Student Loan Reform

[DOwnage]

How about my $300,000 Art History PhD to teach finger painting to underserved students at a public school for 10 yrs. Does that factor into HC reform?

That is a little extreme now hahaha, but plausible. Sure there are going to be people who take advantage of the system, it happens all the time not just for this reform. Still the money saved by eliminating the middle man will cover this abuse of the system. If this is found to be more common than what they expected that like anything the law will be amended. Also remember the govt has set programs which are considered "service." Lets not stretch this definition now. The student loan reform has nothing to do with healthcare, however without this loan reform the healthcare reform would not have been budget neutral, and there would be healthcare reform.

Relax11: So just because people take advantage of the system now means that its acceptable that they will take advantage of the system in the future? Lets simplify this illustration for a moment to make the point. Lets say that only 10% of people go on to become doctors because that's how many people have what it takes academically. Then lets say the rest of the 90% goes on to become creative writing majors, poly sci majors, or teachers or something that either doesn't have a very high paying job afterward, in other words, it really has a lot lower return on investment.

This is not a stretch of the imagination because I've attend a decent sized state school, where ANY pre-professional (med, dent, vet) are a very very very tiny percentage of the overall student body. I've also attended an even smaller private school, where I knew every single pre-professional student and they made up an even smaller percentage of the student body. When I say "low return on investment", I mean that for the amount doctors put into their education, they know they will see some kind of 6-figure salary on the end. If someone is very fiscally responsible, they can reasonably pay off their student loans in 5-10 years. For a creative writing major, poly sci, or especially an education major (who decides to follow that specific major's career path and not opt for medical school, dental school, etc.), they will probably never see the kind of money necessary to pay it off reasonably. By never, I'm specifically thinking of a few friends of mine that attended private school and borrowed their souls away to get a low 5-figure job after graduation. So we can establish that the government is a financier...it is financing the education of all 100% of the people in this hypothetical model.

If only 10% of the money loaned out by the financier is considered a good investment since the 10% has a reasonable chance at paying it off, while the other 90% will never be able to earn back what they borrowed, that would pretty much skew the entire financial system and make it an overall loss. Certainly the 10% of people actually paying it off within the timeline isn't enough to counter-act the 90% of people who are relying on Uncle Sam to forgive them after 20 years. This causes a problem: In order for this to remain profitable, the government will have to raise overall interest rates on all 100% to make up for the lost money. That means when you borrow money to educate yourself in the future, you will have to pay higher interest rates...mind boggling interest rates.

But wait! I thought the entire purpose of this was to save money by cutting out those greedy banks while financing the health care system making the awesome health care bill budget neutral. So how is the government supposed to make it easier for people 20-30 years from now who borrow money for school, when all the people at the enacting of this bill will indiscriminately borrow whatever they want to be comfortable since they know it will be forgiven in 20 years? This will cause interest rates to jump so that the government actually makes a profit off of this - because the profit was intended to be funneled into the health care bill to finance it since without this provision, universal health care would have added more to the deficit. But how is this supposed to be profitable at all if only say 10% actually pays their loans back and the other 90% don't within the 20 year window? If this is the case, not only will this loan program be a money pit that constantly loses money, there's no way in hell it is financing health care because it won't even be able to sustain itself.

I am curious as to your background on any kind of business at any level? I mean I am open to debate and if I am wrong, I would be happy if you corrected me. Otherwise, going "rabble rabble rabble FAUX NEWS!" isn't really a good argument. Simply calling out "right wingers" and "FAUX NEWS" in 1 statement, then in the very next statement backing away from any kind of political argument shows you either don't know what you're talking about or you know your talking points are weak and don't follow a logical sequence.

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[Dr Skeptismo]

the federal government, the taxpayers, and those obtaining loans cut out the profits that were going to the banks for unnecessary administrative costs by eliminating the "middle player."

Great, do away with a profit motive. One less incentive to make sure students will be able to pay off the loans they borrow.

also, the government actually tends to be more efficient with administrative costs than the private sector. case in point - medicare.

You must be joking. Google how much medicare was supposed to cost when it was implemented, and then look up its actual cost.

 

[DOwnage]

If the government packed up their things and left the student loan business entirely, school would be much more affordable. If government was backing the banks and taking all the risk while the banks profited, that means the government was guaranteeing return on investment (plain english: guaranteeing MONEY) to the banks for whatever they loaned out to students.

