Student loans and SAHP-ing

[findingdeadbeats]

I've said before that my BFF has over 100K in student loans. She is currently doing on online master's program with a for-profit school. She will end up near the $135K barrier for allowed federal loans by the time she is finished.

Her plan, since jobs here only pay about $2-3K tops per month, she can use IBR and manage to have very low monthly payment due to family size, poverty numbers for CA, and low income. She figures even with the lower IBR, and not paying the extra interest and letting it capitalize, she will just make low payments for 25 years and let them be written off - at which time they will likely have capitalized the interest and easily could reach well into the $300K+ range.

This is one of the problems that I think will cause a sort of bubble in the student loan area. Many people have figured out that you can borrow a shit-ton of money and likely never have to pay it all back.

Also, someone mentioned here that you probably can't borrow $100K for any degree. Um, yes, you pretty much can. Many students today graduate with well over $50K in loans for a simple BS/BA degree from a state school.

studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp

[Firebird]

So what's your view on SAHPs who have large student loans? Are they burdening the working spouse? Is it their obligation to pay off those loans themselves? Or, as long as both spouses agree to it, it's no big deal? Does it depend on the loan repayment terms? (E.g. what if someone's parent pays off the SL and the debt is then owed to the parent?)

As long as it's not my marriage, I don't really care what two people agree to between themselves

That being said, no way in hell would I be okay with either one of us staying home (even to raise our children) if we had that kind of non-mortgage debt in anything. I don't really care whose it is, either - I consider all of our debt "ours" and if DH died tomorrow I would still pay off all of his creditors even if I wasn't legally obligated.

But I would probably resent DH a little bit for even seriously asking me if the debt was "his." I don't want that kind of pressure in addition to being the sole breadwinner.

Small caveat: DH and I both make pretty good money, and our salaries are comparable (or will be in a few years' time). If one of us was stuck at minimum wage, the other was making really great money, and that wasn't going to change anytime soon then I could see where it might make sense to have the lower-earning spouse at home so the higher-earner could focus solely on the high-earning career without worrying about home obligations. It would be much more efficient.

But given our career choices, DH and I will probably always be bringing in comparable incomes, and as long as that's the case we will always bring in more money with both of us working than we would with just one.

[8 Bit WWBG]

My attitude toward DW being a SAHW (no kids) has always been consistent. If she no longer wants to work, she has to accept the financial limitations that living on one income brings in. She also has to take on the majority of the housework, and any errand that can only be done m-f 9-5.

Our lives have been a LOT more fun with her making enough to support her own consumption with enough left over. I am really not OK with losing that kind of money. Even if we both saved all of it, the opportunities that big chunks of savings bring are worth it.

[Deleted]

This goes unsaid, but is tied to the origins of this topic. Over 50% of marriages end in divorce. Fellas - make your women work! Child support is a given, but no reason to support her while she sits on forums all day posting what an asshole you were.

[Miss Tequila]

"This goes unsaid, but is tied to the origins of this topic. Over 50% of marriages end in divorce. Fellas - make your women work! Child support is a given, but no reason to support her while she sits on forums all day posting what an asshole you were. "

Exactly...she should post from work like the rest of us do!lol

[Deleted]

May 11, 2012 12:05:18 GMT -5 Miss Tequila said:

"This goes unsaid, but is tied to the origins of this topic. Over 50% of marriages end in divorce. Fellas - make your women work! Child support is a given, but no reason to support her while she sits on forums all day posting what an asshole you were. "

Exactly...she should post from work like the rest of us do!lol

And then complain when posts aren't work place friendly.

[Sum Dum Gai]

if DH died tomorrow I would still pay off all of his creditors even if I wasn't legally obligated.

That's just stupid. Creditors charge the interest they do because they know that some of the money won't be paid back. The person getting the loan dying is factored into the loan. You aren't taking money out of their pocket or stiffing them. They priced that possibility into every single other loan they made.

[Sum Dum Gai]

Her plan, since jobs here only pay about $2-3K tops per month, she can use IBR and manage to have very low monthly payment due to family size, poverty numbers for CA, and low income. She figures even with the lower IBR, and not paying the extra interest and letting it capitalize, she will just make low payments for 25 years and let them be written off - at which time they will likely have capitalized the interest and easily could reach well into the $300K+ range.

I hope they still feel smug about what they're doing when we're forced to tighten lending standards on student loans and their kids and grand kids have a much harder time going to school.

[Taxman10]

May 11, 2012 12:06:44 GMT -5 ArchietheDragon said:

May 11, 2012 12:05:18 GMT -5 Miss Tequila said:

"This goes unsaid, but is tied to the origins of this topic. Over 50% of marriages end in divorce. Fellas - make your women work! Child support is a given, but no reason to support her while she sits on forums all day posting what an asshole you were. "

Exactly...she should post from work like the rest of us do!lol

And then complain when posts aren't work place friendly.

