The future of student loans

[haapai]

I somewhat regret that last post.  It was typed up after a sleepless night and before I found this on NBC's breaking news site. 

It's a bloody long read, but it does appear that Biden has some ideas for more substantial student loan relief than extending the current forbearance.  He also seems poised to have positioned himself to do so fairly rapidly once he takes office. 

The most concrete comments from Biden appear to relate to loan forgiveness for public service.  Then the article dives into what others have proposed and have to say.  Be careful while reading the article and pay attention to who is saying what.  There's quite a bit of bouncing around between speakers. 

Borrowers not working in public service may get some relief via the cleanup of broken loan forgiveness programs and good-faith interpretation of the borrower's defense to repayment. 

I don't see much relief being offered to the borrower who is currently not working in public service. 

Reading between the lines, or perhaps wildly prognosticating, it appears that we are headed toward a future in which almost every student who takes out federal student loans lands up in an income-based repayment program with forgiveness of any remaining balance after twenty or thirty years if they jump through the right hoops without disaster.  That is quite similar to how the Australians handle higher education costs except with trickier calculations and more hoops. 

[thyme4change]

Nov 25, 2020 18:00:39 GMT -5 adela76 said:

Nov 25, 2020 10:51:21 GMT -5 thyme4change said:

The real tragedy is that we let this happen in the first place- and guess who supported the actions that got us here?!

Who?

A lot of people - including Mr. Joe Biden.

[alabamagal]

I also support the extension of current no interest forbearance. It is a great way to help those most in need. The more you owe the more it helps.

I am not a big fan of the focus on public service as a solution to the student loan program. The problem becomes when you try to define public service jobs. Some are obvious ( teachers, law enforcement), and I am fine with programs to assist them. But when you get into non-profits, nursing, other government jobs, the definitions get very murky, you end up with complicated laws and regulations that are hard to follow. You also get people choosing jobs based on their loans, not based on their skills and ability.

[Ava]

Nov 27, 2020 14:49:09 GMT -5 alabamagal said:

I also support the extension of current no interest forbearance. It is a great way to help those most in need. The more you owe the more it helps.

I am not a big fan of the focus on public service as a solution to the student loan program. The problem becomes when you try to define public service jobs. Some are obvious ( teachers, law enforcement), and I am fine with programs to assist them. But when you get into non-profits, nursing, other government jobs, the definitions get very murky, you end up with complicated laws and regulations that are hard to follow. You also get people choosing jobs based on their loans, not based on their skills and ability.

I agree that focusing on public service jobs is not the solution.
Not only may it influence career choices, but it also leaves a large portion of the population without access to it. 
Granted, it's been years since I last checked, but fresh out of college I tried to land a public sector job. It's not that easy, and the person may not have a choice of working public sector or non-profit.

[haapai]

Nov 21, 2020 10:58:16 GMT -5 wvugurl26 said:

There is a bill floating around Congress to extend the 0% interest to next September. That could pass. I'm hoping that passes. I put my small raise towards increasing my payments under the 0% we've had this year. I forgot I was due for the raise so I decided to increase my payment.

If they do 0% through next September and I keep making the same payment, I would cut my balance in half. At that point we could probably shuffle things to just pay it off. I'm tired of paying on them. We make too much to write off the interest and 6.8% on something that is not dischargeable should be criminal.

This is off-topic, but have you been able to figure out whether your monthly minimum payment will change (i.e. drop) when forbearance ends?  

I've haven't been able to find the answer to this question by googling.  In fact, I can't even find a clear description of how or whether minimum payments are usually recalculated when a borrower exits forbearance. 

[alabamagal]

Nov 28, 2020 7:32:23 GMT -5 haapai said:

Nov 21, 2020 10:58:16 GMT -5 wvugurl26 said:

There is a bill floating around Congress to extend the 0% interest to next September. That could pass. I'm hoping that passes. I put my small raise towards increasing my payments under the 0% we've had this year. I forgot I was due for the raise so I decided to increase my payment.

If they do 0% through next September and I keep making the same payment, I would cut my balance in half. At that point we could probably shuffle things to just pay it off. I'm tired of paying on them. We make too much to write off the interest and 6.8% on something that is not dischargeable should be criminal.

This is off-topic, but have you been able to figure out whether your monthly minimum payment will change (i.e. drop) when forbearance ends?  

I've haven't been able to find the answer to this question by googling.  In fact, I can't even find a clear description of how or whether minimum payments are usually recalculated when a borrower exits forbearance. 

