Paying down student loans....

[Rukh O'Rorke]

so - given the platform on the democratic side, some of DDs friends have decided not to pay extra on their student loans in case some forgiveness comes. I'm kind of torn on that strategy. DD was paying extra but she is reconsidering.

So - while any forgiveness is speculative - and they all realize that - I think as long as they are paying the minimums, then it's not the worst thing in the world. They are all 1-2 years out of college, and certainly have a lot of things to stretch their starter salaries on.

I can see how for the younger crowd, giving up a bunch of tiny luxuries now when that same $$ might be forgiven in a few years seems overly stringent. And they can always start paying more down the road if it doesn't pan out.

Wonder what the YM crowd would think about that?

[Deleted]

I haven't been following anything going on on that front, but I don't think I'd count on it that's for sure.  I think if I were to take the only paying minimum route, I'd still give up the "tiny luxuries" and set aside what I was going to pay extra so it didn't just get spent. 

[Rukh O'Rorke]

Jan 25, 2020 13:41:25 GMT -5 minnesotapaintlady said:

I haven't been following anything going on on that front, but I don't think I'd count on it that's for sure.  I think if I were to take the only paying minimum route, I'd still give up the "tiny luxuries" and set aside what I was going to pay extra so it didn't just get spent. 

hahaha! I'm talking about young people . let me amend that. Young, fashionable, out on the town young people.

I have encouraged those with 401ks to invest there - if not, Roths - but then you don't take it out to pay off loans later.

I'm thinking it really doesn't matter overmuch, and paying extra will be easier down the line after a few years of raises and/or promotion or something.

[tskeeter]

Despite not having the possibility of student loan forgiveness on the horizon, I did not pay off my student loans early.  I complied with the terms of my student loan notes.

That said, I don’t believe that student loan forgiveness will ever happen.  It’s just a talking point to buy the votes of naive young people.

First, private lenders won’t want the existing process to change.  There is too much money to be made to allow the student loan industry to be killed off without a fight.  Let the lobbying begin.

Second, the people who would benefit, and who would be loan forgiveness supporters, aren’t likely to be big contributors to political campaigns.  Campaign contributors would typically be more affluent and older, with their student loans paid off.  Why would they support candidates who want the contributors to pay more taxes in order to pay off someone else’s student loans when the contributors had to pay off their own loans?  Buying votes with campaign promises that are unlikely to ever be realized is one thing.  To alienate campaign contributors, whose contributions politicians can convert to personal assets, isn’t something that an astute politician would do.

[alabamagal]

I don't think it is going to happen, at least not in the way that Sanders/Warren are proposing.  I would support some relief for some, possibly in the form of rate reductions for some, some relief for those who went to abusive schools.

For rukh, I'm pretty sure you are above the income level that would result in forgiveness.  Sorry.  

My 3 kids all graduated with ~$30k in loans in 2012, 2014 and 2017.  The 2012 loans are more than half paid off even though DD has had job struggles and is currently SAHM.  The 2014 loans are paid off (and he would not qualify for forgiveness due to high salary).  The 2017 graduate is paying minimum on income based repayment, and this is first year he has a significant payment.  He is paying the minimum while saving for a house.

[TheOtherMe]

Any person on any topic who thinks campaign promises will become reality needs their head examined.

They need to pay their student loans unless there is already a program they qualify for.  

It's a long way from a campaign promise to a working law.  

[Deleted]

Jan 25, 2020 16:13:23 GMT -5 tskeeter said:

Despite not having the possibility of student loan forgiveness on the horizon, I did not pay off my student loans early.  I complied with the terms of my student loan notes.

That's all good if you're actually repaying them.  For a lot of people on IBR the minimum payments don't even cover the accrued interest.  

I don't know how I feel about student loan forgiveness (although I do lean towards "pay your own mess off"),  but I for sure support student loan reform, including abolishing IBR and cracking down on the private loan industry. 

[Tiny]

If it was my loan(s),  I'd be doing what I could to make sure that I was paying enough so the balance wasn't getting bigger - that would be the absolute minimum I would pay - but I would probably throw a little towards principle at the loan(s) even if it was just $50 a month  jprobably more because I'd have a "this is paid off within this time frame" that I'd be working towards. 