This wasn't secret to anyone, especially to colleges and universities everywhere. They knew they could charge whatever they wanted, and they knew demand would be strong especially if it was easy for people to get loans backed by the government. All of a sudden, schools charge more and more every year, resulting in tuition inflation we all suffer from since the schools know they'll get whatever they charge. Money is basically being directly transferred from government to schools, but YOU THE STUDENT gets left with the bill.

What would happen if government stopped backing all these loans? You probably think "OH NO! No more higher education for me!!" Wrong. Do you honestly think that a school would go through its academic year empty simply because less people could afford to pay what they charged? No. If the government stopped backing loans and got out of the business for good, schools would actually charge competitive tuition rates just to make some money and fill the damn class rooms.

On top of that, if you allowed private lenders to loan in a fairly unregulated (note I said fairly, not completely unregulated) system and allowed them to compete with one another, the banks would actually compete with one another by slashing their interest rates so that you would borrow from them over their competitors.

 

[AD28]

Great, do away with a profit motive. One less incentive to make sure students will be able to pay off the loans they borrow.


You must be joking. Google how much medicare was supposed to cost when it was implemented, and then look up its actually cost.

umm... read carefully please. i said medicare is more efficient with its administrative costs than private insurers. there are countless studies and reports to back this up. google them. it's pretty intuitive too. as opposed to dozens of private insurers, one entity overseeing the administration of insurance should be more efficient with its overhead. as for the actual costs of running the program exceeding its projected costs, you are forgetting many key points i.e., the inherent difficulties in forecasted budgeting, baby boomers, and the unprecedented growth of healthcare costs. obviously if everyone is spending more on healthcare wouldn't the largest insurer in the country have to spend more on healthcare too? especially if you consider the fact that medicare is an insurance for the elderly, which is the more often than not costliest population?


@relax11, relax. you took a shot at me and i responded by letting you know that what you thought was a mistake in understanding on my part was an omission by choice. i was mainly talking about specialists because those going the PCP route have many options for reducing the financial burden of medical education that have existed for years. also the OP did not mention the 10 year loan forgiveness so i addressed his question about the 20 year program. since he will be starting before 2014 that means he will be on the 25 year program which means it will cost him even more money. you don't have to try and show up everyone on this thread since not everyone here is against you.

@downage - your post is really long hahah. i'll just address a few things that stuck out to me:

1. all loans have to be approved by making sure that disbursements are no greater than the COA. if you max out stafford loans, then you have to take out grad plus loans that carry a higher interest rate. if you still want more, you need private loans which the government does not forgive. this will keep people from borrowing indiscriminately as you suggest.
2. your 10%/90% argument is purely conjecture, but to follow that logic, that 10% that actually does pay, will have significantly more debt than the 90%. outside of medical/law school, graduate programs probably won't cost students hundreds of thousands of dollars in debt. that means that the percentage of actual money owed is proportionately greater in that 10% than in the 90%.

it may end up being that this program doesnt bring about the savings that it is purported to bring, but by no means will it cause financial ruin. people are grossly overestimating the amount that will be written off. but other than that, it will help put teachers, health professionals, etc. in underserved areas that have a greater need for those services. that alone makes it a worthy endeavor. and if people refuse to participate in loan forgiveness, then so be it! they will have to pay what they owe in full.

 

[wannabeaDO]

Sorry to burst your bubble OP, if this hasn't already been discussed:


To get the 10% of income towards payments you have to be enrolled 2014 or later. So if you take out loans in 2013, 2012, 2011, etc, which you will if you graduate in 2014 you will fall on the previous student reform of 15% of income towards payments a year and over a period of 25 years not 20 years.

Really? Oh no! Now after redoing the calculations I would be paying $562,200 in loans altogether instead of $300,000 (not calculating the proverty line thing).

Relax11... Is there anywhere I could look to confirm this? I thought it was was when repayment starts which would have been 2014.

 

[AD28]

Really? Oh no! Now after redoing the calculations I would be paying $562,200 in loans altogether instead of $300,000 (not calculating the proverty line thing).

