WSJ Graduate Debt Article

Discussion in 'Financial Aid' started by SigmaFS, Aug 19, 2015.

  1. RangerBob

    Physician 5+ Year Member

    Joined:
    Sep 16, 2012
    Messages:
    1,171
    Likes Received:
    740
    Status:
    Attending Physician
    I was predicting an article like this would pop up at some point--forgiving the debt of people making six-figure salaries makes for good shocker news. Expect a photograph of a neurosurgeon driving a Ferrari the next time an article like this pops up... The last time the media reported about doctors and lawyers getting a break on the taxpayer's dime (via declaring bankruptcy), the government amended loans so you could no longer discharge them in bankruptcy.

    The article comes across as being biased, in my opinion. It probably isn't intentional, but while ~75% of hospitals may be non-profit, at most of those the physicians are not directly employed by the hospital and instead work for a for-profit group, so most physicians will not be eligible for PSLF.

    Still, I can't understand how politicians didn't think this through--we're in bad enough shape because of the guarantee of student loans if you apply for them (I don't even want to think about what my kid's college will cost, or if loans will even be available at that point...). Adding the prospect of forgiveness makes already naive students (I was one) think they should just borrow as much as possible, and it gives schools all the more reason to increase tuition.

    I'm very concerned about the future of higher education and student loans.
     
  2. Lesley

    Lesley Member
    10+ Year Member

    Joined:
    Jun 18, 2006
    Messages:
    707
    Likes Received:
    18
    Status:
    Attending Physician
    #3 Lesley, Aug 20, 2015
    Last edited: Aug 20, 2015
  3. SigmaFS

    2+ Year Member

    Joined:
    Apr 4, 2014
    Messages:
    157
    Likes Received:
    55
    Something from The Atlantic:

    The uptick in borrowers with repayment plans pegged to their incomes is one of the reasons the Congressional Budget Office in January and March estimated that student-loan debt will cost taxpayers an additional $66 billion in the period between 2015 and 2024. Given the income the government generates from various other federal student loan programs, it claims taxpayers still come out ahead in servicing student loans, particularly graduate student loans and those taken out by parents for their kids (though there’s a fierce debate over whether the government calculates its student debt revenue accurately).
    calculates its student debt revenue accurately).

    As more colleges wise up to income-based programs, they could charge higher tuition, with Uncle Sam swallowing their debt loads.

    http://www.theatlantic.com/education/archive/2015/08/student-debt-forgiveness-/401948/?utm_source=yahoo
     
  4. PL198

    2+ Year Member

    Joined:
    Apr 25, 2014
    Messages:
    4,582
    Likes Received:
    4,093
    Status:
    Resident [Any Field]
    it's not really uncle sam swallowing their debt loads. uncle sam is getting 7-8 % on their money at a pretty good success rate. incredibly sweet deal for them. screws the students. not only does it jack up tuition, they pay a high interest rate on that bogus tuition
     
  5. sazerac

    sazerac rye sense of humor
    5+ Year Member

    Joined:
    Feb 26, 2012
    Messages:
    2,002
    Likes Received:
    2,131
    Status:
    Medical Student
    I think the point is, students aren't paying these loans back. If you borrow $500,000 for medical school, pay back only $200,000 and at an effective interest rate that is closer to 1% or 2% and then the loan is forgiven, who is left swallowing the debt load?

    The student is a largely disinterested third party who gets a degree, meanwhile there is a massive transfer of wealth to the institution, from the federal government (e.g. the taxpayers).
     
  6. Seth Joo

    2+ Year Member

    Joined:
    Oct 27, 2013
    Messages:
    4,212
    Likes Received:
    1,355
    Status:
    Resident [Any Field]
    Students are paying the loans back, they just do not have much left over for anything else, have you seen the home ownership rates for Gen Y? Its the lowest of any generation of Americans, in fact, home ownership is now something of the past. Most people under 30 are renting. Heck most Gen Xers are going the same way.