The way that they calculate payments is always such a mystery, and different services do it differently. I have some Federal parent loans and set them up on graduated payments, but I was always paying extra. One services would show as paid ahead, but principal balance was going down, the other would show just principal going down with extra paid. While in forbearance I have been making small payments to lower the principal. I am planning on minimums returning to previous amounts in Jan, but who knows. I don’t think it will be bad. I can afford whatever it is, I am just prioritizing other things right now.

[wvugurl26]

I don't think they will be recalculated? I've gotten a couple emails about updating income if it's drastically changed due to covid.

I've been making payments every month and larger than my normal one so I can't imagine mine changing. And if they did reset them that doesn't seem like help. If they make the minimums bigger to make up for lost payments during the forbearance? Not so helpful.

I'm just ready to be done with mine.

[haapai]

wvugurl,  don't think that there is any chance of your minimum loan payments going up if you are in standard or extended repayment. 

On the other hand, there is a chance that the minimum required payment will be recalculated and in your case, drop significantly.  I'm old and I remember a little bit about how variable-rate federal student loans worked.  The minimum monthly payment amount always had to be recalculated when the interest rate changed and once you got a handle on how that minimum payment was calculated, it tended to incentivize paying more than the minimum.  Just think of the formula that they pretty much have to use -- PMT(rate, nper, principal). 

You may want to contact your lender or loan servicer for details.  It is really, really nice to see your minimum required student loan payment cut by half or more. 

ETA:  If the thought of calling your loan servicer and asking this question fills you with dread, you are not alone.  They generally do not employ accountants to answer questions like this.  You may be able to bypass that route and still get some information merely by logging onto your account and seeing what clues are there.  The amount and date of the next payment due, particularly if you wait until after your December 2020 payment would have been due, may tell you something quite exciting. 

[wvugurl26]

I don't really care if they drop the minimum payment. I doubt my payment changes at all. I'm locked in at my last income based payment amount from before I was kicked out for making too much money. They said my income based was higher than what standard would be and left it alone.

I've been paying more than minimums this year since the 0% kicked in to make headway on reducing the balance. I plan to continue doing so.

I'm down to a $7100 balance. I want this thing gone. The higher payment and an extension of the 0% would help me wipe it out in 2021.

[wanttofire]

Community college is a great option for those that are starting out. $5k in the state I live in for a year which can paid out of pocket. Also there are other non conventional ways to get college education at a very low cost virtually.

20 years ago, I was an immigrant, went to community college the 1st 2 years then a private college as that was my only option where I lived. Graduated with $30k in loans and paid it off in 4 years, I did graduate with an accounting degree and moved around the US for my career which helped bump my salary, started at $35k in 2004.

I do think some sort of reform is needed but cancelling balances is no the solution in my opinion. Corporations are getting their labor needs met by people who are going into debt greatly, maybe they can help with some of that bill, the tax cuts by the Trump administration are not trickling down, except to anyone that has money in the stock market.

[emma1420]

I hope that there is some type of student debt relief, and more importantly I hope that they open up that relief to those people who still have FFELP loans.   I don't personally need any sort of forbearance or forgiveness, however, during the current plan, my loans don't qualify for the forbearance program because they are FFELP versus direct loans.  I am just one of 6+ million student loan borrowers who did not qualify for the forbearance program (anyone with a FFELP or Perkin's Loan was ineligible for the program).  I am hoping that the program gets extended to those 6+ million borrowers, so that they can at least opt into the program if they need to.

In terms of loan forgiveness, well some sort of forgiveness would be nice, I'd prefer that interest be set to 0% and have it be income tested and have a threshold amount.  So that your interest rate is 0% until you get to 50K or 25K, and then interest is added, and then you have earn a certain amount before you can be charged interest.  I think it's ridiculous that some people may never ever pay off their loans, and for many people it's not because of lack of trying.  It's wrong that someone can pay towards their loans for years only to owe more than they borrowed after all those years of payments.  So I think something needs to be done about those types of situations.  

I also think that we need to find ways to reduce the cost of college.  Students need more grants and fewer loans.  We need to find ways to make it more affordable, so that going to college doesn't become something that only the upper middle class can do.  To me the issue is far more complicated than just potentially forgiving current student loans.  To me that basically a very expensive bandaid on a gun shot wound.

[haapai]

Nov 30, 2020 13:59:04 GMT -5 emma1420 said:

I hope that there is some type of student debt relief, and more importantly I hope that they open up that relief to those people who still have FFELP loans.   I don't personally need any sort of forbearance or forgiveness, however, during the current plan, my loans don't qualify for the forbearance program because they are FFELP versus direct loans.  I am just one of 6+ million student loan borrowers who did not qualify for the forbearance program (anyone with a FFELP or Perkin's Loan was ineligible for the program).  I am hoping that the program gets extended to those 6+ million borrowers, so that they can at least opt into the program if they need to.

emma, have you found your way to this ED page yet?  Folks with FFELP and Perkins Loans held by ED did get forbearance and 0%.  Plenty of others holding the same types of loans through other lenders didn't get the same relief but you do have to check with your lender. 