[midjd]

Her plan, since jobs here only pay about $2-3K tops per month, she can use IBR and manage to have very low monthly payment due to family size, poverty numbers for CA, and low income. She figures even with the lower IBR, and not paying the extra interest and letting it capitalize, she will just make low payments for 25 years and let them be written off - at which time they will likely have capitalized the interest and easily could reach well into the $300K+ range.

I hope they still feel smug about what they're doing when we're forced to tighten lending standards on student loans and their kids and grand kids have a much harder time going to school.

It's going to be fun for her when she gets a bill from the IRS for $300K (likely much more than that) in imputed income for the year in which it's forgiven... that's the part people overlook in this plan. If you work in public service for 10 years and pay under the IBR plan, your balance is forgiven, no penalty... but pay the minimum for 25 years and you'd better have been saving up, because the government is going to send you a HUGE bill.

Assuming you don't die before your SLs are paid off, I guess. I can see how it would work if you took the loans out at 65-70, but I'd be scared to death to try that myself. If for whatever reason I can't get the 10-year discharge, I'm going to Dave Ramsey the hell out of my loans.

[Deleted]

If you work in public service for 10 years and pay under the IBR plan, your balance is forgiven, no penalty... but pay the minimum for 25 years and you'd better have been saving up, because the government is going to send you a HUGE bill.

I didn't know that. The taxes owed will be a fraction of the student loans but with a much shorter repayment time. The IRS always gets what they are due.

[Firebird]

That's just stupid. Creditors charge the interest they do because they know that some of the money won't be paid back. The person getting the loan dying is factored into the loan. You aren't taking money out of their pocket or stiffing them. They priced that possibility into every single other loan they made.

Maybe I should rephrase. DH's only current debt is his car, which presumably I would still have in my possession, and I'd feel obligated to cover that even if he wasn't here anymore. I'd still be getting use out of the asset and I wouldn't feel right stiffing that loan even if I'm not on it.

I'd probably feel differently if he had SL debt, because no one's getting any use out of that anymore if the person dies. Certainly I wouldn't expect him to cover mine if I got hit by a truck tomorrow.

[Deleted]

May 11, 2012 12:17:41 GMT -5 @tbird said:

May 11, 2012 12:02:52 GMT -5 @mmc said:

This goes unsaid, but is tied to the origins of this topic. Over 50% of marriages end in divorce. Fellas - make your women work! Child support is a given, but no reason to support her while she sits on forums all day posting what an asshole you were.

MMC - very very very disappointed in you. very.





very.


The true answer is that if you want a working wife, marry a woman who is educated and working and proud of her career. Leave ann alone so she can find happiness with mitt, and marry yourself a hillary.

that's not much of an improvement....

[Sum Dum Gai]

That makes more sense. Car loans are different anyway. If you don't pay it off out of his estate, I think they repo the car. Since the thread was about student loans, I was picturing some widow paying off her late husbands six figure student loan debts just for the principal of it or whatever. That sounds completely crazy to me.

[midjd]

I didn't know that. The taxes owed will be a fraction of the student loans but with a much shorter repayment time. The IRS always gets what they are due.

True. I did the math with my student loans ($132K, 7.5% ) - if I made the IBR payments (currently $400/mo) for another 23 years and had no major fluctuations in income, my forgiven balance would be around $500K, and state/federal taxes would probably be $200K.

Hence why I will pay it down ASAP if it's not forgiven after 10 years. Watching that balance grow is scary. Those who are taking out these loans and thinking of IBR as a get-out-of-jail-free card are going to be in for a nasty surprise...

Although Dark has given me another idea - have DH shoot me right before I make my last SL payment. Death is the ultimate get-out-of-jail-free card!

[findingdeadbeats]

Just wanted to say that I don't endorse my BFF's choice, that is her life and her choice. I think it is crazy and have told her so. But, in her case, she has the ultimate out because she is a legal citizen of another country. So, the IRS stuff won't really matter in her case, because she can just move back to her country of origin at that point.

I think this type of situation is likely to cause some form of "forgiveness program" or modification at some point. As a country, we are going to have a very lot of people with high student loans from the rising cost of what is now nearly mandatory education if you want a decent job. Many of those people will be unable to pay their high loans back and do things like pay for rent, have kids, etc... on low wages. I think a lot of them will go into default and the debt will just continue to build.

The same can be said for the IBR repayment plan. That IBR payment doesn't typically cover the interest, that then gets capitalized onto the loan. And ultimately, you can't get blood from a stone. So, they owe the IRS, what will that do when people by that age are old with very little income?

