IBR versus Minimum Payment

Let me start by saying I am 200k in debt and never ever planshikes05/18/12
Your friend is talking out of his ass. You have to be on onkeithd05/18/12
I think its terrible for people to go into law school with tanonymous54205/18/12
Kethd has it right once again. Anon542, while I agree that onehell05/18/12
I guess you're right in the sense that otherwise there is noanonymous54205/18/12
IBR is a great deal if 1) you want to go from the frying panesq7705/18/12
OK, so here's the thing. First, forgiven debt is not taxablonehell05/18/12
If you have assets that 1/3 on the 500k is still a huge chunanonymous54205/18/12
By your logic: 1) If I go to law school, graduate and pass esq7705/18/12
Most people's only real assets are their home and retirementonehell05/18/12
I have seen the government change the rules in the middle ofesq7705/18/12
Oh OK to answer your questions above, 1. I *AM* married, onehell05/18/12
I looked into married filing separately. If two people makeesq7705/18/12
Remember that your accountant has one goal in mind: Minimizeonehell05/18/12
IBR interest does not compound.agp205/18/12
YES! Your post should be in all bold 24 point type! dtejd199705/20/12
"Here is a point that no one else has made. What if you owe keithd05/20/12
"I am NOT on IBR and have paid nearly $70k on my loans in thkeithd05/20/12
For most people not going on IBR isn't really a choice. Onceshikes05/18/12
I put my relatively small $55k loan on a 30 year plan. Paymbeachbumpd05/18/12
I just caught this. If you're on the 30 year plan, 10 years notmyideas05/21/12
I'm on IBR, and I've checked my contract...it clearly says tkman05/20/12
It is a contractual right that hopefully never gets taken awesq7705/20/12
You guys are overthinking this. It's one thing to take out keithd05/20/12
I think removal of BK protections and IBR changes are very resq7705/20/12
Somebody mentioned that 20 years is the payback period underkman05/20/12
True about the 25 years. I should have made it clearer in mesq7705/20/12
Yeah it always bothers me how obama gets all this credit foronehell05/20/12
Seems like there are many cases where simply consolidating tshikes05/20/12
But you only get the 25 yr forgiveness if you're on one of tkeithd05/20/12
Man, I'm behind then. I was always under the impression thatshikes05/20/12
Nope, only payments made under IBR, ICR, or 10 yr standard conehell05/20/12
Onehell, It was my understanding that if you're already ckeithd05/20/12
You can re-consolidate again specifically for the purposes onotmyideas05/20/12
Yup. Actually, when I had an FFEL consolidation loan at one onehell05/21/12
I have FFELP loans and tried to move them to Direct Loans. esq7705/21/12
Nope, you can't get any better of a rate. Actually I used tonehell05/21/12
The same reason to have doubts IBR will be around in 25 yearshitlawsf05/21/12
"to the extent the situation changes, it'll be in the directonehell05/21/12



shikes (May 18, 2012 - 3:02 pm)

Let me start by saying I am 200k in debt and never ever plan on paying it all off (IBR till the 20 year mark if I have to). A friend of mine recently said that IBR is a joke and if you're looking for forgiveness anyway why not just pay the minimum payment to keep them out of default for 20 years which is significantly less than IBR.

I thought you had to make IBR payments to qualify for the 20 year forgiveness? Is there an advantage or disadvantage of paying IBR or paying the minimum payment on your loans each month?

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keithd (May 18, 2012 - 3:09 pm)

Your friend is talking out of his ass. You have to be on one of the IBR programs to qualify for any type of forgiveness. All the bullshit about IBR causing loans to balloon is irrelevant because you are entering into this payment plan with the understanding that the government will forgive your loans at a certain point in time if certain conditions are met. If the gubbmint tries to back out, just imagine the lawsuits that will erupt. The government may ultimately decide to cancel IBR for new people, but once you're in the program it would essentially be a breach of contract for the government to fail to fulfill its end of the bargain.

