Celebrating 10 years! 2007-2017

House GOP To Cap Amount Of Student Loans For Law School, Eliminate Public Service Loan Forgiveness

http://taxprof.typepad.com/taxprof_ blog/2017/11/house-gop-to massivemissive11/30/17
Simkovic (from the embedded article): "These educational pri supesnation11/30/17
that's because only idiots buy into republican orthodoxy dingbat11/30/17
Debatable, but in any event leave it to the Simkovics of the dupednontraditional11/30/17
Simkovic is concern trolling. Whenever a proposal comes up t ichininosan11/30/17
Exactly, Scamkovic's only political concern is that he and h 6figuremistake11/30/17
Can't they just hike the interest enough to account for what perkinwarbeck11/30/17
Agreed. Just look at what some of these liberal arts program secondcareerlawyer11/30/17
At least you can weave baskets and sell them, cant say the s mtbislife11/30/17
Good to see that they are cutting at least some corporate we triplesix11/30/17
Capping the supply of student loans means that law schools w flyer1411/30/17
Exactly. Since the Feds took over, some schools have raised downwardslope11/30/17
"However, participants in both the current public-service an zuma11/30/17
I'm not surprised either, but I don't think the reason is be onehell11/30/17
Do you think that the private lenders are going lend $200k+ 6figuremistake11/30/17
"a bank isn't going to be to keen on lending nearly a quarte onehell11/30/17
I knew people who couldn’t get private loans. I went the f downwardslope11/30/17
Good point, but not only that, LS was expensive before grad 6figuremistake11/30/17
Which is exactly why bankers continue to loan - it’s a win cyph3r12/07/17
"[lenders] were more than happy to let these hapless schmuck wutwutwut12/01/17
This is a change that has been needed for years. Present dietcoke11/30/17
Yeah, the scam deans will cry crocodile tears over limiting 6figuremistake11/30/17
Weren’t they capped until the gradplus came out in 2006? E downwardslope11/30/17
Great news and makes me glad that I voted for Trump. No way tedandlisa12311/30/17
If you think a Goldman Sachs-loaded Trump Administration is cyph3r12/07/17
It's ridiculous the number of deans and support staff school secondcareerlawyer11/30/17
I just counted, and my school has 20 deans. 20! rwhyan11/30/17
You forgot the Daycare Dean! inho2solo11/30/17
This is the pendulum swinging back in the other direction af shitlawsf11/30/17
One thing no one is mentioning - student loan interest rates molawmo11/30/17
If you have $250,000 in debt from La Verne, it is irrelevant tedandlisa12312/01/17
Ouch...that school blows worse then a drunk school girl on p cocolawyer12/08/17
I've always said that. Give me a 1.5-2% interest rate I'd ha thirdtierlaw12/07/17
I'm the same way. guyingorillasuit12/07/17
I seriously doubt that math of yours. 15% of your discre dietcoke12/07/17
Get out a spread sheet and do the math, you'd be surprised. thirdtierlaw12/07/17
For anyone who has anywhere near $200,000.00 in student loan cocolawyer12/08/17
It would appear that you are right, for most people in most onehell12/08/17
Yeah my analogy was that around year 10 the individual was m cocolawyer12/08/17

massivemissive (Nov 30, 2017 - 10:54 am)

http://taxprof.typepad.com/taxprof_blog/2017/11/house-gop-to-cap-amount-of-student-loans-for-law-school-eliminate-public-service-loan-forgiveness.html

Wow.

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supesnation (Nov 30, 2017 - 11:52 am)

Simkovic (from the embedded article): "These educational priorities, may however, provide Republicans with political advantages. Political scientists and pollsters have found that as education levels increase--after controlling for income, race, sex, and age--individuals become more likely to identify as Democrats and less likely to identify as Republicans. The association is particularly pronounced among scientists and others with graduate degrees."

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dingbat (Nov 30, 2017 - 3:10 pm)

that's because only idiots buy into republican orthodoxy

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dupednontraditional (Nov 30, 2017 - 4:39 pm)

Debatable, but in any event leave it to the Simkovics of the world to declare the end of Western Civilization if law schools can't charge $250k for a law degree.

