student loan payment pause extended through May 1st

[Rukh O'Rorke]

www.cnn.com/2021/12/22/politics/student-loan-pause-biden/index.html


Woohoo!

[haapai]

Interesting!  On one hand, the stated reasons make a lot of sense.  The surge of cases and exposures caused by the Omicron wave will definitely disrupt workplaces and incomes.  Even payers who are sticking with their old plans and payments may have difficulty making those payments if they lose two weeks of pay in the next few months. Then there are the absences among the Education Department and loan servicers to consider.

On the other hand, part of me considers this an admission that the restart was going to be a shit-show no matter what. 

[jerseygirl]

Is interest still accumulating!

[haapai]

Nope. 

[haapai]

The way that CNN, Politico, the Washington Post, and the NYT covered the story was quite different.   They all had their own spin on a relatively detail-free announcement. 

Methinks that one of the major reasons behind the extension was to make it easier for folks in (or switching into) income-based repayment to re-certify (actually self-certify) their income.  They'll have their w-2s by then.  So much hassle can be avoided by using the numbers on those documents. 

[geenamercile]

Dec 22, 2021 19:19:36 GMT -5 haapai said:

The way that CNN, Politico, the Washington Post, and the NYT covered the story was quite different.   They all had their own spin on a relatively detail-free announcement. 

Methinks that one of the major reasons behind the extension was to make it easier for folks in (or switching into) income-based repayment to re-certify (actually self-certify) their income.  They'll have their w-2s by then.  So much hassle can be avoided by using the numbers on those documents. 

I don't know about that because when I got my restart information, I normally re-certify in the spring, it told me that they used my last re-certification I did when COVID was getting starting, up to May 2023.   

[Knee Deep in Water Chloe]

I'm cash-flowing my doctoral program with my deferred student loan payments, so I appreciate that extension. It will get me most of spring term's tuition. 

I'm going to just vent and risk a bashing: 
I'd prefer a long term solution though, and I'm hoping the altered PSFL program criteria will apply to both DH and me. 
We've literally paid and amount equal to the principal. However because of the way the loans are managed, only 10% of my loans are paid off. That's from 2005 to 2019. Yes, I know I should have been a more aggressive in paying them down. The Great Recession was devastating for me though and made it so I could either not pay more toward my student loans or I could file bankruptcy. I did not choose bankruptcy. 

[Knee Deep in Water Chloe]

Dec 22, 2021 19:19:36 GMT -5 haapai said:

The way that CNN, Politico, the Washington Post, and the NYT covered the story was quite different.   They all had their own spin on a relatively detail-free announcement. 

Methinks that one of the major reasons behind the extension was to make it easier for folks in (or switching into) income-based repayment to re-certify (actually self-certify) their income.  They'll have their w-2s by then.  So much hassle can be avoided by using the numbers on those documents. 

Depends on what "hassle" you're referring to. 

[haapai]

Have you ever tried to figure out what your gross income or AGI was without paystubs or W-2s, perhaps due to unemployment or switching jobs or banks?  I have.  It can be very inexact.  I've found myself counting bank deposits and trying to figure out how much tax needs to be added back in.  Not everyone knows how to do that with any kind of accuracy.  A rookie could find themselves adding up net paychecks, making wild guesses on the gross amount and budgeting on the results.   They might be in for a big surprise when the next certification of income comes around. 

Plus, I've got a hunch that for many folks who have experienced income disruptions, using 2021 annual numbers will be more advantageous than using current income. 

[Knee Deep in Water Chloe]

Again, there is more than one "hassle" regarding IBR. You thought you were being specific, but you weren't. Based on your response, you're referring to someone submitting a version of their AGI. That may not be the hassle someone is trying to avoid. 

[haapai]

I think that what I am trying to say is that a lot of people only sit down and think about their money once a year -- when they file their returns.  That's when they look at their total income and get a sense of how much came in and try to figure out where it went.  For many people, this is the only time of year that they even attempt to look at the big picture instead of what is in their checking account. 

[Rukh O'Rorke]

Dec 23, 2021 10:52:17 GMT -5 Knee Deep in Water Chloe said:

I'm cash-flowing my doctoral program with my deferred student loan payments, so I appreciate that extension. It will get me most of spring term's tuition. 