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anonymous542 (May 18, 2012 - 3:38 pm)

I think its terrible for people to go into law school with the attitude that they want to use IBR. That is the kind of thinking that would cause popular rage at the IBR program and is NOT the reason its there. The reason it is there is for many of us who were conned into thinking that the average salary and respective employers were sufficient to pay back the debt we were entering into. It is for people who did their due diligence and could not have anticipated the bimodal law salary curve, the horrendous job market, and the "hide the ball" employment statistics. This argument is easier to make for those who graduated law school in the past several years but will be very hard for new law school entrants to make. I'm surprised many of the schools have any applicants at all. I think Judge Schweitzer unfairly looked at the present unfolding of the law school scam as opposed to the situation 3-6 years ago when we were all in the dark.

Shikes hopefully you are only not planning on repaying your debt in full because you can't (i.e. you can't get a 100k+/year or even a 70-80k/year firm job and many can't) and not because you are choosing an easier cheaper job or because you don't believe you should have to.

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onehell (May 18, 2012 - 4:04 pm)

Kethd has it right once again. Anon542, while I agree that you make a valid moral argument, the fact is that under IBR you are agreeing to pay a certain percentage of your income for a certain amount of time. That's it. The balance is an irrelevant number. Perhaps that's dangerous but I think that these schools who are printing money because of IBR will have to reign it in or the DOE will eventually be forced to.

But for a student right now, if they really don't mind (1) committing themselves to a 20 year indenture and (2) enduring some limited potential confusion other consumer lenders might have when they see such a high balance and such a low payment, and (3) possibly paying some tax on the forgiven amounts on the end, then so be it. You can fault the gov't for finding this weirdo solution, but you can't fault people for taking advantage of it.

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anonymous542 (May 18, 2012 - 5:23 pm)

I guess you're right in the sense that otherwise there is no way for people who genuinely want to be a lawyer to afford to become a lawyer because the school cost is way too high. Unfortunately the schools seem to be the real victors. And even in-state, many schools are going to leave you with debt you can only manage on IBR. If the Grad Plus Loans weren't federally guaranteed the schools would have to cut costs in a big way which would be a good thing. But given that the Grad Plus Loans are federally guaranteed and given out like candy the government has to give some kind of solution to allow people to have some kind of a life so IBR is it right now.

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esq77 (May 18, 2012 - 4:25 pm)

IBR is a great deal if 1) you want to go from the frying pan right 2) into the fire, while 3) depending upon your government to not change the terms in the middle of the game.

I like this line: "some limited potential confusion other consumer lenders might have when they see such a high balance and such a low payment,"

I don't think there will be any confusion by the lender when it says, "No" to any loan for a car, house, CC, etc. The only confusion will be from the indentured servant's side when they cannot understand why they make the minimum payment each month but the debt keeps growing like a nasty fungus on their credit report.

As far as paying "some" tax on the forgiven amount: if the balance , at the end of 20 years is $500,000, 1/3 is not just "some" tax, it is a life altering event. Onehell, if this is your version of "some" I would not like to see your version of "more" in this particular set of circumstances.

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onehell (May 18, 2012 - 5:06 pm)

OK, so here's the thing. First, forgiven debt is not taxable to the extent it made you insolvent. IRS form 982.

Second, your FICO does not drop by even a single point due to IBR because you are paying as agreed. Now, I fully concede that some lenders might actually compare balance to payment and smell something fishy, BUT I have been trying to find some actual evidence, even anecdotal, that this is happening and have been unable to find any EXCEPT in cases where a person's IBR payment is flat zero which of course would mean their income was below 150% of poverty on the prior year's tax return and they wouldn't qualify for a mortgage or whatever anyway. If there actually was a real IBR payment of 3 or 400 per month or whatever I've never heard of a lender not accepting that that is the real payment.

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anonymous542 (May 18, 2012 - 5:25 pm)

If you have assets that 1/3 on the 500k is still a huge chunk. The only thing I can hope for is for inflation to eat away at that chunk and to negotiate a payment plan with the IRS for paying the massive tax bill. I won't owe 500k but the amount still won't be pretty. Hopefully by the time IBR balances are about to be forgiven they will change the law so that the forgiven debt won't be taxable.