I know I would be looking long term... how is the loan/payment gonna effect me 5/10/15 years down the road?   I got places to go, people to see, and things to do.  I don't need a millstone around my neck - especially one of my own making.  

The fact that the student loan(s) would be a long term thing - would make me shrug off the "forgiveness" may happen... I'd proceed as if it wasn't gonna happen. 

I would kind of  think of it like a house/mortgage.  You don't pay on your mortgage expecting your house to quadruple in value in 30 years.  It's a place to live.  it would be nice if it's value skyrocketed - but you don't make financial plans around that happening in year 2 of the mortgage.    

[Tiny]

Have the youngsters considered the possible income tax on that loan forgiveness amount?    Would be pretty sucky if they were earning 100K and got hit with an additional 80 or 100K of "income" from the forgiven loan.      
 

[alabamagal]

Jan 25, 2020 16:35:02 GMT -5 TheOtherMe said:

Any person on any topic who thinks campaign promises will become reality needs their head examined.

They need to pay their student loans unless there is already a program they qualify for.  

It's a long way from a campaign promise to a working law.  

But Elizabeth Warren says she is going to forgive student loans on day 1 of her Presidency using existing laws and she does not need Congress to do it.

Personally this just does not seem legal to me.

[giramomma]

Jan 25, 2020 19:01:46 GMT -5 alabamagal said:

Jan 25, 2020 16:35:02 GMT -5 TheOtherMe said:

Any person on any topic who thinks campaign promises will become reality needs their head examined.

They need to pay their student loans unless there is already a program they qualify for.  

It's a long way from a campaign promise to a working law.  

But Elizabeth Warren says she is going to forgive student loans on day 1 of her Presidency using existing laws and she does not need Congress to do it.

Personally this just does not seem legal to me.

And where is the money coming from?

[giramomma]

Jan 25, 2020 13:19:25 GMT -5 Rukh O'Rorke said:

I can see how for the younger crowd, giving up a bunch of tiny luxuries now when that same $$ might be forgiven in a few years seems overly stringent. And they can always start paying more down the road if it doesn't pan out.

Wonder what the YM crowd would think about that?

Sorry that adulting sucks, but it is what it is.

But, DH lived, basically like broke college students until we bought our current house in at 34.

Its something I've never regretted..Because it gave us options and flexibility when the shit hit the fan.

[NastyWoman]

Jan 25, 2020 16:35:02 GMT -5 TheOtherMe said:

Any person on any topic who thinks campaign promises will become reality needs their head examined.

They need to pay their student loans unless there is already a program they qualify for.  

It's a long way from a campaign promise to a working law.  

And even that I would take with a grain of salt -> there may be another Betsy deVos on the horizon

[Rukh O'Rorke]

I hadn't thought about if any of them are on IBR. I'll have to mention to DD that that is a different scenario from making the regular type payments.

In case she wants to pass that on.

[Deleted]

Jan 25, 2020 19:34:02 GMT -5 giramomma said:

Jan 25, 2020 19:01:46 GMT -5 alabamagal said:

But Elizabeth Warren says she is going to forgive student loans on day 1 of her Presidency using existing laws and she does not need Congress to do it.

Personally this just does not seem legal to me.

And where is the money coming from?

From the taxpayers, of course.  She could probably do something like that with federal loans.  Those with private loans are going to be pissed.

[giramomma]

Jan 25, 2020 21:06:24 GMT -5 @bamafan1954 said:

Jan 25, 2020 19:34:02 GMT -5 giramomma said:

And where is the money coming from?

From the taxpayers, of course.  She could probably do something like that with federal loans.  Those with private loans are going to be pissed.

See, that's what I don't get...

Why not fix what's broken first there's plenty to chose from between medicare, SS, and the deficit..and then see what money is left over to do things like forgive student loans.

That's the problem I have with all the Dems right now. Or maybe they are all cultivating forests of money trees and will surprise us with all the money they've grown to pay for everyone's student load debt if they manage to get into office.

