ve benefited from government/tax policies in other ways. We all do at some point or another

 

[Gilakend]

Any idea if incoming MS1s who took out federal unsub loans beginning of August would be covered?

No. I read the loans had to be taken out by June 2022.

 

[Gilakend]

My big question is if you get to pick which loans get removed? I had some great loans (LDS) that are subsidized in residency so would prefer to remove the high-interest rate unsub loans.

 

[CanIBeAnonymous]

My big question is if you get to pick which loans get removed? I had some great loans (LDS) that are subsidized in residency so would prefer to remove the high-interest rate unsub loans.

That's my exact question. Is 20k just gonna disappear from my balance, and coincidentally be from the lowest interest ones? Will it be our earliest loans or latest?

Truly hope we get some say there.

 

[RangerBob]

That's my exact question. Is 20k just gonna disappear from my balance, and coincidentally be from the lowest interest ones? Will it be our earliest loans or latest?

Truly hope we get some say there.

My big question is if you get to pick which loans get removed? I had some great loans (LDS) that are subsidized in residency so would prefer to remove the high-interest rate unsub loans.

My guess is it'll be treated as an extra payment, which gets divided proportionately among all the loans (to interest first, then principle)

 

[Billiam95]

Terribly unfair - people who didn't go to college or grad school will subsidize those who do. The underlying problem - inflated cost of attendance due to guaranteed federal student loans - remains unaddressed, and we will be in the exact same place in 2 years time.

 

[CyrilFiggis]

Terribly unfair - people who didn't go to college or grad school will subsidize those who do. The underlying problem - inflated cost of attendance due to guaranteed federal student loans - remains unaddressed, and we will be in the exact same place in 2 years time.

Everything is terribly unfair. You only complain about this because it seems like people are getting free money. But the government bails out banks, airlines, oil companies, auto makers, etc, companies earning billions in profit. Heaven forbid we actually ease the burden on those who decided to pursue a higher education.

 

[CyrilFiggis]

Terribly unfair - people who didn't go to college or grad school will subsidize those who do. The underlying problem - inflated cost of attendance due to guaranteed federal student loans - remains unaddressed, and we will be in the exact same place in 2 years time.

Not to mention, Biden quietly discharged the debt of people who went to TRADE schools like ITT Tech and got scammed. My taxes subsidized those people, and I’m happy for them.

 

[VA Hopeful Dr]

Everything is terribly unfair. You only complain about this because it seems like people are getting free money. But the government bails out banks, airlines, oil companies, auto makers, etc, companies earning billions in profit. Heaven forbid we actually ease the burden on those who decided to pursue a higher education.

It's not the forgiveness I mind, it's the fact that nothing was changed to prevent this from being necessary again for the foreseeable future.

There's no reason the federal government needs to be charging three times my mortgage rate for student loans and there's also no reason to come out of any kind of school owing more than $300,000.

 

[Billiam95]

Everything is terribly unfair. You only complain about this because it seems like people are getting free money. But the government bails out banks, airlines, oil companies, auto makers, etc, companies earning billions in profit. Heaven forbid we actually ease the burden on those who decided to pursue a higher education.

People are getting free money, and people who did not go to higher ed or have already paid off their loans are paying for it. Bailouts of all of the above are bad and encourage future poor behavior if economic actors know they can count on a bail out.

 

[voxveritatisetlucis]

In real terms, the 10k will be negative because this is going to spur more inflation.

 

[MDMechEngr]

Tuitions will misteriously increase accross the board next year. LOL.

 

[operaman]

It's not the forgiveness I mind, it's the fact that nothing was changed to prevent this from being necessary again for the foreseeable future.

There's no reason the federal government needs to be charging three times my mortgage rate for student loans and there's also no reason to come out of any kind of school owing more than $300,000.

Exactly.

I wish they had done an interest rate reduction and made it retroactive for x number of years. I think a number of people who’ve paid off their principal many times over would have had their balance forgiven and think it would have been easier to sell to the public that these people paid back what they owed but the interest was keeping them from paying it off. Then the lower rate would also help reduce payments going forward and prevent the same thing from happening again.

 

[voxveritatisetlucis]

I mean theoretically the reason that rates are high is that there is no physical asset backstopping the loan.

Sure, for doctors the rates could be lower, seeing as they probably rarely default. But for the person going to state U to study accounting or something? It needs to be high to compensate for losses.

 

[VA Hopeful Dr]

I mean theoretically the reason that rates are high is that there is no physical asset backstopping the loan.

Sure, for doctors the rates could be lower, seeing as they probably rarely default. But for the person going to state U to study accounting or something? It needs to be high to compensate for losses.

Accountants make decent money

 

[deleted1139416]

How far out from training are you? Its based on 2020 and 2021 tax returns. If in either year you were below 125k you qualify. I make way above the 125k threshold but still qualify because in 2020 I was at like 65k.