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esq77 (May 18, 2012 - 5:55 pm)

By your logic:
1) If I go to law school, graduate and pass the bar by say age 26, go on IBR, pay it off in 20 years (Assuming it is after 2014), then at age 46 I get a tax bill. Some questions:

If I can get the insolvency exception, then I guess I have not made much money during those 20 years. Insolvency = poor, in my mind. I might be able to keep my house and my retirement. A shitty way to live for 20 years.

A few questions:

What happens if I inherit money? While married? What happens if I get married during those 20 years? Ever tried to file married filing separately in a CP state? Seen all the tax benefits lost? Please don't tell me about a pre-nup. Waste o' time. Will I be on the hook for a larger amount in year 19 if I get a great job or a law practice takes off?

You brought up FICO, I did not. FICO aside, the lender is still going to look at debt to income, regardless of score, even if the borrower's FICO is off the charts. JD Painterguy is on IBR, he was rejected for a high debt to income ratio. Check out his blog.

All of the above makes HUGE assumptions that the program will last and not be changed. Even it its current form it is still a big screw. I shudder to think what it would be like if the government actually changes the rules to favor its own agenda.

OneHell: You have always defended this shitty IBR program. I sense it is because you are on it and you struggle with cognitive dissonance. You are looking for reassurance based upon your situation. I think IBR is a last resort to default and should only be used if there is no other alternative. You feel different and always seem to jump in on an IBR discussion regardless of topic. I don't hold it against you. I suspect I would react similarly if in your shoes. I am not. Not yet.

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onehell (May 18, 2012 - 6:45 pm)

Most people's only real assets are their home and retirement accounts, and both can be borrowed against to reduce the equity you have in them. I suppose one could potentially borrow from the 401k and cash refi the house and then pay back both loans right after the forgiveness as another tax-minimizing tactic. At any rate, I'd trade the DOE for the IRS as a creditor any day.

I don't think IBR is perfect, but to say it's a last resort goes too far in the other direction. I have no cognitive dissonance whatsoever, my only goal is to stop the spread of fear, distrust and misinformation that keeps people from enrolling. You can always pay more than the IBR minimum and bring the balance down if you would otherwise negative amortize, BTW.

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esq77 (May 18, 2012 - 7:03 pm)

I have seen the government change the rules in the middle of the game with these student loans too many times (See HEA changes to BK in 1998, 2005 for private).

I think the fear and mistrust from many people (myself included) stem from the fact that there is so much misinformation. I gave studied IBR in depth and NOBODY, not my law school, the DOE, or my servicer have the necessary answers....yourself included. This program cannot be trusted for many reason but the one that stands out for me is that it is nearly impossible to see 20-25 years down the road. I think that foresight, especially in today's economic climate, is too much to ask anyone.

I think it is completely understandable that people would be fearful and mistrust the program, especially when the result of not paying attention to detail can lead to more trouble.

I don't think calling IBR a last resort "goes too far in the other direction." Not at all. IBR is a desperate act. Furthermore, the only way to keep the balance from negatively amortizing is to pay the minimum amount of interest. If a person on IBR could pay the minimum amount of interest, they probably don't need IBR.

Finally, if your "only goal is to stop the spread of fear, distrust and misinformation that keeps people from enrolling" then maybe you could answer some of the questions I proposed in my post at 5:55. If not, good luck to you.

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onehell (May 18, 2012 - 7:10 pm)

Oh OK to answer your questions above,

1. I *AM* married, and I *DID* file separately, AND I *do* live in a CP state. I estimate I lost about 3k in deductions, but that's just deductions, the actual increase in the tax is in the hundreds of dollars, which is made up for in a single month's reduced loan payment. Actually, I make more than my wife and so the income equalizing nature of CP helped me reduce payments even more than they would have been in a non-CP state.