    Student loan debt is just as toxic as the sub prime mortgage mess that wrecked the economy 8 years ago, its eventually going to collapse, and its going to destroy the entire higher education industry. It cannot go on forever.
     
  7. PL198

    2+ Year Member

    Joined:
    Apr 25, 2014
    Messages:
    4,582
    Likes Received:
    4,093
    Status:
    Resident [Any Field]
    assuming the forgiveness programs actually pay out which is unlikely
     
  8. sazerac

    sazerac rye sense of humor
    5+ Year Member

    Joined:
    Feb 26, 2012
    Messages:
    2,002
    Likes Received:
    2,131
    Status:
    Medical Student
    If they don't forgive, then all the better. The price of going to graduate school simply becomes a permanent 10% tax on income. A person could move from California to Nevada and get a 10% bonus in saved income taxes, so the entire transaction is a wash and school becomes free.
     
  9. RangerBob

    Physician 5+ Year Member

    Joined:
    Sep 16, 2012
    Messages:
    1,171
    Likes Received:
    740
    Status:
    Attending Physician
    Have you ever spent time in Nevada? I'd rather pay the 10% and live in CA. Now, Washington state on the other hand, would definitely be worth it. Most of it, outside of Seattle, is fairly affordable, and it's beautiful up there. I guess everyone has their preferences though.

    But I agree, it seems we're moving towards a permanent 10% tax. It'll be interesting to see how the limitation/elimination of PSLF plays out. I'm 100% sure it's coming--what I'm interested in seeing is if they "grandfather" current borrowers in. My guess is first they limit the amount forgiven, but that it only applies to new borrowers. Then in the Fall of 2017 when a NY Times (or other prestigious paper) article appears showcasing a neurosurgeon who did 7 years residency and 1-2 years fellowship, now making over $800,000, gets his $400k forgiven on the taxpayer dime, the change will apply retroactively to all borrowers because of the media storm, public backlash, and then politicians trying to gain favor with the public by going after greedy doctors and lawyers.

    Of course, if I were making that much money as a neurosurgeon, I'd pay everything off in 1-2 years. But you know there has to be at least one person out there making the bare-minimum IBR payments and letting their loans grow, who will spend near 10 years in fellowship, and then take advantage of the program.

    Honestly it would have been best if the program had never been started, or was limited (to say, $50k) from the start. I worry about how many people are relying on PSLF.
     
  10. Doctor Bagel

    Doctor Bagel so cheap and juicy
    Moderator Emeritus 15+ Year Member

    Joined:
    Sep 26, 2002
    Messages:
    10,919
    Likes Received:
    1,118
    Status:
    Attending Physician
    I'm with Ranger Bob in wanting to avoid Nevada. It is kind of like a 10% tax aside from the potential tax bomb on the forgiven portion in 25 years. If interest stays relatively high, and cost of attendance keeps on rising, that taxable forgiveness amount could be huge. Are people really going to have the money to pay that? You could argue that we could, but what would lawyers making $60k/year who owe six figure debts and who don't qualify for PSLF.
     
  11. sazerac

    sazerac rye sense of humor
    5+ Year Member

    Joined:
    Feb 26, 2012
    Messages:
    2,002
    Likes Received:
    2,131
    Status:
    Medical Student
    I feel like the goalposts keep getting moved in this discussion.

    Either the loans are forgiven, in which case you lose at most 1/3 of your stuff (and most likely considerably less) when it is forgiven, and the government gets the shaft. Or the loans are not forgiven, in which case they continue at negative amortization rates similar to a state income tax or sales tax until death, in which case the government gets the shaft.

    In either case the student loan crisis is a crisis upon the government and not the student borrower.

    When you owe $500 in student loans, that is your problem. When you owe $500,000 in student loans, that is the government's problem, and the government (not the consumer) will have to suffer the consequences.
     