Relax11... Is there anywhere I could look to confirm this? I thought it was was when repayment starts which would have been 2014.

http://www.finaid.org/calculators/ibr.phtml

 

[DOwnage]

@downage - your post is really long hahah. i'll just address a few things that stuck out to me:

1. all loans have to be approved by making sure that disbursements are no greater than the COA. if you max out stafford loans, then you have to take out grad plus loans that carry a higher interest rate. if you still want more, you need private loans which the government does not forgive. this will keep people from borrowing indiscriminately as you suggest.

Fair argument.

2. your 10%/90% argument is purely conjecture, but to follow that logic, that 10% that actually does pay, will have significantly more debt than the 90%. outside of medical/law school, graduate programs probably won't cost students hundreds of thousands of dollars in debt. that means that the percentage of actual money owed is proportionately greater in that 10% than in the 90%.

Well even if proportionally the expenses of student loans for these professional school students is a larger piece of the pie, they're going to have to make up for it by increasing interest rates across the board to make up for the people underpaying. It's similar to the concept of third party payers in medicine: One group pays (insurance), the other underpays or doesn't pay at all (medicare, medicaid) and as a result, overall prices go up for the industry to stay afloat.

One group pays (med, dent, law, etc.), the other underpays or doesn't pay at all (teachers, creative writing, art history, etc.), so overall prices (interest rates) will have to rise.

it may end up being that this program doesnt bring about the savings that it is purported to bring, but by no means will it cause financial ruin. people are grossly overestimating the amount that will be written off. but other than that, it will help put teachers, health professionals, etc. in underserved areas that have a greater need for those services. that alone makes it a worthy endeavor. and if people refuse to participate in loan forgiveness, then so be it! they will have to pay what they owe in full.

A slight distortion in the market can cause a huge effect on prices. Minimum wage is a slight distortion on the market and it causes inflation since you can't pay people more money for equal productivity. This example doesn't exactly mirror minimum wage, but it's a point that illustrates that market distortions end up causing more problems than actually solving any.

 

[creativename]

Sounds like you get it. So long as you start from the premise that the government does what it does only to create a more authoritarian state, it all makes sense.

So indentured servitude to the banks for 1/3 to 1/2 of one's life is your idea of freedom? Why don't you take your right wing crap somewhere else limbaugh. I don't see any point in keeping teachers, whom will always make a paltry sum of money, in debt for a required degree.

 

[DOwnage]

So indentured servitude to the banks for 1/3 to 1/2 of one's life is your idea of freedom? Why don't you take your right wing crap somewhere else limbaugh. I don't see any point in keeping teachers, whom will always make a paltry sum of money, in debt for a required degree.

LMAO, name-calling, cute. Forget making policy based on common sense and logical conclusions, instead let's base policy on compassion - compassion for the poor teachers and the poor liberal arts majors that chose their major knowing the amount of money they'd be making in the future. Look, I'm not against people taking these majors since its a free country, but if the government wasn't involved in financing people's educations, these people would have a lighter debt load period.

Nobody has addressed my statement that the fact that government backs school tuition (someone mentioned COA earlier), that schools charge WHATEVER THEY WANT because they know you will gladly pay the amount with borrowed money? Money transfers from government to school and you get the bill at the end of it all. Schools aren't going to stick with their current tuition figures if nobody can afford it... they will adjust the cost of attendance accordingly because getting SOME money is better than getting NO money. They have to pay the electricity bills and everything right? Some money > No money.

How about government get the hell out of the financing business, driving tuition costs down so that teachers earning low to mid 5 figure salaries can actually pay off a market-based tuition cost vs. a heavily inflated market-distorted tuition cost?

Its plausible that whoever came up with these policies is a complete stooge and didn't extrapolate this series of events, thinking it would unfold a lot better than it has. It's also plausible that the elected representatives are inflating costs on purpose so that you will depend on them for more financial aid to help you from pumping gas or flipping burgers the rest of your life. If you know the types of people who are power hungry, and the types of people who actually make it to the highest levels of power, they tend to be the latter type of person, not ignorant bumbling idiots making feel-good policy.

 

[Dr Skeptismo]

umm... read carefully please. i said medicare is more efficient with its administrative costs than private insurers. there are countless studies and reports to back this up. google them. it's pretty intuitive too. as opposed to dozens of private insurers, one entity overseeing the administration of insurance should be more efficient with its overhead.

Oh sorry, I skimmed over the administrative part, just saw efficiency. I'd argue its admin costs can be lower because, on a whole, medicare can be more inefficient. Private companies have to see a return(after paying taxes which go subsidize medicare) to stay in business, whereas medicare can run at a loss. No need to pinch pennies when you're hemorrhaging money anyway.