2. Inheritance doesn't matter, only income does. It won't affect your payment and come forgiveness time, I'm sure you could spend it down or do something with it like put it in a trust or something or hey, you could just put it to your loan principal and thus reduce the amount forgiven and thus your tax later and some future interest that would have accrued. When an inheritance actually comes into your control is usually something over which you have at least some control, too, so if it happened to come the day before forgiveness I'm sure you could wait to collect until after.

3. Yes, there is debt to income and not just FICO. But what I am saying is that every story of someone being screwed by DTI comes from someone who had an IBR payment of zero. Show me someone with a nonzero IBR payment screwed by DTI. I've just not been able to find an example of it happening. They don't re-amortize all your debts to make sure your payment is sufficient to prevent neg am, their system just won't let them put in zero.

Finally, remember that you can never be kicked off of IBR if your income rises. The most your payment can ever be is the same as your ten year standard would have been *at the time you first entered repayment.* So even if you do negative amortize, you WILL be out of debt in that 20 years. There's no way that neg am can make it take longer or even raise your payment beyond the original 10 yr amount. This is called your "permanent standard" repayment.

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esq77 (May 18, 2012 - 7:35 pm)

I looked into married filing separately. If two people make roughly the same amount, it is not as bad as one spouse making a bunch more than the other. Either way, the tax breaks on MFS seem to outweigh many of the benefits of IBR. The accountants both said that income can change over the course of years. Your spouse may make more one year, you the next. I spoke to two separate accountants in my area, had them run the numbers and they both said the same thing: don't go on IBR. I owe over 100K.

About the inheritance: Say I inherit money in year 15 of IBR. If, by your explanation, I "put it to your loan principal and thus reduce the amount forgiven and thus your tax later and some future interest that would have accrued" then it appears as though I would be paying "principal" that has accrued on IBR. In other words, the "principal" would be the result of capitalization and my payment would go towards money I did not even borrow. No thanks, I will pass.

I have heard different things re: DTI. Creditors look at that huge mass of student loan dukie on a credit report, want to know the payment, and RUN when they figure the payment will never pay down the prin but will actually grow larger as time passes. In today's credit environment I would not want that mass o' crap on my credit.

Interesting story: I called my student loan servicer the other day, got some 30 year old on the phone who seemed to hate his job. I asked a few questions about IBR then I let him talk. At first I thought he was discouraging me from IBR because his company made less money on a borrower on IBR. He told me that he has worked as a student loan rep for years and saw the crazy crap that went on there. He told me that he steers people away from IBR for the reasons I mentioned in this thread. He basically said it was a scam and that IBR was good for the servicer because they were paid on the amount forgiven at the end of 25 years, not the original amount borrowed.

He then mentioned that he would never advise someone to borrow money for school because of the predatory nature of these loans. He said if he ever had to go to school he would take two units a semester and pay cash each time, regardless of how long it took him to finish.

Scary.

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onehell (May 18, 2012 - 7:51 pm)

Remember that your accountant has one goal in mind: Minimize your tax liability. He's not taking into account how much more your loan payment would be if you filed jointly, or if you don't go on IBR. He doesn't care. His advice is going to be to do whatever results in the lowest tax bill. Also, accountants are trained pretty much from birth to avoid MFS like the plague. I find very few who truly understand the unique issues of student loan borrowers. Sure income could fluctuate, or I could move outside of CP jurisdiction entirely. Regardless, my payment is based on *MY* income, and that is the goal, not to minimize tax liability. If incomes are such that our combined income were ever low enough, we'd just file jointly that year. We do the IBR calculation and the tax calculation and do whatever is the best net benefit.

On DTI I don't think we're really arguing on that one. I'm only saying I haven't seen it (except for people whose payment was zero) and it hasn't happened to me. YMMV.

I too tell people not to borrow if they can possibly avoid it. But if it's the only way to be what you want to be, and it requires huge borrowing, I say go on IBR regardless if eligible but if you can afford to pay enough additional to prevent neg am, do so. But I also explain why even neg am isn't the end of the world.

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agp2 (May 18, 2012 - 9:56 pm)

IBR interest does not compound.

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dtejd1997 (May 20, 2012 - 1:34 pm)

YES!