  12. PL198

    2+ Year Member

    Joined:
    Apr 25, 2014
    Messages:
    4,582
    Likes Received:
    4,093
    Status:
    Resident [Any Field]
    or you pay them off and the government was making 7 % interest for a while? It seems you're presenting a false dichotomy where either they're forgiven or one is unable to pay them off at any point in their life.
     
  13. PL198

    2+ Year Member

    Joined:
    Apr 25, 2014
    Messages:
    4,582
    Likes Received:
    4,093
    Status:
    Resident [Any Field]
    she chose to become a public defender. who knew that allowing your loans to balloon to 250k so that you could make 50k was a bad idea? I feel no sympathy for people that make openly stupid financial decisions.

    "“I would be living in a box and eating salt crackers” without income-based repayment, Ms. Van Kirk says. “It just wouldn’t be financially possible.”"

    Um then why don't you do that, so you can actually honor the contract you signed?
     
  14. Doctor Bagel

    Doctor Bagel so cheap and juicy
    Moderator Emeritus 15+ Year Member

    Joined:
    Sep 26, 2002
    Messages:
    10,919
    Likes Received:
    1,118
    Status:
    Attending Physician
    I believe the person quoted at the bottom of your post was talking about paying her loans during residency. Pretty no one has ever made substantial loan payments during residency with the assumption that we'll make the bulk of our payments afterwards. Prior to income-based repayment, residents generally all used deferment. Could you pay $3k/month as a resident? I believe that was about my take home pay, and I trained in a place with slightly higher salaries than the national average.

    As for the public defender, law schools used to have loan repayment programs for people who did public interest work. They've largely gotten rid of those programs because of the PSLF program. So under the old system, the public defender might still have borrowed more than she ever paid back, and the loans were then paid off by her school's program. Now the government takes the hit, and Tulane gets to charge more money and spend less funding their own loan repayment programs. In the legal profession, it's been understood that we need people to do work with low compensation, and we have to find a way to fund that. I agree that going to her state school versus Tulane would have made as much sense, unless she didn't have a state school -- there are no state law schools in a few states -- or if her state school was super expensive (which actually they're all way more expensive than they were just 10 years ago).
     
  15. sazerac

    sazerac rye sense of humor
    5+ Year Member

    Joined:
    Feb 26, 2012
    Messages:
    2,002
    Likes Received:
    2,131
    Status:
    Medical Student
    At Georgetown Law, the school actually makes the first ten years of IBR payments for you, if you work in legal public service. Georgetown of course just rolled those first 10 years of loan payments into the tuition and had the student get loans for that as well.

    It is a genius system, really. Georgetown Law could charge a billion dollars tuition if they wanted to. Georgetown collects insane levels of full retail tuition, the student gets the education entirely for free, and after 10 years of public service the government is left holding the whole bag.

    If public service medicine had predictable and low salaries like public service law, I'm sure medical schools would offer similar deals. It's win-win-lose!
     
    Doctor Bagel likes this.
  16. PL198

    2+ Year Member

    Joined:
    Apr 25, 2014
    Messages:
    4,582
    Likes Received:
    4,093
    Status:
    Resident [Any Field]
    How was your payment 3k a month?
     
  17. PL198

    2+ Year Member

    Joined:
    Apr 25, 2014
    Messages:
    4,582
    Likes Received:
    4,093
    Status:
    Resident [Any Field]
    the schools will keep charging more and sometime in the relatively near future it'll be a financial net negative to go into medicine. but thousands of delusional pre-meds will still flock to it and enjoy their 100k/yr tuition
     
  18. Doctor Bagel

    Doctor Bagel so cheap and juicy
    Moderator Emeritus 15+ Year Member

    Joined:
    Sep 26, 2002
    Messages:
    10,919
    Likes Received:
    1,118
    Status:
    Attending Physician
    The woman in the article said her payment would be $3k/month without income based repayment, which for people with six figure debt assuming a 10 year payoff, would be pretty accurate. I believe she was paying using income based repayment. Either way, no one pays the usual expected amount (which according to financial aid lenders is a 10 year payoff) in residency.
     

Share This Page