Its crazy. I'm not upset and I'll take any help I can get, but that + payment pause for ~3 years + 7 years of training + PSLF, I will have a nearly free medical degree and masters degree. The 10k will wipe out the remaining balance on the masters degree I did in PGY4-5 year and PSLF will nuke the rest.

I’m currently an MS3, and I don’t know if I’ll go for PSLF. In theory it sounds great, especially if you are doing a longer residency. The problem is that PSLF, by it’s very nature, incentivizes you to make the bare minimum payment for 10 years. The problem is that the success rate of getting your loans forgiven is so low at the end of the 10 years because of all the red tape nonsense. And even though the Biden administration is trying to do away with that, the next president will likely try to make it just as as hard as it was. Betsy Devos practically ate children for breakfast to make sure as few people successfully completed the PSLF program as possible. And if you are unsuccessful in achieving PSLF then you just end up in a worse position from all the interest that accured.

 

[Lem0nz]

I’m currently an MS3, and I don’t know if I’ll go for PSLF. In theory it sounds great, especially if you are doing a longer residency. The problem is that PSLF, by it’s very nature, incentivizes you to make the bare minimum payment for 10 years. The problem is that the success rate of getting your loans forgiven is so low at the end of the 10 years because of all the red tape nonsense. And even though the Biden administration is trying to do away with that, the next president will likely try to make it just as as hard as it was. Betsy Devos practically ate children for breakfast to make sure as few people successfully completed the PSLF program as possible. And if you are unsuccessful in achieving PSLF then you just end up in a worse position from all the interest that accured.

I would take that in context. Appropriate planning and record keeping is all that is required. Multiple attendings on this site have successfully used PSLF.

 

[throwaway123342]

Everything is terribly unfair. You only complain about this because it seems like people are getting free money. But the government bails out banks, airlines, oil companies, auto makers, etc, companies earning billions in profit. Heaven forbid we actually ease the burden on those who decided to pursue a higher education.

Maybe those things are bad too?

 

[deleted1139416]

I would take that in context. Appropriate planning and record keeping is all that is required. Multiple attendings on this site have successfully used PSLF.

But for every one who did, there are several who couldn’t.

 

[SooConfused]

But for every one who did, there are several who couldn’t.

Couldn't, or didn't?

 

[sloop]

But for every one who did, there are several who couldn’t.

It’s very simple. Have the right type of loans, work for a qualifying employer, certify your employment, and make 120 payments and you will get forgiven. The problem is that a lot of people, especially the first people who were 10 years into the program, did not have qualifying loans and had not consolidated to a qualifying loan type.

Go to the PSLF subreddit. There are plenty of success stories. The people who actually pay attention to the requirements are having their loans forgiven.

 

[mvenus929]

The problem is that PSLF, by it’s very nature, incentivizes you to make the bare minimum payment for 10 years.

This bothers me only for those intentionally gaming the system. Think like consolidating loans right after graduation to forgo the mandatory 6 month grace period so they can get loans forgiven 6 months sooner. Of course, as I say this, I also haven't made a payment on my loans in 2.5 years despite being able to. But the people who ultimately qualify for forgiveness are also those making significantly less than those who are able to pay it off within 10 years (me sitting here making $170K as an attending after 6+1 years of training). But I should qualify for forgiveness in January 2025 and very much doubt I will have made a significant dent in the principal by then, since I still have about $50K in interest right now.

 

[deleted1139416]

This bothers me only for those intentionally gaming the system. Think like consolidating loans right after graduation to forgo the mandatory 6 month grace period so they can get loans forgiven 6 months sooner. Of course, as I say this, I also haven't made a payment on my loans in 2.5 years despite being able to. But the people who ultimately qualify for forgiveness are also those making significantly less than those who are able to pay it off within 10 years (me sitting here making $170K as an attending after 6+1 years of training). But I should qualify for forgiveness in January 2025 and very much doubt I will have made a significant dent in the principal by then, since I still have about $50K in interest right now.

I think most doctors still qualify for PSLF even with high salaries because 1) Some people have loans from undergrad and med school up to 500,000 and 2) Residency and fellowship payments contribute towards PSLF

But the problem is that PSLF incentivizes you to make the least payment possible for 10 years because if it’s all being forgiven, then what’s the point of paying more anyways? But making the bare minimum payment means you don’t make a dent in the principle for those 10 years and the interest keeps accruing - which means that if your PSLF doesn’t go through then you’re even more screwed.