[alabamagal]

Jan 25, 2020 20:51:54 GMT -5 Rukh O'Rorke said:

I hadn't thought about if any of them are on IBR. I'll have to mention to DD that that is a different scenario from making the regular type payments.

In case she wants to pass that on.

IBR plans have really helped DS2 stay current on his loan. His career (real estate appraisal) is one where he has to start off first year as an internship with lower income, but has to have reliable transportation to do his job. After first year his income doubled, and just got higher as he got his certification after 2 1/2 years.

He graduated May 2017. In Dec 2017 he was due to start payments. He did IBR that was based on his 2016 income when he was in school, so he owed $0. In Dec 2018 he had to recertifications, but it was based on 2017 income where he worked 7 months at reduced rate. He owed $20/ month. Dec 2019 his recertification is based on much better income, so payments are higher and he will start to make progress now that he can afford to. He also has a small private loan ($4k) that doesn’t have IBR and is on 5 year payment that is $75/ month that he has been paying full amounts.

[Rukh O'Rorke]

Jan 26, 2020 6:03:00 GMT -5 alabamagal said:

Jan 25, 2020 20:51:54 GMT -5 Rukh O'Rorke said:

I hadn't thought about if any of them are on IBR. I'll have to mention to DD that that is a different scenario from making the regular type payments.

In case she wants to pass that on.

IBR plans have really helped DS2 stay current on his loan. His career (real estate appraisal) is one where he has to start off first year as an internship with lower income, but has to have reliable transportation to do his job. After first year his income doubled, and just got higher as he got his certification after 2 1/2 years.

He graduated May 2017. In Dec 2017 he was due to start payments. He did IBR that was based on his 2016 income when he was in school, so he owed $0. In Dec 2018 he had to recertifications, but it was based on 2017 income where he worked 7 months at reduced rate. He owed $20/ month. Dec 2019 his recertification is based on much better income, so payments are higher and he will start to make progress now that he can afford to. He also has a small private loan ($4k) that doesn’t have IBR and is on 5 year payment that is $75/ month that he has been paying full amounts.

I'm not sure how this applies to the topic here. No one is saying people can't have access to IRB if they want to. And only making IBR payments if they need to.

The discussion is altering planned additional payment to see if any loan forgiveness comes up on the horizon. 

[Deleted]

Jan 26, 2020 12:02:27 GMT -5 Rukh O'Rorke said:

Jan 26, 2020 6:03:00 GMT -5 alabamagal said:

IBR plans have really helped DS2 stay current on his loan. His career (real estate appraisal) is one where he has to start off first year as an internship with lower income, but has to have reliable transportation to do his job. After first year his income doubled, and just got higher as he got his certification after 2 1/2 years.

He graduated May 2017. In Dec 2017 he was due to start payments. He did IBR that was based on his 2016 income when he was in school, so he owed $0. In Dec 2018 he had to recertifications, but it was based on 2017 income where he worked 7 months at reduced rate. He owed $20/ month. Dec 2019 his recertification is based on much better income, so payments are higher and he will start to make progress now that he can afford to. He also has a small private loan ($4k) that doesn’t have IBR and is on 5 year payment that is $75/ month that he has been paying full amounts.

I'm not sure how this applies to the topic here. No one is saying people can't have access to IRB if they want to. And only making IBR payments if they need to.

The discussion is altering planned additional payment to see if any loan forgiveness comes up on the horizon. 

Probably due to my comment that IBR should be abolished as part of student loan reform...

[NomoreDramaQ1015]

I've taken the Phil approach to my loan. I've never paid extra. My rate is super low. That allows me more cash to do likes like invest for retirement.

I think over the long haul I made the better choice. Over 30+ years I'm compounding more interest in my 401k than I'd have saved paying off the loan early.

I wouldn't do it with the idea my balance would be forgiven though. A lot can change over the 10 year repayment period.

[Rukh O'Rorke]

Jan 26, 2020 12:04:51 GMT -5 minnesotapaintlady said:

Jan 26, 2020 12:02:27 GMT -5 Rukh O'Rorke said:

I'm not sure how this applies to the topic here. No one is saying people can't have access to IRB if they want to. And only making IBR payments if they need to.

The discussion is altering planned additional payment to see if any loan forgiveness comes up on the horizon. 