When did he care about the plight of students, anyway? With everybody riding the million-dollar express, there are No Problems, Clearly. Hell, schools should charge even more for the Privilege.

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ichininosan (Nov 30, 2017 - 7:30 pm)

Simkovic is concern trolling. Whenever a proposal comes up that threatens to tighten the spigot of federal money pouring into higher ed, his concern for the students pops up. The reality is that private lenders are going to think twice about lending a student $100K to attend a bottom-feeding law school if they believe the student will be paying off $100K in federal loans while earning $40K per year. Granted, the loans are not dischargable in bankruptcy, but that doesn’t make them risk-free for a private lender hoping to draw blood from a stone. Bottom line: schools with terrible employment outcomes may need to reduce tuition to attract applicants and that is surely a good thing for students (though not profs)

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6figuremistake (Nov 30, 2017 - 8:31 pm)

Exactly, Scamkovic's only political concern is that he and his fellow scam profs are able to keep the gravy train flowing.

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perkinwarbeck (Nov 30, 2017 - 10:07 pm)

Can't they just hike the interest enough to account for whatever risk there is? These kids will sign anything.

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secondcareerlawyer (Nov 30, 2017 - 11:55 am)

Agreed. Just look at what some of these liberal arts programs charge to study basket weaving.

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mtbislife (Nov 30, 2017 - 6:48 pm)

At least you can weave baskets and sell them, cant say the same about gender studies.

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triplesix (Nov 30, 2017 - 11:53 am)

Good to see that they are cutting at least some corporate welfare. Schools got too fat.

Also good to see that they might stop discrimination against private sector wage slaves.

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flyer14 (Nov 30, 2017 - 12:07 pm)

Capping the supply of student loans means that law schools will be forced to lower their prices.

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downwardslope (Nov 30, 2017 - 12:21 pm)

Exactly. Since the Feds took over, some schools have raised tuition 50-70%. It is ridiculous. Before they went up, but not at such an insane pace.

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zuma (Nov 30, 2017 - 12:13 pm)

"However, participants in both the current public-service and income-based programs would be grandfathered in and not lose those benefits after a reauthorized law is passed."

Before the tax plan rollout I would have said there was no chance of the GOP congress taking programs away from current borrowers, but now just the tiniest bit surprised given congress' ongoing war on the poors.

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onehell (Nov 30, 2017 - 2:04 pm)

I'm not surprised either, but I don't think the reason is because anyone in the administration has a heart. It was a risk-management decision.

A lot of people smarter than I have looked at the promissory notes and concluded it may be a contractual right for existing borrowers. Right or wrong, trying to eliminate it for them would almost certainly mean litigation. It's much easier to just eliminate it prospectively only, as that is where the lion's share of the savings is anyway, particularly since the program was never well-marketed in the first place so most people who are potentially eligible for it have not signed up as they are simply unaware of it, do not trust it, or do not understand it as it is admittedly rather complex. Some 20% of the entire workforce is in government or nonprofit nationally, so the fact that so few are actually on IBR and certifying employment for PSLF is telling.

If you eliminate forgiveness but ALSO cap loan amounts for people subject to that elimination, you do put pressure on the schools to control costs. Indeed, existing Stafford loan limits already serve as a pseudo price control on undergrad, which is why you see them graduating with debt like 30k despite nominal tuition of 50k a year: Stafford won't lend that much so the kids have to either find other aid, get money from their parents, or go somewhere cheaper.

The problem is that without a restoration of BK protection, private lenders with no kind of income driven repayment option are going to step in to cover the gap. A lot of those poor saps are just going to default, get sued, and then live under whatever wage garnishment level their state allows. Or worse, these lenders will, having demanded a cosigner, go after people's parents.

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6figuremistake (Nov 30, 2017 - 2:14 pm)

Do you think that the private lenders are going lend $200k+ to all students? Even with bankruptcy protection, you have to think a bank isn't going to be to keen on lending nearly a quarter million bucks to some guy who's in the bottom of the class at La Verne Law. I mean how can they ever expect to make that money back? I imagine schools are only going to be able to charge so much if they expect students to be able to get financing without endless federal dollars flowing in. Bankruptcy protection does need to be restored, however, for private loans.