 

[SooConfused]

This bothers me only for those intentionally gaming the system. Think like consolidating loans right after graduation to forgo the mandatory 6 month grace period so they can get loans forgiven 6 months sooner. Of course, as I say this, I also haven't made a payment on my loans in 2.5 years despite being able to. But the people who ultimately qualify for forgiveness are also those making significantly less than those who are able to pay it off within 10 years (me sitting here making $170K as an attending after 6+1 years of training). But I should qualify for forgiveness in January 2025 and very much doubt I will have made a significant dent in the principal by then, since I still have about $50K in interest right now.

No one is intentionally gaming anything. It's all a big gamble, there is "no one size fits all" answer that is right for everyone, and everyone should do what is right for them, based on their risk tolerance.

For some, that will mean attending the least expensive school. Others will want the highest ranked school, without regard to out of pocket cost, if it offers resources that enhance the possibility of matching into preferred residencies.

For some, the smartest move will be to borrow as little as possible and pay it back as quickly as possible. Others, banking on PSLF, will borrow the max, even forgoing less expensive schools or parental financial contributions, because, as @HipiMochi said, if any balance is going to be forgiven, every penny paid is a penny thrown away.

This could very well backfire if there are future changes to the program that make forgiveness more difficult, or impossible, to receive, if people who have already borrowed or entered repayment are not grandfathered into what they thought they had. It could also backfire if the borrower cannot get a job with an eligible employer, or if any such job would pay so much less over the remaining path to forgiveness that pursuing forgiveness doesn't make economic sense (i.e., making $600K+ less over 3-7 years in order to have $400K in loans forgiven).

There is absolutely no way for any of us to know how our student debt story is going to end until we get to the final chapter. As a result, as I said, it's not about "gaming." It's about understanding your tolerance for risk, and then acting accordingly (i.e., minimizing costs on the front end and paying any debt down as quickly as possible, going "all in" on debt, making minimum payments and hoping for massive relief, or doing anything in the middle).

No gaming, just financial management. Some buy bitcoin while others keep their money in a low interest bank account, or under their mattress.

 

[Ho0v-man]

Exactly.

I wish they had done an interest rate reduction and made it retroactive for x number of years. I think a number of people who’ve paid off their principal many times over would have had their balance forgiven and think it would have been easier to sell to the public that these people paid back what they owed but the interest was keeping them from paying it off. Then the lower rate would also help reduce payments going forward and prevent the same thing from happening again.

Absolutely. Tuition is obscene no doubt. But I’d argue the interest is much worse. It’s not as bad for us because we have so much earning potential. But people who obtain masters or PhDs and make <$70k get screwed the worst. They’ll never pay that off. Not to mention people who go to college only to eventually realize that higher education isn’t for them. They’re ruined now. They can pay the entire balance only to owe more than when they started.

There should not be this much risk involved in higher education. You shouldn’t have to worry about ruining your life when you try to better yourself.

 

[deleted1139416]

Absolutely. Tuition is obscene no doubt. But I’d argue the interest is much worse. It’s not as bad for us because we have so much earning potential. But people who obtain masters or PhDs and make <$70k get screwed the worst. They’ll never pay that off. Not to mention people who go to college only to eventually realize that higher education isn’t for them. They’re ruined now. They can pay the entire balance only to owe more than when they started.

There should not be this much risk involved in higher education. You shouldn’t have to worry about ruining your life when you try to better yourself.

Interest should be 0% for federal student loans, and there should be a cap on how much can go towards tuition.

 

[deleted1139416]

No one is intentionally gaming anything. It's all a big gamble, there is "no one size fits all" answer that is right for everyone, and everyone should do what is right for them, based on their risk tolerance.

For some, that will mean attending the least expensive school. Others will want the highest ranked school, without regard to out of pocket cost, if it offers resources that enhance the possibility of matching into preferred residencies.

For some, the smartest move will be to borrow as little as possible and pay it back as quickly as possible. Others, banking on PSLF, will borrow the max, even forgoing less expensive schools or parental financial contributions, because, as @HipiMochi said, if any balance is going to be forgiven, every penny paid is a penny thrown away.

This could very well backfire if there are future changes to the program that make forgiveness more difficult, or impossible, to receive, if people who have already borrowed or entered repayment are not grandfathered into what they thought they had. It could also backfire if the borrower cannot get a job with an eligible employer, or if any such job would pay so much less over the remaining path to forgiveness that pursuing forgiveness doesn't make economic sense (i.e., making $600K+ less over 3-7 years in order to have $400K in loans forgiven).

There is absolutely no way for any of us to know how our student debt story is going to end until we get to the final chapter. As a result, as I said, it's not about "gaming." It's about understanding your tolerance for risk, and then acting accordingly (i.e., minimizing costs on the front end and paying any debt down as quickly as possible, going "all in" on debt, making minimum payments and hoping for massive relief, or doing anything in the middle).

No gaming, just financial management. Some buy bitcoin while others keep their money in a low interest bank account, or under their mattress.