Your post should be in all bold 24 point type!

The government can and WILL change IBR, you can take that to the bank.

Here is a point that no one else has made. What if you owe $125k in loans and are doing IBR. Assume you make $25k to $40k for 5 years. In year six you LUCK OUT and get a part of settlement and your income for the year goes to $100k. Year 7 you are back down to $30k. I bet you would be OUT of IBR.

I am NOT on IBR and have paid nearly $70k on my loans in the past 6 years. I have a credit score of 690 and tried to get a mortgage. Can't be done...I have too much debt to income. This is for a $120K mortgage too! I might never be able to buy a house.

I would also suggest that you guys take a look at student loan stories on regular media sites (CNN, Salon, Slate). Take a look at the comments left by readers. Most people in this country are resentful of students and are laughing at our plight. There is little sympathy for student borrowers...

Another factor to consider is that we are at peak debt and peak government. Do you think boomers will have cuts to medicare, medicaid and social security? students are going to have to pay the freight.

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keithd (May 20, 2012 - 1:45 pm)

"Here is a point that no one else has made. What if you owe $125k in loans and are doing IBR. Assume you make $25k to $40k for 5 years. In year six you LUCK OUT and get a part of settlement and your income for the year goes to $100k. Year 7 you are back down to $30k. I bet you would be OUT of IBR."
________________________________

No, you wouldn't. Contrary to popular belief, you do not "reapply" for IBR each year. What happens each year is that your contribution towards your student loans is REASSESSED based on your income. So if you make all of ONE MILLION DOLLARS in Year 7 of IBR, you're still IN IBR. Your payment that year just reverts to what it would be under a standard ten year repayment plan. If in Year 8 you go back to making 12 dollars for the whole year, your IBR payment goes back to 0 dollars a month for that year. And so on, until Year 25 is reached, and then forgiveness.

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keithd (May 20, 2012 - 1:49 pm)

"I am NOT on IBR and have paid nearly $70k on my loans in the past 6 years. I have a credit score of 690 and tried to get a mortgage. Can't be done...I have too much debt to income. This is for a $120K mortgage too! I might never be able to buy a house."
________________________________________

This part of what you say is true though. IBR or no IBR, those of us with massive student loan debt are screwed in lots of ways that we may not realize right now. Unless we get high-paying jobs in the very near future, most of us with six figs of law school debt will never be able to live the traditional "American Dream" sort of life, with a big house in the suburbs and all that nonsense.

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shikes (May 18, 2012 - 9:01 pm)

For most people not going on IBR isn't really a choice. Once the money is already borrowed and you're at a job that pays 40k (or less) you cant make the standard monthly payments on a typical 10 year plan and there is simply no point in consolidating to a 30 year plan versus the 20 year IBR forgiveness with a likely smaller per month payment.

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beachbumpd (May 18, 2012 - 11:55 pm)

I put my relatively small $55k loan on a 30 year plan. Payments are about $325 per month. 10 years work at PD and my loan amount is $0. Meanwhile I have a $55k loan at a low interest rate.

Paying $325 per month is like paying 7% interest on $55k for 10 years then having no principle amount to pay off. Heck of a lot better than margin interest on a brokerage account. Wish I would have borrowed $150k. That would have been an even better deal.

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notmyideas (May 21, 2012 - 12:21 pm)

I just caught this. If you're on the 30 year plan, 10 years work at PD and your loan amount won't be 0. PSLF isn't available for 30 year repayment only 10 year repayment, IBR, and ICR.

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kman (May 20, 2012 - 8:04 am)

I'm on IBR, and I've checked my contract...it clearly says that I may choose IBR, with NO mention of any possibility of revocation.

So agree with keithd above, that it's a contractual right now for those already on it. That said, I do wish that I didn't have to be on it...but alas, I got sucked into the scam before it was exposed...

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esq77 (May 20, 2012 - 10:52 am)

It is a contractual right that hopefully never gets taken away. Many people had a similar contractual right when they signed for their student loans pre-1998. Those federal loans had BK protections. The government changed that right retroactively in each contract so that the bk protections were lost for those who thought they had it.