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onehell (Nov 30, 2017 - 5:17 pm)

"a bank isn't going to be to keen on lending nearly a quarter million bucks to some guy who's in the bottom of the class at La Verne Law."

They are if you have a cosigner, which is usually a boomer parent. That plus the bankruptcy-proofing and the ability to price defaults into the interest rate made it a pretty profitable endeavor. I went to school before GradPLUS existed and Access Group and places like that were more than happy to let these hapless schmucks go into debt up to their eyeballs for Cooley Law.

There are lenders (SoFi for example) that base lending decisions largely on the prestige of your school or other evidence of high earnings potential, but most of them protected themselves in other ways in those pre-gradPLUS days, mainly by charging higher interest, demanding cosigners, etc. Across the overall portfolio, I'm sure the ones that paid up more than made up for the ones that didn't. Plus these notes were bundled up and sold much like mortgages anyway.

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downwardslope (Nov 30, 2017 - 6:01 pm)

I knew people who couldn’t get private loans. I went the first year of the GradPLUS when the terms were so horrible that no one in their right mind would sign up (like 12.5% interest after you put in origination and fees, plus no upside), yet I knew a few people who could not qualify for private loans because they could not get a qualified co-signer or even with a co-signer, they were considered too much of a risk. They weren’t going to take anyone who didn’t have evidence of good or excellent credit at that point.

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6figuremistake (Nov 30, 2017 - 8:38 pm)

Good point, but not only that, LS was expensive before grad plus, but back then maxing out on loans usually put you at around $150k and that was if you really went to town on the personal expenses. Today, if you pay full freight at most schools, there's no way you're coming out with any less than $200 large in debt even if you're conservative with your spending. Sure there's inflation, but not to that degree.

Still, it would be nice if they could plug up the private lender pool by treating student loan debt like any other debt for bankruptcy purposes.

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cyph3r (Dec 7, 2017 - 8:32 am)

Which is exactly why bankers continue to loan - it’s a win/win...

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wutwutwut (Dec 1, 2017 - 7:35 am)

"[lenders] were more than happy to let these hapless schmucks go into debt up to their eyeballs for Cooley Law."

Sure. But back then people's eyeballs were a lot lower, so to speak.

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dietcoke (Nov 30, 2017 - 12:52 pm)

This is a change that has been needed for years.

Presently, people can be professional students for life. You could theoretically rack up $2m in loans and just take year-after-year of in school deferment.

And schools have wised up. My law school went up $6.5k/yr just in the time I was there. It's insanity.

And for what? An old man standing in front of a classroom talking. No machinery, no reagents, no equipment, no technology, and only arguably some skill. 2 years of that (6 semesters, which is not 3 years) somehow costs $180,000 in tuition?

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6figuremistake (Nov 30, 2017 - 12:59 pm)

Yeah, the scam deans will cry crocodile tears over limiting access to education, but this just means a little less honey for them to suck from the comb.

If it passes, it will be interesting to see what the effect may be. Right now the model is give generous discounts to those with strong credentials and pound everyone else with sky high tuition. If the loan amounts are capped, it will limit just how must they can gouge the losers.

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downwardslope (Nov 30, 2017 - 1:01 pm)

Weren’t they capped until the gradplus came out in 2006? Even at that point there was no PSLF or other forgiveness programs so it was not super appealing to take a gradplus. The terms were horrific when the private companies administered them.

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tedandlisa123 (Nov 30, 2017 - 3:18 pm)

Great news and makes me glad that I voted for Trump. No way in hell that Hillary would have cut off the higher education gravy train. Step in the right direction, but this problem won’t go away until private student loans are fully dischargeable in bankruptcy, which they were until bozo Bush made them exempt in 2005. At least there is a lot more information about the scam out there now than there was in 2005, so I can’t feel too bad about people signing themselves up for a lifetime of non-dischargeable debt.