Probably due to my comment that IBR should be abolished as part of student loan reform...

oh- seems likely, wonder why I was quote?

I think it is tough if people can't make rent, food, and student loan payments at the 10 year payoff mark.


If that is abolished, what would happen to those people? I think amongst DDs group there are a couple of people who are in real trouble with their student loan balances. I'm not up to date on if they were able to get decent-enough jobs to start paying down on that, I just remember the convos about it - it really helped DD see what a good position she was in, despite having some friends whose parents paid 100%.

So - it's real cross section she is seeing - from those who owe nothing, and those with 6 figures. I do try to pass along what wisdom I am able to - without sticking my nose in too much.

[tskeeter]

Jan 25, 2020 19:01:46 GMT -5 alabamagal said:

Jan 25, 2020 16:35:02 GMT -5 TheOtherMe said:

Any person on any topic who thinks campaign promises will become reality needs their head examined.

They need to pay their student loans unless there is already a program they qualify for.  

It's a long way from a campaign promise to a working law.  

But Elizabeth Warren says she is going to forgive student loans on day 1 of her Presidency using existing laws and she does not need Congress to do it.

Personally this just does not seem legal to me.

It’s possible that Ms Warren envisions using Executive Order powers to forgive student loans.  The obstacle she faces is that she doesn’t control the funding to “pay off” the loans.  Congress does.  Hard to change the world when you don’t have the where with all to fund the changes.

Warren might be able to forgive federally funded loans.  But, it seems that the real problem for former students are the privately funded loans they used to side step federal loan limits.

[hoops902]

If I thought there was a reasonable chance that taking a specific action would save me a bunch of money after the election...I wouldn't be in any rush to take myself out of that situation.  I'd be paying the minimum until after the election to see where I thought things were going.

[haapai]

Forgive me for resurrecting a nearly dead thread.  This post has been gnawing at me for a while.  I've been turning it over and over in my mind.  What actions would I do in such a situation?

Sadly, I've come to the conclusion that my loans were so different from the loans that this crop of young ones have, both in magnitude and design, that I cannot answer the question.  I just don't know enough about current interest rates, loan amounts, or repayment options to crack the question. 

But one thing that definitely comes up when I consider the loans that I had is how they were packed with incentives to pay more than the minimum.  A lot changed when student loans were resdesigned in the early aughts.  Many of the incentives for paying more than the minimum disappeared or lost their punch. 

[gs11rmb]

I think the chances of forgiveness of private loans are very slim.  I do think there is the possibility that Congress will act to change how loans work going forward.  If private loans are no longer protected by bankruptcy then I suspect that market will dry up very quickly.  However, if they can't be discharged in bankruptcy then I think it's unfair to have high interest rates. 

Also, I'm not sure how it would work in practice but I wish there was a way to tie loan amounts to areas of study.  Slowing down the supply of money is the only thing that's going to curb college costs.

[Deleted]

Jan 29, 2020 8:06:54 GMT -5 gs11rmb said:

Slowing down the supply of money is the only thing that's going to curb college costs.

[Tiny]

Jan 29, 2020 8:06:54 GMT -5 gs11rmb said:

Also, I'm not sure how it would work in practice but I wish there was a way to tie loan amounts to areas of study.  Slowing down the supply of money is the only thing that's going to curb college costs.

It might also help to cut back on predatory lending  -  Those for profit university who promised high paying jobs and let students sign up for just about any program that was offered regardless of the student's aptitude or jobs available in the market.     (ITT Technical Institute  is an example of what I'm talking about  -  There's Kaplan, Uni of Phoenix, and DeVry University currently operating. ) 

[NomoreDramaQ1015]

Jan 29, 2020 8:06:54 GMT -5 gs11rmb said:

Also, I'm not sure how it would work in practice but I wish there was a way to tie loan amounts to areas of study.  Slowing down the supply of money is the only thing that's going to curb college costs.