The fact that it's also a heavily subsidized government program helps too. No need for expensive billing/collections departments when you have the IRS and your members don't have to pay for most of their care anyway. No need for advertising/customer service when you don't have to compete for business. Etc, etc. It's easy to keep admin costs low when you don't have to worry about ever going out of business.

 

[FutureCTDoc]

This is wonderful, I have the privilege, nay honor of paying someone's loans off for them. This makes me wonder why my parents and I should have planned carefully so I could go debt free. Here is an idea if you want to major in art history either do it on the cheap at your state's university or save up before you go for it. The same is true for any major, either be intelligent with loans or save up to minimize them. Here is a simple hypo if a student works 15 hours a week at 5 an hour after taxes during the school year and does forty a week each summer, with 10 weeks in the summer and 38 weeks in the school year that works out to $4,850 per years times two years, an additional $9,700 to put towards tuition.

 

[naus]

This new rule is good for people who took out loans to do MAs and PhDs in Visual Arts, Gender Studies and Philosophy (i.e., only good for people who have no hell's chance of ever repaying it back). It's useless for people going into medicine whose 10% of salary after residency would quickly surpass the minimum payments due.

Welcome to the liberal agenda.

 

[RELAX11]

This new rule is good for people who took out loans to do MAs and PhDs in Visual Arts, Gender Studies and Philosophy (i.e., only good for people who have no hell's chance of ever repaying it back). It's useless for people going into medicine whose 10% of salary after residency would quickly surpass the minimum payments due.

Welcome to the liberal agenda.

Well yes in theory.

Good for high paying specialists? No

Good for primary care specialists? Yes, but not nearly as helpful compared to lower paid jobs such as teachers etc. This is how it should be, I am sorry if you disagree with it.

 

[creativename]

LMAO, name-calling, cute. Forget making policy based on common sense and logical conclusions, instead let's base policy on compassion - compassion for the poor teachers and the poor liberal arts majors that chose their major knowing the amount of money they'd be making in the future. Look, I'm not against people taking these majors since its a free country, but if the government wasn't involved in financing people's educations, these people would have a lighter debt load period.

Nobody has addressed my statement that the fact that government backs school tuition (someone mentioned COA earlier), that schools charge WHATEVER THEY WANT because they know you will gladly pay the amount with borrowed money? Money transfers from government to school and you get the bill at the end of it all. Schools aren't going to stick with their current tuition figures if nobody can afford it... they will adjust the cost of attendance accordingly because getting SOME money is better than getting NO money. They have to pay the electricity bills and everything right? Some money > No money.

How about government get the hell out of the financing business, driving tuition costs down so that teachers earning low to mid 5 figure salaries can actually pay off a market-based tuition cost vs. a heavily inflated market-distorted tuition cost?

Its plausible that whoever came up with these policies is a complete stooge and didn't extrapolate this series of events, thinking it would unfold a lot better than it has. It's also plausible that the elected representatives are inflating costs on purpose so that you will depend on them for more financial aid to help you from pumping gas or flipping burgers the rest of your life. If you know the types of people who are power hungry, and the types of people who actually make it to the highest levels of power, they tend to be the latter type of person, not ignorant bumbling idiots making feel-good policy.

Yea I'll admit to having a triggerfinger. I wasn't responding to you when I wrote it but sure enough afterwards I got to your entry about Faux news and right winger name calling. I'm sure you have a lot of good ideas. I won't even try to critique them because I'm certain they're all fullproof. I just want to reiterate that these are your children's teachers who aren't doing their job because when they go into work they're not focused on your brats but rather how in the world they're going to find a second job at night to help get out of debt. I'm not saying give everyone a free pass when it comes to indebtedness and bad career decisions while in college but student loans are the only loans that cannot be discharged if you go bankrupt. The law was only recently put in favor of the lender and this doesn't even repeal that legislation but it at least gives more hope to those taking out subsidized loans. It gets borrowers off the mouse treadmill sooner so their paycheck isn't always going towards a bank's profit margin which I honestly don't believe helps the economy. Once again, I'm not taking issue with your comments. I don't have the time right now to pour over them. You do speculate some but really, who doesn't? The person I was responding to before was spouting rhetoric that was getting on my nerves, you... not so much. You seem to know a bit more about what you're talking about.