[The Walk of the Penguin Mich]

May 11, 2012 11:32:14 GMT -5 Formerly SK said:

May 11, 2012 9:22:28 GMT -5 whoisjohngalt said:

As far as C is concern, I don't think it's even a matter of SL or retirement or whatever. It can be really hard mentally to know that you are the sole income for the family, especially when there are kids involved.

My DH always wanted a spouse who would be SAP, but I really thinks what helps him sleep better at night is knowledge that I "could" get a job if need be.

Lena

Funny, DH was initially against me being a SAHM (we discussed this while dating) but now that I've done it for 7.5 years he doesn't want me to return to work. He definitely doesn't feel any pressure being the sole support. His fantasy is that I get a very flexible PT job that doesn't create DC issues, while at the same time I still get everything done around the house/yard/kids. I can't say I blame him as he's had a cushy home life for a long time now. Since I'm not about to martyr myself as a "do it all" woman, me returning to work is going to need a lot more conversations.

My BIL had this fantasy. My sister (who paid off her SL before they got married) made a comparable salary to him (near 6 figures) when she stepped out of the work force after the birth of her third child. They had a fourth child. The intention was that my sister would get a job when the youngest went to school.

Only problem with this idea was that she was in a highly technical field which rarely hires part time employees. She's lost a lot of her technical knowledge after being ou of the workforce for 10+ years. And ironically enough, my BIL is very comfortable with my sister doing not only all the housework, cooking, financial dealing and schlepping kids around, she also does 100% of the yardwork and automotive care. He will have to pick up the slack if she works, but this was largely the reason my sister stepped out when she did, because he was not pulling his weight at home when she was working.

[Firebird]

That makes more sense. Car loans are different anyway. If you don't pay it off out of his estate, I think they repo the car. Since the thread was about student loans, I was picturing some widow paying off her late husbands six figure student loan debts just for the principal of it or whatever. That sounds completely crazy to me.

Oh yeah, no way. My own student loan debt is pretty negligible by comparison, but I'd never pay off that kind of student debt if the debtor wasn't even around anymore. In fact, it almost sounds like a decent motive for murdering one's spouse

ETA: Mid, you're in my head again. Beat it!

[quotequeen]

May 11, 2012 12:57:33 GMT -5 The Walk of the Penguin Mich said:

And ironically enough, my BIL is very comfortable with my sister doing not only all the housework, cooking, financial dealing and schlepping kids around, she also does 100% of the artwork and automotive care.

Is one of us supposed to be doing artwork? I guess we really are slackers!

[Firebird]

why would someone who aspires to be a SAHP get a horribly expensive education for which they have to borrow money? I understand that sometimes priorities change- you plan to go back to work but a special-needs child makes it impossible, for example-but if you start out from the very beginning wanting to be a SAHM when the time comes, then don't borrow gobs of money for some poor spouse to pay back later.

Yup, that's the part that's never made any sense to me. If you want to be a SAHP and you want to go to college anyway just for "insurance" in case you need a job later, you'd be well served to keep those costs as low as possible.

I think that's the part that would piss me off if DH had six figures of SL debt and wanted to be a SAHP. I'd want to ask, "WHEN did you have this grand revelation that you didn't want a career, and what in the hell justified you spending so much money you didn't have on school anyway?!??!"

[Firebird]

At the same time, there is a possibility we will sell his mother's condo. The money that we get from that could be used to pay off all of my student loan debt. And I'm against that. Because the debt is mine. And inheritence money is his.

I forget whether you guys have separate finances, but whether you do or not, isn't it kind of a wash? "Your" income went to paying his education, so "his" inheritance going to pay for yours doesn't strike me as terribly unfair.

ETA: Never mind, I read the rest of your post (I really need to start doing that BEFORE I comment ) and your approach makes sense now. Basically mutual decisions can be paid for from either side, but individual/pre-relationship decisions are the person's own responsibility.

[The Walk of the Penguin Mich]

May 11, 2012 13:21:23 GMT -5 quotequeen said:

May 11, 2012 12:57:33 GMT -5 The Walk of the Penguin Mich said:

And ironically enough, my BIL is very comfortable with my sister doing not only all the housework, cooking, financial dealing and schlepping kids around, she also does 100% of the artwork and automotive care.

Is one of us supposed to be doing artwork? I guess we really are slackers!

Damn autocorrect!

[emma1420]

May 11, 2012 13:42:18 GMT -5 Firebird said:

why would someone who aspires to be a SAHP get a horribly expensive education for which they have to borrow money? I understand that sometimes priorities change- you plan to go back to work but a special-needs child makes it impossible, for example-but if you start out from the very beginning wanting to be a SAHM when the time comes, then don't borrow gobs of money for some poor spouse to pay back later.