I'm going to just vent and risk a bashing: 
I'd prefer a long term solution though, and I'm hoping the altered PSFL program criteria will apply to both DH and me. 
We've literally paid and amount equal to the principal. However because of the way the loans are managed, only 10% of my loans are paid off. That's from 2005 to 2019. Yes, I know I should have been a more aggressive in paying them down. The Great Recession was devastating for me though and made it so I could either not pay more toward my student loans or I could file bankruptcy. I did not choose bankruptcy. 

in 2020, I finally paid off the loans from the master's degree I got in 1996. It was way too late to feel good about it, frankly. These loans did not qualify for no payment or go to 0 percent due to being consolidated around 2001/2002. With all the forbearances I had due to a lot of life circumstances the first 5-10 years, I likely paid 3-4x the amount back that I had borrowed. I still remember being so stunned that after the 6 months after degree to start paymens, paying regular payments (not income based or anything) for a few years, taking a 6 month forbearance, paying regular payments another few years and doing a second forbearance, when I was ready to start paying again, the balance was the pretty much the initial loan amount. That hurt.

I still have over 100k balance for my phd and parent plus for dd. 

With 5% inflation and no interest accruing on that balance, I feel like I am making headway? maybe I am deluding myself, but I'm trying to spin a little bit of a possitve on the 6 figures of debt. Which I am not looking forward to resuming payments on.

[haapai]

Dec 23, 2021 13:28:38 GMT -5 Rukh O'Rorke said:

Dec 23, 2021 10:52:17 GMT -5 Knee Deep in Water Chloe said:

I'm cash-flowing my doctoral program with my deferred student loan payments, so I appreciate that extension. It will get me most of spring term's tuition. 

I'm going to just vent and risk a bashing: 
I'd prefer a long term solution though, and I'm hoping the altered PSFL program criteria will apply to both DH and me. 
We've literally paid and amount equal to the principal. However because of the way the loans are managed, only 10% of my loans are paid off. That's from 2005 to 2019. Yes, I know I should have been a more aggressive in paying them down. The Great Recession was devastating for me though and made it so I could either not pay more toward my student loans or I could file bankruptcy. I did not choose bankruptcy. 

in 2020, I finally paid off the loans from the master's degree I got in 1996. It was way too late to feel good about it, frankly. These loans did not qualify for no payment or go to 0 percent due to being consolidated around 2001/2002. With all the forbearances I had due to a lot of life circumstances the first 5-10 years, I likely paid 3-4x the amount back that I had borrowed. I still remember being so stunned that after the 6 months after degree to start paymens, paying regular payments (not income based or anything) for a few years, taking a 6 month forbearance, paying regular payments another few years and doing a second forbearance, when I was ready to start paying again, the balance was the pretty much the initial loan amount. That hurt.

I still have over 100k balance for my phd and parent plus for dd. 

With 5% inflation and no interest accruing on that balance, I feel like I am making headway? maybe I am deluding myself, but I'm trying to spin a little bit of a possitve on the 6 figures of debt. Which I am not looking forward to resuming payments on.

Am I correct, reading between the lines, that you had several separate loans and had to consolidate in 2001/2002 in order to get a longer repayment period? 

I had variable-rate loans too.  A lot of people had to consolidate and lock in bad rates just to stay current on their payments. 

[Ava]

That's what I think most people don't understand.
Many say "you took the loans, you pay them"
But the way the system is set up, it's very difficult to pay the loans themselves. At the most you're paying interest.
Before the pandemic, I'd been paying $350 a month, which for me is a huge burden, and covering interest so it doesn't accrue, plus maybe $10 a month of the principal. It's discouraging.

And I will say I'm glad and grateful for the extension, but this is exhausting. The politicians need to think long-term here, because student loans are a huge problem and 3 or 6 months pause extension is not the solution.

[haapai]

I agree.  I think that the exit-counseling is a little too heavy on "call us if you get into trouble: there are always options; do not default" and does not do a good job of explaining how a short break in making payments early in the repayment process can really sink you. 

I lost my job in June or July of 2001 after making four or five payments and had heard too many stories of what taking a six-month forbearance could do to balances and payments to even seek information on the 3-month unemployment deferment that I qualified for.  I am so damn lucky that my loans were relatively small and I somehow found the means to keep paying on them for another two years before consolidating and extending the repayment period. 