I hope that government does not do that to people already on IBR. They are stupid enough to do that. The Contract Clause applies to the states, not the Federal government.

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keithd (May 20, 2012 - 11:00 am)

You guys are overthinking this. It's one thing to take out a student loan and then see an entire area of the law reworked (bankruptcy code) that impacts the risk of taking out that loan. It's quite another thing for the government to essentially create a program, and then once millions of people enter into it, to pull that program entirely and allow those who participated in the program to exit with higher student loan balances than they would have had otherwise. I realize that legally we may be limited in going after the gubbmint if they made a move like that, but I would think that politically that would be a tough move. If such legislation was considered, you'd immediately start seeing stories on CNN about the stay at home mom with three kids who had an IBR payment of 0 for 20 years and who would be responsible for half a mil in student loan debt if Congress cancels the program. People love sob stories like that. It's far more likely that once the first group of IBR'ers reach forgiveness, the cost will be so great that the feds will cancel the program for new people. But I think we're safe.

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esq77 (May 20, 2012 - 11:32 am)

I think removal of BK protections and IBR changes are very realistic and not as different as you say. Also, there are plenty of stories about people struggling with student loans right now but it does not seem to move any elected officials to make any real systemic changes to the program....and no, IBR does not count.

I think the whole, "fool my once shame on you, fool me twice shame on me" argument applies here. Some people are comfortable with going into another long-term contract with the government. I am not one of those people. They cannot be trusted. We have a huge debt crisis on our hands and I see Congress doing nothing about it (the few bills introduced seem to be going nowhere), a President pandering to his base, and a media that only discusses the increase on July 1 that impacts roughly 3% of all loans that have not even been taken out yet.

As mentioned before, I will IBR my loans if the only other alternative is default.

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kman (May 20, 2012 - 8:17 am)

Somebody mentioned that 20 years is the payback period under IBR. But unfortunately that appears to be ONLY for people who BEGIN borrowing after 2014. For the rest of us, it's still 25 years (unless you're on PSLF).

http://projectonstudentdebt.org/files/pub/SAFRA_final_passage_sta.pdf

Another bummer is that those "new" borrowers will get a monthly IBR payment that's 1/3 LESS (than whatever it would be for a pre-2014 borrower with the same income, etc.).

I think Congress would probably need to reconsider those newer goodies coming down the pike, before they could even think about getting rid of the current IBR system. (And as I mentioned above, they could only even get rid of the current system for future borrowers, before it becomes a contractual right for them.)

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esq77 (May 20, 2012 - 10:55 am)

True about the 25 years. I should have made it clearer in my posts. I think the President may have moved some of those 2014 rules to 2012 but I am not entirely sure.

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onehell (May 20, 2012 - 2:54 pm)

Yeah it always bothers me how obama gets all this credit for IBR just because he made these tiny tweaks to it that only help new borrowers. At least it is helpful that things seem to be moving in exactly the opposite direction of a revocation of this program.

Here's the thing. The fact is that the vast majority of people don't go to grad school. The vast majority borrow like 20k for undergrad only and they will pay it back with interest. Those like us with 100k plus are outliers, and you don't make policy based on outliers. The money we get forgiven will barely be noticed. That's the core of why I trust that the gov't will make good come forgiveness time.

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shikes (May 20, 2012 - 4:27 pm)

Seems like there are many cases where simply consolidating to a 30 year plan will make your payment lower per month than IBR would and you would still get the 25 year forgiveness.

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keithd (May 20, 2012 - 4:47 pm)

But you only get the 25 yr forgiveness if you're on one of the IBR programs.

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shikes (May 20, 2012 - 5:56 pm)

Man, I'm behind then. I was always under the impression that you get the forgiveness for consecutive payments without defaulting after 25 years no matter what.

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onehell (May 20, 2012 - 11:37 pm)

Nope, only payments made under IBR, ICR, or 10 yr standard count towards forgiveness. This is in the definition of a "qualifying payment." In addition, if you are going for PSLF, you MUST consolidate all loans with DOE. No PSLF credit for any payments made under any plan to an FFEL lender.