Yup, that's the part that's never made any sense to me. If you want to be a SAHP and you want to go to college anyway just for "insurance" in case you need a job later, you'd be well served to keep those costs as low as possible.

I think that's the part that would piss me off if DH had six figures of SL debt and wanted to be a SAHP. I'd want to ask, "WHEN did you have this grand revelation that you didn't want a career, and what in the hell justified you spending so much money you didn't have on school anyway?!??!"

I think the problem comes when someone who never thought they wanted to become a SAHP decides after the birth of their child that they now do. I have several friends, who never thought they wanted to stay at home, even came back to work immediately following the birth of their first child, but ended up quitting work after 6 months to a year afterwards.

But, then I also find many college students have a very disjointed idea of how much money they will be earning post graduation. Because I really think some college students really think that they will get jobs earning six figures out of the gate, and so will be able to take care of those loans quickly.

[savecents]

I paid Dh's student loans -- but he only had $20 K or so left.

He was working full-time before school, and he works part-time and is preparing to be SAHD now. Having him stay at home is a big contribution to the family so I don't mind paying off the loans.

If he had over 100K I'm not sure how I would feel though. I certainly couldn't have afforded to pay those off myself.

[Firebird]

But, then I also find many college students have a very disjointed idea of how much money they will be earning post graduation. Because I really think some college students really think that they will get jobs earning six figures out of the gate, and so will be able to take care of those loans quickly.

Ohh yeah. People have very inflated ideas about how much they're worth.

Of course the flip side to that is that if you don't believe you're worth a high salary, you can hardly expect anyone else to believe you are. So it's a balancing act. I can't tell you how many people told me I didn't "deserve" to make more than $30k without a college degree and - later - that I couldn't hope to command more than $50k at BEST once I'd gotten that degree. But I did both anyway.

Sometimes you have to decide what you want to be worth and then work toward that rather than listening to other people's arbitrary definitions of what you're worth based on what you've done or gotten or accomplished. In general, the world will always lowball you.

[Sum Dum Gai]

So, they owe the IRS, what will that do when people by that age are old with very little income?

Congress will pass a law limiting student loans to anyone over the age of like 30 or 35. And we'll forgive the debt of the people abusing the system now. The moochers and abusers will make out like bandits, and their actions will cause us to screw over future borrowers who had no intentions of abusing the system. Or that's my guess anyway, given how government likes to operate.

[qofcc]

The ONLY reason I went to school is to be able to support myself no matter what (let's face it - no one gets degree in accounting bc they are passionate about it)

LOL - Lena, you just spoiled my image of you. I don't think I've ever heard you say what you used to do. The way you've talked about having moved here from another country and giving up your high paying career I had this picture of you as a french model.

[NastyWoman]

May 11, 2012 12:56:05 GMT -5 @findingdeadbeats said:

Just wanted to say that I don't endorse my BFF's choice, that is her life and her choice. I think it is crazy and have told her so. But, in her case, she has the ultimate out because she is a legal citizen of another country. So, the IRS stuff won't really matter in her case, because she can just move back to her country of origin at that point.

Your BFF had better check whether her home country has a tax treaty with the US since her plan might not work in that case. Also, even if it does not right now, there are a lot of years for that to change so she really should think about that...

[Deleted]

"So, they owe the IRS, what will that do when people by that age are old with very little income?"

It will depend on whether there are any other assets. Insolvent tax payers may be forgiven their debt.

www.irs.gov/newsroom/article/0,,id=201877,00.html

[Deleted]

"we are cash flowing that- no more loans. But I am the only person earning money,"

Shane,

I would have no problem using the inheritance to pay off my existing student loans in your situation. You ARE paying for his education. The argument would be that he should reimburse you for his "share" or take out student loans himself and pay those off when he gets his inheritance.

I recommend looking at the situation holistically and how the decision is going to affect you long term. Perhaps it DOES make sense to keep the student loans and invest the inheritance for retirement.

DH and I didn't have any student loan debt. We had a little bit of debt < $5000 and got that paid off before we married. However he did get a sizable inheritance which was a game changer for us. Not so much that we could both quit our jobs and retire to a Caribbean Island but enough to know we had some options.

We jointly agreed 9 years ago to relocated to AZ for his job (we could have stayed in the SF Bay Area and had me support the family for a while) and we bought a house in a location which would have made it difficult for me to commute to work from. Now I think it would be hard for me to find anything but entry level work.

This one aspect of Carl's situation that no one has really discussed. If Carl is going to be doing a lot relocating for his career, Mrs. C is likely to have some issues with advancing in her career. A potential employer is going to take a look at her job hopping and say that she's just going to follow her husband's career and never hire her in a leadership position because the employer will figure that she'll be moving on within 2-3 years. She will be sacrificing her career for his even if she wants to work.