Consolidating into a Direct Consolidation loan is an option worth considering if there is an extension.  Don't let the eighth of a point roundup scare you too much.  If it comes with  9-12 months of zero interest, you might come out ahead.  There's also some strange and lovely things that can happen if you have a small Perkins loan with a short payback period and Stafford loans with longer payback periods.  You really have to do the consolidation math and throw in a return on investment.  

Other parts of the webpage indicate that if the forbearance and zero percent interest get extended, this would be an excellent time to rehabilitate a defaulted student loan.  (I know that's not you, but you've given me an opportunity to shout this out to the world.)  Usually folks who are in default are in no position to make the necessary number of full and on-time payments but zero is a number that most folks can swing.

[emma1420]

Nov 30, 2020 14:40:06 GMT -5 haapai said:

Nov 30, 2020 13:59:04 GMT -5 emma1420 said:

I hope that there is some type of student debt relief, and more importantly I hope that they open up that relief to those people who still have FFELP loans.   I don't personally need any sort of forbearance or forgiveness, however, during the current plan, my loans don't qualify for the forbearance program because they are FFELP versus direct loans.  I am just one of 6+ million student loan borrowers who did not qualify for the forbearance program (anyone with a FFELP or Perkin's Loan was ineligible for the program).  I am hoping that the program gets extended to those 6+ million borrowers, so that they can at least opt into the program if they need to.

emma, have you found your way to this ED page yet?  Folks with FFELP and Perkins Loans held by ED did get forbearance and 0%.  Plenty of others holding the same types of loans through other lenders didn't get the same relief but you do have to check with your lender. 

Consolidating into a Direct Consolidation loan is an option worth considering if there is an extension.  Don't let the eighth of a point roundup scare you too much.  If it comes with  9-12 months of zero interest, you might come out ahead.  There's also some strange and lovely things that can happen if you have a small Perkins loan with a short payback period and Stafford loans with longer payback periods.  You really have to do the consolidation math and throw in a return on investment.  

Other parts of the webpage indicate that if the forbearance and zero percent interest get extended, this would be an excellent time to rehabilitate a defaulted student loan.  (I know that's not you, but you've given me an opportunity to shout this out to the world.)  Usually folks who are in default are in no position to make the necessary number of full and on-time payments but zero is a number that most folks can swing.

Thank you for the information.  For me it's not really a big deal, and I'm close enough to paying off my loans (and my interest rate is 2% so it's really not worth the hassle to me, as I've only got about 2 years left) that I'm staying put.  But, it's such a shame that the information you posted is widely reported so that people who still have another 10 years left on their repayment plan and/or who have higher interest rates are unaware they have this option.  Although I do think that borrowers need to be careful especially if they are part of some forgiveness programs, because refinancing can reset the clock in a few cases.  

It would be nice if the fed could just cut the interest rate down to 0% for the next 5 years or so.  Give people an opportunity to make some real headway.

[Ava]

Betsy De Vos extended the loan forbearance period until January 31, 2021.
So now we wait to see what President Biden does. I expect we'll get an extension until September 30, 2021 and some sort of debt forgiveness, probably 10k. 

[wvugurl26]

Every extra month helps me. Not having the nearly 7% interest tacked on is helping me pay it down a lot faster.

[Ava]

Dec 5, 2020 13:58:03 GMT -5 wvugurl26 said:

Every extra month helps me. Not having the nearly 7% interest tacked on is helping me pay it down a lot faster.

Can I give you unsolicited advice?

Since the loans are 0% interest right now, why don't you keep the money aside instead of sending it for the loan payment?
I think there's a very strong possibility that President Biden will do an executive order on inauguration and grant some form of loan forgiveness. Even if it's 10k that would wipe out your balance.
If he doesn't give any forgiveness, you can go ahead and pay the balance before the 0% interest period expires.

[haapai]

Biden extended the payment and interest holiday on Federal student loans until Sept 30, 2021. 

Make the best of it folks!  

ETA:  This is extraordinary relief and if you have been struggling with student loans, an extraordinary opportunity.  While my primary interest is in those borrowers who have defaulted on federal student loans or were struggling to make payments prior to the pandemic or who fear the end of the holiday, there's also a lot of good moves for the more solvent to take. 

This administration might actually provide some details regarding how borrowers who have made unnecessary payments during the holiday can expect their payments to change (or not).  This is a big firicking deal to folks who have been pushing money at student loans when they weren't required to do so.