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cyph3r (Dec 7, 2017 - 8:37 am)

If you think a Goldman Sachs-loaded Trump Administration is going to allow bankruptcy on private student loans, I have a few bridges connecting Manhattan to Brooklyn to sell you...🙄

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secondcareerlawyer (Nov 30, 2017 - 3:23 pm)

It's ridiculous the number of deans and support staff schools have- not just law schools but graduate and undergrad too.

THE Dean. The Dean of Career Svcs. The Dean of Alumni Relations. The Dean of endowment funding. The Dean of Research. The Dean of the North Wind. The Dean of the South. Etc. Etc. Cut some fat already.

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rwhyan (Nov 30, 2017 - 3:46 pm)

I just counted, and my school has 20 deans. 20!

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inho2solo (Nov 30, 2017 - 3:57 pm)

You forgot the Daycare Dean!

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shitlawsf (Nov 30, 2017 - 7:04 pm)

This is the pendulum swinging back in the other direction after the incredibly generous but necessary income based repayment plans. I suspect after a few years of pain, a post Trump administration will give it all back. The hope would be that caps on loans would remain to force schools to control costs.

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molawmo (Nov 30, 2017 - 11:54 pm)

One thing no one is mentioning - student loan interest rates in the early 2000s were like 2%. Bring those rates back and paying back the extravagant loans becomes much easier

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tedandlisa123 (Dec 1, 2017 - 6:17 am)

If you have $250,000 in debt from La Verne, it is irrelevant as to what your interest rate is.

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cocolawyer (Dec 8, 2017 - 1:38 am)

Ouch...that school blows worse then a drunk school girl on prom night.

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thirdtierlaw (Dec 7, 2017 - 7:53 pm)

I've always said that. Give me a 1.5-2% interest rate I'd have my loans paid off in 11 years or less. I'd hurry to get it done, instead, I did the math between paying my loans back on a 20 year plan, or get my IBR it until year 25 while planning for the tax bomb. It was an easy choice.

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guyingorillasuit (Dec 7, 2017 - 8:01 pm)

I'm the same way.

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dietcoke (Dec 7, 2017 - 8:52 pm)

I seriously doubt that math of yours.

15% of your discretionary income for 25 years is a lot. Tighten your belt and pay it off in 10 years (plus some refinancing in there) just has to be better.

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thirdtierlaw (Dec 7, 2017 - 9:49 pm)

Get out a spread sheet and do the math, you'd be surprised. You can estimate about what the payments will be, the interest accumlated, etc. I then assumed I'd be in the second to top tax bracket for that year. So I'm paying 35% of the outstanding loan amount.

For the past 3 years the difference between a 10 year repayment plan and IBR has been close to $1,200 a month. The difference between a 20 year repayment and IBR is $750ish.

As of right now the 10 year plan would be too hard to swing. And getting it paid off in 15 doesn't save me that much on a monthly payment. We just had another baby, so things got a little tighter, but I've been putting half of what I've been saving each month from being on IBR into a separate account. Let's just assume my rate of return is zero on the account. $600/month over 25 years equals $180,000. If the tax bomb disappears, I'm gambling it will, that is pure savings. If it doesn't a $180,000 Will more than cover the tax bomb. If my income shoots up dramatically my payments are capped at the 10 year repayment amount and maybe I'll tap into this separate account to knock the total down faster. If God forbid I become unemployed, I'd feel much better having an extra account with money somewhat accessible and a zero IBR monthly payment than knowing that my student loan debt is much lower than it was when I graduated.

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cocolawyer (Dec 8, 2017 - 11:43 am)

For anyone who has anywhere near $200,000.00 in student loan debt it would be a no brainer to do a 20-25 year IBR forgiveness program.

First for it to make sense for a 10 year payoff, over the first 10 years of practice you would have to make an average of $250,000.00 a year in the ten years. Likely your 10 year around $350,000.00 while your first was around $160,000.00. Basically those are numbers for Biglaw. If you fall in that group, pay it off in a standard 10 year period.

The vast majority though average around $120,000.00 in the first 10 years of practice. This means they started between 60-80k and around the 10 year mark are making close to $200,000.00. For those individuals there is no possible way, unless you live in a low COL area that you are able to make the payments the first 3-4 years of practice on the normal 10 year payment area (or you live with mommy and daddy). You would either IBR it or defer. At the time you are at 5 year mark making around 120k and could possibly make the original payment, your loan has skyrocketed by 50-60k due to interest. Now you CAN'T make the new payment. It just makes little sense.