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keithd (May 20, 2012 - 11:43 pm)

Onehell,

It was my understanding that if you're already consolidated with another FFEL lender, you can't re-consolidate with DOE unless you have a new loan or an additional loan that you haven't yet consolidated. If a DOE consolidation loan is required for PSLF, does that essentially make PSLF off limits to those who consolidated with other lenders?

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notmyideas (May 20, 2012 - 11:55 pm)

You can re-consolidate again specifically for the purposes of PSLF, even if you're consolidated before and have no new loans. You may also be eligible for special re-consolidation(that thing announced last year) even if you're not PSLFing.

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onehell (May 21, 2012 - 12:04 am)

Yup. Actually, when I had an FFEL consolidation loan at one time, I kept waiting for someone to even ask me to make the certification that I was re-consolidating to DOE for PSLF or some other allowable reason, but they never even asked. Consolidating a consolidation loan appears to be no big deal I guess.. There's definitely a list of allowed reasons to reconsolidate (PSLF being one), it's just they don't seem to be asking..

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esq77 (May 21, 2012 - 11:21 am)

I have FFELP loans and tried to move them to Direct Loans. It is possible to do but unfortunately, Direct Loans will not honor the 1% interest rate reduction I have on my FFELP loans. This is part of the "what they don't tell you" scenario. It gets old.

Onehell: what do you mean when you say "There's definitely a list of allowed reasons to reconsolidate (PSLF being one), it's just they don't seem to be asking.."

Is there a way to reconsolidate and get a better interest rate that I do not know about?

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onehell (May 21, 2012 - 12:17 pm)

Nope, you can't get any better of a rate. Actually I used to have the 1% rate reduction incentive as well. I definitely remember reading that there was actually a change in the law that got rid of it (for new consol. loans). So it's not that they won't give you the 1% off, it's that they can't. So the choice to re-consolidate with the feds was in fact a choice to raise my rate by 1%. I do recall that. But because of PSLF, it was worth it for me to do so.

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shitlawsf (May 21, 2012 - 10:29 am)

The same reason to have doubts IBR will be around in 25 years are the same reasons to act as if it will: You can't anticipate the future with certainty.

Another point is that the student loan bubble shows no signs of deflating anytime soon. My sense is that as things get worse, there will be more changes and more programs like IBR. (The schools, both law schools and grad and undergrad will be impacted too.) Things will get worse all on their own. So to the extent the situation changes, it'll be in the direction of alleviating the problem. At least until millions of educated but indentured graduates lose their right to vote.

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onehell (May 21, 2012 - 12:33 pm)

"to the extent the situation changes, it'll be in the direction of alleviating the problem. At least until millions of educated but indentured graduates lose their right to vote."

This is right. The problem is becoming more visible, not less so. And as time goes on, the voices will get weaker and fewer from the personal responsibility crowd of boomers who paid tuition out of pocket when the cost was more akin to a used car than a new house. Also, we all know how much congress likes to kick the can down the road. They're not going to deal with IBR unless and until actual forgiveness starts to kick in and cause a budgetary problem.

Think about it. IBR was created in 2007. It will be 2030 or so by the time anyone outside PSLF is actually applying for the forgiveness, and that's just the smallish number of early adopters who stayed low-income for the entire time and have anything left to forgive. Real, significant numbers of people applying to forgive their loans probably won't occur until around 2040, by which time all of us will be around 60 years old and thus in the power positions that the boomers are in now. Any boomers still alive will be in their 90s so the time when people paid for tuition in cash out of pocket with "hard work" will no longer even be a memory.

If IBR forgiveness applications create a budget problem (unlikely given that most people won't go beyond undergrad and some sort of price controls likely will have been enacted by then) the solution won't be to simply revoke forgiveness. Not with the Millenials who will be in power when it comes time to pay this piper. To the contrary, much as I'd like to think our generation will know better, we'll probably find some way to screw the generation below us much as the boomers are screwing us now.

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