ETA:  There were two other bits of luck that I didn't mention.  Two guys who made a whole lot more money than I did and did not particularly like told me their strategies for handling their loans which gave me a lot of insight into how the loans worked and behaved.  One was my older cousin who told me to opt for the 10-year standard repayment for sixty months to take advantage of the student loan interest deduction and then consolidate and take the longest possible term.  The other was a fellow student who had graduated a year earlier than me.  In May 1999 the student club was visiting his company that he worked for and he was our guide.  It was the day that the Fed met and announced the interest rates that would set the rates on our loans for the next 12 months.   He asked us if we'd heard what the Fed did.  When someone else answered, he swore a bit.  He'd been hoping for different news because he was interested in consolidation but not at that rate.  That was my clue that the interest rate at which you consolidated variable-rate student loans meant a lot and when and how it was set. 

I managed to put both those clues to good use but could only do so because the loans were small.  The size of the loans was crucial. 

[Deleted]

Dec 23, 2021 13:28:38 GMT -5 Rukh O'Rorke said:

I still have over 100k balance for my phd and parent plus for dd.

But why isn't DD paying in the Parent Plus loans since they were for her education? I don't get that and I've read stories of people who can't retire because they're paying on loans they took out for their kids' educations.

As for the loan payments barely paying off any principal- I wish people were forced to understand compound interest before they took out loans so they could better understand if they were getting a bad deal and would also understand how much interest can accrue during forbearance and income-based repayment schedules. My first mortgage, in 1979, was a 30-year at 12.25%. I knew darn well that the first payment, for $795, would pay off less than $30 of principal and that if I paid for the full 30 years the repayment would be 3.8 times what I'd borrowed. That's the way compound interest works.

Of course the "financial counselors" at universities gain nothing by educating borrowers.

[haapai]

Weird formating, pedantic tone.  Don't know which one bothered me more, so I deleted all of it. 

[haapai]

Dec 23, 2021 17:32:47 GMT -5 @athena53 said:

Dec 23, 2021 13:28:38 GMT -5 Rukh O'Rorke said:

I still have over 100k balance for my phd and parent plus for dd.

But why isn't DD paying in the Parent Plus loans since they were for her education? I don't get that and I've read stories of people who can't retire because they're paying on loans they took out for their kids' educations.

As for the loan payments barely paying off any principal- I wish people were forced to understand compound interest before they took out loans so they could better understand if they were getting a bad deal and would also understand how much interest can accrue during forbearance and income-based repayment schedules. My first mortgage, in 1979, was a 30-year at 12.25%. I knew darn well that the first payment, for $795, would pay off less than $30 of principal and that if I paid for the full 30 years the repayment would be 3.8 times what I'd borrowed. That's the way compound interest works.

Of course the "financial counselors" at universities gain nothing by educating borrowers.

Not on the front end.  They have little interest in educating borrowers then.  There may be some incentives on the back end, though I doubt that this actually translates into educating the borrower.  Some schools are getting dinged or at least threatened with a swat across the knuckles if their default rates are too high.  Sadly, because default rates are calculated in a strange manner, a lot of schools can delay the default of their school-leavers, especially those that do not graduate, by encouraging them to enter forbearance or deferment programs immediately upon leaving.  It can take years for a student who has never made a payment and who does not know what their many payment options are, to officially default if they follow such guidance. 

[Rukh O'Rorke]

Dec 23, 2021 17:32:47 GMT -5 @athena53 said:

Dec 23, 2021 13:28:38 GMT -5 Rukh O'Rorke said:

I still have over 100k balance for my phd and parent plus for dd.

But why isn't DD paying in the Parent Plus loans since they were for her education? I don't get that and I've read stories of people who can't retire because they're paying on loans they took out for their kids' educations.

As for the loan payments barely paying off any principal- I wish people were forced to understand compound interest before they took out loans so they could better understand if they were getting a bad deal and would also understand how much interest can accrue during forbearance and income-based repayment schedules. My first mortgage, in 1979, was a 30-year at 12.25%. I knew darn well that the first payment, for $795, would pay off less than $30 of principal and that if I paid for the full 30 years the repayment would be 3.8 times what I'd borrowed. That's the way compound interest works.