Over the life of the loan for most people they will pay about half of what they would of paid under a ten year repayment period. At that point it is forgiven and you may be taxed on it...key word may. Even if you are the tax bomb still will be less then the payment under 10 year.

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onehell (Dec 8, 2017 - 1:01 pm)

It would appear that you are right, for most people in most situations. Finaid.org has a "net present value" calculator where you can compare IBR to 10 year standard.

By way of example, I put in 60k of income jumpting to 120k 10 years after graduation, which represents a situation on the good side of typical for an average lawyer.

With 200k debt at 6.8% APR, paying it all off in ten years = 276k over life of loan. IBR with 20 yr forgiveness = 256k paid over life of loan. At the end, about 200k gets forgiven on IBR. So the tax bomb at 25% is maybe 50k, which adjusted for future inflation is more like 30k.

But on IBR you are paying less now and throughout the life of the loan. Because of inflation, money now is worth more than money later. That's the net present value. The calculator reports that the NPV on the forgiveness is about 70k. You come out ahead on IBR even if you do have to pay the tax bomb, which is itself uncertain.

When there is the prospect of forgiveness, not only might you pay less over the life of the loan despite theoretically paying more interest, but you've also got inflation working for you, and this fact can more than make up for the tax bomb, even if you do have to pay it, which is a big "if."

Sure there are variables. Maybe you'll marry someone with high earnings and little debt. Maybe inflation will be lower than expected. Maybe the law will change. But the other "maybe" is that you could lose your job, in which case IBR drop your payment and function as a safety net. On balance, it seems to me that IBR is the better bet for most people. And you'll actually get to enjoy life instead of living with mom & dad and putting most of your net pay towards debt in the early years.

I know Dave Ramsey would probably strangle me for saying it, but the fact is that IBR is a game-changer. It makes student loans quite unlike almost any other debt.

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cocolawyer (Dec 8, 2017 - 1:33 pm)

Yeah my analogy was that around year 10 the individual was making close to 200,000.00. These attorneys are generally in high COL areas. Most attorneys in fly over states never even get close to $200,000.00 a year. Anyways I digress.

I would expect most people to have families around year 10 of practice. So add to that kids, a larger space, day care...still not real possible to make the 10 year repayment. For people in fly over states the foregoing information may shock you.

Rent in San Francisco in a meh area for a two bedroom averages around between $4,000.00 to $4,500.00. Say you have one kid. Average daycare costs are approximately $1,300.00. Unlike most San Francisco types you will need a car to get around in. Congrats you are probably paying about $400.00 a month in parking (not counting the car payment or insurance). Food costs more in the city. So with nothing else included you are paying $7500.00 per month. Well local and state taxes plus federal, healthcare blah blah (ps you will no longer be able to deduct those taxes for federal...thanks trump). Your take home is probably around 10,000.00. So you could I guess possibly at year 10 start making 10 year repayment after you have already been on IBR for 10 years. BUT you will have zero savings, zero extracurricular activities, zero retirement, no home. etc. At year 20 you then I guess could try to start to save for retirement. At that point you will be 50. To get a real retirement you would have to work until you are 75....as an attorney....you will likely have a stroke before then. You will then have to relocate to a real cheap COL area because you have to rent. You never purchased a home. So if you don't stroke out before then, that is your future.

OR you could do the 20 year IBR, save for retirement, buy a home, have vacations, and at 50 your loan is forgiven and you may or may not pay like 50k in taxes. At that point your retirement will be worth $750,000.00, you will be ten years from a debt free home, and can look forward to a comfortable retirement at age 60. You will not have to relocate because all you will be paying is taxes on the home and insurance...that home is free and clear now. You will have a comfortable monthly allotment from retirement. You can travel, and are still young enough to do it. Basically the world is your oyster.

So if you are making the choice, I repeat why would anyone ever pay the ten year term (unless you are one of the 1% of lawyers killing it)? Dietcoke is delusional.

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