 

[creativename]

Well yes in theory.

Good for high paying specialists? No

Good for primary care specialists? Yes, but not nearly as helpful compared to lower paid jobs such as teachers etc. This is how it should be, I am sorry if you disagree with it.

 

[tncekm]

Well yes in theory.

Good for high paying specialists? No

Good for primary care specialists? Yes, but not nearly as helpful compared to lower paid jobs such as teachers etc. This is how it should be, I am sorry if you disagree with it.

No, how it should be is that people going into lower paid jobs should go to lower cost institutions, like a state school. E.g. There is no need for an elementary teacher to be Harvard trained. Also, people can, and should, work at least part-time while they go to school to offset some of their costs. Undergrad work isn't that hard, especially in the humanities. People just need to learn a little bit about personal responsibility and quit expecting hand-outs because an entitlement mentality is absolutely dangerous.

 

[Daedra22]

... is anyone other than me happy about the expansion of pell grants as a result of the loan reform? I mean, I won't be able to benefit from it since I'm graduating in May, but a few of my friends will. I think it will be a huge help to encourage poor students to seek an education.

 

[bige11]

There will no longer be high paying specialists.... even if you make a lot, it will all be taxed away! Don't go into medicine for the $

 

[RELAX11]

There will no longer be high paying specialists.... even if you make a lot, it will all be taxed away! Don't go into medicine for the $

How NAIVE.

This assumes democrats will always be in power

This assumes the doc fix will not get passed, which it will! Just do some research.


This assumes that you are aware of the job/salary market which you are not!


Sure don't go into med for the money, but that doesn't mean you can't get wealthy as a doctor.


Go troll elsewhere.

 

[tncekm]

How NAIVE.

This assumes democrats will always be in power

How NAIVE! This assumes that 'either' party gives a damn about physicians, which they don't because they have no reason to.

This assumes the doc fix will not get passed, which it will! Just do some research.

Oh, great... so the doc fix gets passed and now all the accounting tricks that made the recent reform bill seem economically palatable go right out the window. Doc fix doesn't help in the long run if our country is broke!

There is no long term assurance for physicians. This is a big, expensive bill and costs will have to be cut somewhere.

This assumes that you are aware of the job/salary market which you are not!

Oh, and you are? You're honestly the most self-righteous tool I've seen on these forums in a while.

 

[RELAX11]

How NAIVE! This assumes that 'either' party gives a damn about physicians, which they don't because they have no reason to.

Oh, great... so the doc fix gets passed and now all the accounting tricks that made the recent reform bill seem economically palatable go right out the window. Doc fix doesn't help in the long run if our country is broke!

There is no long term assurance for physicians. This is a big, expensive bill and costs will have to be cut somewhere.

Oh, and you are? You're honestly the most self-righteous tool I've seen on these forums in a while.

Look I was addressing the concern from the previous poster and you seem to agree with me, I was not even addressing how the doc fix would essentially make the healthcare reform not be budget neutral. Republicans in power will decrease taxes, saving physicians money. As others have noted OVER AND OVER, you are essentially Rush Limbaugh and push the far right agenda. I know how that goes so I will just let you continue to believe what you believe.

 

[Bones DO]

Does this apply to any and all student loans, or only federal loans?

 

[tncekm]

you are essentially Rush Limbaugh and push the far right agenda. I know how that goes so I will just let you continue to believe what you believe.

Yes, yes... I'm Rush. Just like Rush, I believe that we're getting screwed by both sides of the aisle.

 

[jmcfirst]

is the interest on the loans still tax deductible while in residency? what is considered a federal service program? would national health corps be considered? if so, do you still recieve the loan repayment sums annually? thx.

 

[organdonor]

I have a great resource that may be able to answer at least some of the questions on this thread.

It was forwarded to me by my schools financial aid officer. It covers the Income Based Repayment (IBR) and loan forgiveness as it was enacted a few years ago and went into effect in 2009. It seems very similar to the laws just recently passed, which I know absolutely nothing about

Under these (older) laws, loan repayments are capped at 15% of discretionary income

Also, after 25 years, the balance is forgiven.

It is a short slideshow about 8 minutes long. Enjoy

https://admin.na5.acrobat.com/_a719980293/updatedmed2010/