Of course the "financial counselors" at universities gain nothing by educating borrowers.

 

The parent plus loan is a loan the parent takes out, dd has her own loans she is responsible for. 

[wvugurl26]

I fully understand and am very aware of how compound interest works. I still think it's wrong that a loan that is non dischargeable charges nearly 7% interest. I'm finally down to 4 figures owed.

[Deleted]

Dec 23, 2021 17:32:47 GMT -5 @athena53 said:

Dec 23, 2021 13:28:38 GMT -5 Rukh O'Rorke said:

I still have over 100k balance for my phd and parent plus for dd.

But why isn't DD paying in the Parent Plus loans since they were for her education? I don't get that and I've read stories of people who can't retire because they're paying on loans they took out for their kids' educations.

As for the loan payments barely paying off any principal- I wish people were forced to understand compound interest before they took out loans so they could better understand if they were getting a bad deal and would also understand how much interest can accrue during forbearance and income-based repayment schedules. My first mortgage, in 1979, was a 30-year at 12.25%. I knew darn well that the first payment, for $795, would pay off less than $30 of principal and that if I paid for the full 30 years the repayment would be 3.8 times what I'd borrowed. That's the way compound interest works.

Of course the "financial counselors" at universities gain nothing by educating borrowers.

One of my issues with the student loan debacle is that a very young adult can sign up for it without understanding what they’re really getting themselves into. They can’t go out and finance a house or a car because they have no credit history or income, but they can go deep into debt with student loans that can take longer than a mortgage to pay in full.

My 17yo son took out student loans to follow his “dream” at a certain college, against my advice, and dropped out before he even finished the first semester. I paid everything that his scholarship and loans didn’t cover, which was several thousand more dollars. As upset as I was with him, I probably would’ve had a stroke if those loans had been in my name too.

I’d thought that my refusal to get the loans myself might deter him and help him make a more reasonable (to me) choice. I thought a 17yo couldn’t sign a binding contract, so I was surprised that he was able to get loans himself.

[stillmovingforward]

Much to 2 of my kids horror, we refused to get parent plus loans. They had to do it in their own. We weren't going to put our retirement at risk.

[Ava]

I do understand how compound interest works, but student loans were my only option to get an education and find a better job.
It was either student loans or being a cashier for the rest of my working days.
And mine are all federal loans, I don't have any private loans. 
I was also perfectly aware that my unsubsidized loans were accruing interest while I was still attending school, but I had zero chances of making payments on them at the time.

So when I graduated, and I didn't take long for that, the amount I owed was considerably higher than what I had borrowed. Then I made IBR payments for a couple of years, and interest kept accruing.
So then I made a calculation and came up with the $350 a month so I could cover interest and stop it from accruing anymore. I can barely afford the $350, unless I reduce retirement contributions. But that would be a problem, too.
I don't think getting some help and relief is too much to ask.

[Ava]

Dec 23, 2021 21:28:10 GMT -5 stillmovingforward said:

Much to 2 of my kids horror, we refused to get parent plus loans. They had to do it in their own. We weren't going to put our retirement at risk.

 I don't blame you. Particularly as you have more than 2 kids. 

I have a coworker who's paying her parent plus loans she took for her daughter, while her husband is paying on the parent plus loans he took for his two daughters from a prior marriage. Neither of them is contributing to retirement accounts, and they are anxious about that.
I asked her why doesn't your daughter pay the parent plus loans. Well, turns out the daughter has loans in her own name that she's paying on, because the parent plus loan wasn't enough to cover school.

It's insane. How can it be so expensive that all the family has to take on loans with high interest that are Non dischargeable so their kids can get a good career. Why is interest so high?

[Deleted]

Dec 23, 2021 20:49:10 GMT -5 @pinkcshmere said:

I thought a 17yo couldn’t sign a binding contract, so I was surprised that he was able to get loans himself.

Yes, that is scary. And at 17 I didn't understand compound interest. I learned it in my actuarial studies more than 5 years later. Fortunately my parents had saved to put us through college. I know not all parents can and it was easier when the cost of state schools was far lower than it is now, even adjusted for inflation.