Thank you - you hit the nail on the head on what I was trying to say. PSLF is a 10 year process and it can change at any moment. For me it’s just not worth the risk.

 

[sloop]

Thank you - you hit the nail on the head on what I was trying to say. PSLF is a 10 year process and it can change at any moment. For me it’s just not worth the risk.

It cannot change at any moment. All proposals to modify it have died, and all of those have planned to grandfather current borrowers. Language about PSLF is also in master promissory notes which would probably make it illegal to do away with the program for current borrowers.

People often make PSLF out to be this risky thing that could easily go away entirely when you’re in the middle of making payments, but the reality is that it is nowhere near that risky.

 

[voxveritatisetlucis]

What is the incentive to ever pay it off if interest is 0%?

 

[deleted1139416]

What is the incentive to ever pay it off if interest is 0%?

Dealing with collections, garnishing wages, etc. if you’re making 200K and refusing to pay off your loans, then you deserve to have your wages garnished. Doesn’t mean your loans have to accrue interest, but I support loan servicers holding you accountable for your principle balance if you make above a certain income threshold.

 

[deleted1139416]

It cannot change at any moment. All proposals to modify it have died, and all of those have planned to grandfather current borrowers. Language about PSLF is also in master promissory notes which would probably make it illegal to do away with the program for current borrowers.

People often make PSLF out to be this risky thing that could easily go away entirely when you’re in the middle of making payments, but the reality is that it is nowhere near that risky.

When I said “change at any moment” I wasn’t referring to the PSLF program disappearing. I was referring to people not having their loans forgiven due to red-tape nonsense after 10 years of payments. Biden is trying to do away with this, but what’s not to say the next president will make it just as hard as it was?

 

[SooConfused]

When I said “change at any moment” I wasn’t referring to the PSLF program disappearing. I was referring to people not having their loans forgiven due to red-tape nonsense after 10 years of payments. Biden is trying to do away with this, but what’s not to say the next president will make it just as hard as it was?

This^^^^. The program hasn't changed at all. What's changed is the government's insistence on people dotting "i"s and crossing "t"s to get loans forgiven, and temporary waivers that they are seeking to make permanent. THAT can change back at any time, and is almost certain to, many times, in the years ahead as political winds blow back and forth.

 

[ortnakas]

0% would be amazing but I’d even settle for a reasonable interest rate, that doesn’t accumulate until you leave training or at least graduate school. Currently my student loan interest rate is higher than our mortgage or car (the GradPlus loans significantly so).

 

[VA Hopeful Dr]

Interest should be 0% for federal student loans, and there should be a cap on how much can go towards tuition.

Nope to the first. Make it 3-4%. That's not zero but it's generally about the same as inflation so seems fair.

Definitely agree to the second.

 

[deleted1139416]

Nope to the first. Make it 3-4%. That's not zero but it's generally about the same as inflation so seems fair.

Definitely agree to the second.

If banks can get free money, corporations can get bailed out, auto lenders can give 0% APR to well off people, the government can surely give 0% interest for student loans. To be fair, I’m only supporting 0% interest for tuition directly paid to colleges, otherwise everyone will cap out their loans lol.

 

[deleted1139416]

This^^^^. The program hasn't changed at all. What's changed is the government's insistence on people dotting "i"s and crossing "t"s to get loans forgiven, and temporary waivers that they are seeking to make permanent. THAT can change back at any time, and is almost certain to, many times, in the years ahead as political winds blow back and forth.

Yup! And as I said earlier… Devos made it as hard as possible for people to get their loans forgiven.

 

[SooConfused]

If banks can get free money, corporations can get bailed out, auto lenders can give 0% APR to well off people, the government can surely give 0% interest for student loans. To be fair, I’m only supporting 0% interest for tuition directly paid to colleges, otherwise everyone will cap out their loans lol.

You're not getting this, but you ARE getting IBR and PSLF, which are FAR more valuable than 0% for the people able to take advantage of them. Plus, of course, the $10-20K of direct forgiveness. In fact, to the extent forgiveness actually happens, and cumulative payments are less than the principal amount borrowed, the effective interest rate is negative, no matter what the stated rate is!

 

[deleted1139416]

You're not getting this, but you ARE getting IBR and PSLF, which are FAR more valuable than 0% for the people able to take advantage of them. Plus, of course, the $10-20K of direct forgiveness. In fact, to the extent forgiveness actually happens, and cumulative payments are less than the principal amount borrowed, the effective interest rate is negative, no matter what the stated rate is!

But even with IBR, it takes into account your spouse’s income. I know people who purposely delayed getting married till after residency for this exact reason because one spouse had a salary so high that the interest subsidy for the other spouse would essentially be 0 if they got married during residency. But hey……. it’s 2022, who says you can’t have kids out of wedlock!