I disagree with this.  We already see fields over saturated because people are being told "That's the hot thing, major in that!".  That creates a bottle neck in those fields.   Do some research on IT which was hot when I was in school.   Nursing is seeing a similar situation because the "mass retirement" of older nurses is not happening.  Then hospitals are looking to increase efficency while cutting costs and a easy way to do that is to have large pools of "on call" nurses and only a handful of full time nurses.   Your BSN here can cost close to $80k (and a lot are now wanting an MSN), you aren't paying that off being "on call" and a lot of hospitals have rules about moonlighting.

Money needs to slow down but not tied to majors.   Colleges will simply switch to charging an assload for those "approved" majors which is already happening at some schools.   What we need to do is start questioning every penny they spend.   One of my favorite fees was $595 a semester for "student council fees".  Do they REALLY need to be charging me a $595 "student council fee" every semester to stay a float?

UNMC builds a butt load of buildings because everyone wants their name on a building.  Well it costs money afterwards to keep the lights on, there are no donations for that so it has to come from somewhere.   While they should have as close to state of the art capabilities as possible considering they are a medical school do you REALLY need a multi-million dollar glorified student center?

Creighton spent $3 million on an alumni building.  It sits empty 95% of the year because per the rules of it being built only alumni can use it.    It ain't alumni that are paying ot keep that building from rotting away.  It's padded into the tuition costs.

I'll probably get flamed for this but we also need to start limiting international students.  It's one of the few things I agree with Trump on.   International students bring a fortune in tuition with them.   Colleges have no incentive to lower costs if they know they can recruit international students to make up the difference.     Without that back up, and then residential students refusing/being unable to attend at current rate they will either have to adjust or go out of business.

[gs11rmb]

Jan 29, 2020 14:02:29 GMT -5 NomoreDramaQ1015 said:

Jan 29, 2020 8:06:54 GMT -5 gs11rmb said:

Also, I'm not sure how it would work in practice but I wish there was a way to tie loan amounts to areas of study.  Slowing down the supply of money is the only thing that's going to curb college costs.

I disagree with this.  We already see fields over saturated because people are being told "That's the hot thing, major in that!".  That creates a bottle neck in those fields.   Do some research on IT which was hot when I was in school.   Nursing is seeing a similar situation because the "mass retirement" of older nurses is not happening.  Then hospitals are looking to increase efficency while cutting costs and a easy way to do that is to have large pools of "on call" nurses and only a handful of full time nurses.   Your BSN here can cost close to $80k (and a lot are now wanting an MSN), you aren't paying that off being "on call" and a lot of hospitals have rules about moonlighting.

Money needs to slow down but not tied to majors.   Colleges will simply switch to charging an assload for those "approved" majors which is already happening at some schools.   What we need to do is start questioning every penny they spend.   One of my favorite fees was $595 a semester for "student council fees".  Do they REALLY need to be charging me a $595 "student council fee" every semester to stay a float?

UNMC builds a butt load of buildings because everyone wants their name on a building.  Well it costs money afterwards to keep the lights on, there are no donations for that so it has to come from somewhere.   While they should have as close to state of the art capabilities as possible considering they are a medical school do you REALLY need a multi-million dollar glorified student center?

Creighton spent $3 million on an alumni building.  It sits empty 95% of the year because per the rules of it being built only alumni can use it.    It ain't alumni that are paying ot keep that building from rotting away.  It's padded into the tuition costs.

I see your point but to be honest I wasn't envisioning a system where different fees are charged for different majors.

[dragonfly]

Jan 25, 2020 18:04:52 GMT -5 Tiny said:

Have the youngsters considered the possible income tax on that loan forgiveness amount?    Would be pretty sucky if they were earning 100K and got hit with an additional 80 or 100K of "income" from the forgiven loan.      
 

My daughter, who left law school with approximately $250,000 in student loan debt in addition to a considerably lesser amount of undergraduate debt, was advised by a fellow law student who was specializing in tax law, to make the minimum payment on time for twenty years, at which time the debt would be "forgiven".  Her law student friend told her the taxes on the outstanding balance would still be less than paying the whole loan plus interest back even if the forgiven amount taxed as income may put you in a higher tax bracket and your entire income for the year in which the loan is forgiven would be taxed at the higher rate.  I believe my daughter is currently paying only the minimum because that is all she can afford at the moment.  Don't know what her future intent is.