If the loans are non-dischargeable (and aren't some government-guaranteed?) I don't see why the interest rate is so high. Maybe that's what needs to be regulated. Apparently for some loans you can even have your SS attached for unpaid balances.

[minnesotapaintlady]

Dec 23, 2021 21:57:24 GMT -5 @athena53 said:

Dec 23, 2021 20:49:10 GMT -5 @pinkcshmere said:

I thought a 17yo couldn’t sign a binding contract, so I was surprised that he was able to get loans himself.

Yes, that is scary. And at 17 I didn't understand compound interest. I learned it in my actuarial studies more than 5 years later. Fortunately my parents had saved to put us through college. I know not all parents can and it was easier when the cost of state schools was far lower than it is now, even adjusted for inflation.

If the loans are non-dischargeable (and aren't some government-guaranteed?) I don't see why the interest rate is so high. Maybe that's what needs to be regulated. Apparently for some loans you can even have your SS attached for unpaid balances.

I think the higher interest rates are older.  Current rate on direct loans is 3.73%


I am very grateful my kids shouldn't have to deal with loans.  My 19 year old sophomore is still clueless with financial things, and not for lack of my trying to educate him either. 

[Knee Deep in Water Chloe]

I understood/stand that taking out loans is "bad". However, I couldn't get my job without doing so, which meant I couldn't provide for my children if I didn't take out the loans. I got through my bachelor's degree without taking out any loans. It was my Master's of Arts in Teaching that cost me $20K for tuition and another $25K in living expenses & daycare because I couldn't work while doing the program. 

[wvugurl26]

I took my loans out in 2007/2008. 6.8% was the fixed rate on federal loans at that time for a master's degree. It was a percent higher than the bachelor's rate. Not sure if there is still a difference.

Things were good for the first year until I lost my job. The next job as a temp at $10/hour didn't cover all the bills. So yeah that unemployment deferment and subsequent income based payments that didn't even cover interest, set me back.

A year later after losing the job, I got a new job with the federal government. Unfortunately it was in a much higher cost of living area at the same salary so a big pay cut. As my income finally started growing, I was kicked out of the forgiveness program for making too much.

I can't tell what rules they supposedly changed for the program but I sent my paperwork in. I probably still make too much especially since I'm married now but I'm waiting on them to tell me that. It was worth a shot.

[nidena]

Can your wages be garnished if you don't pay your SLs?

I had two that I was able to pay off last year and they only existed because the FA lady messed up.  My loans were supposed to disburse in Spring of 2019 in order to cover my Summer 2019 classes but, instead, they were disbursed in Fall 2018.  But it kind of worked out because by Spring, I had decided I wasn't going to pursue my Master's beyond the two classes I had already taken that were covered as part of my Bachelor's GI Bill payments and I used the money to pay down part of the HVAC that I had financed at 9.99% for 10 years.  I figured the SL interest rate of 5% was better than 9.99%.

The HVAC was paid off shortly after I graduated and then the SL repayment began.  $67/mo because the balance was only $6000.  Last year was a blessing because then those payments were all going to principal.  Once I got the new job in Sept 2020, I paid off the SL balance within three months.

But...I have a friend whose dad took out SLs while she was in college and used the money for goodness knows what in addition to her tuition and stuff.  I think he opted for as much as possible and now she's stuck with $100k+ in SLs and makes $2000/mo at her job.  Those SLs aren't getting paid.  Not when she needs to eat and pay for the roof over her head.  And, at this point, what would be the point?  They will, literally, never be paid off even if she made payments for the next 50 years, into her 80s.

[TheOtherMe]

Yes, wages can be garnished for non payment of student loans.  When I was a bookkeeper, I had to do that calculation every month.  It did not leave the employee much to live on.  She was an adult when she took out the loan to get her Masters in Fine Arts.  Until they caught up with her to garnish her wages, she had not made a single payment.  She told me she had no intention of paying it back.

She was from the UK and was inheriting money that would cover the student loans.  Before she quit so her wages couldn't be garnished, she was trying to figure out how to get the inheritance in to the US so the student loan agency wouldn't know she had it and could pay them off.

That is the kind of attitude that torks me off.

Social security can also be garnished for student loans and if you have a tax refund, that can be intercepted and you will never see it.