Another SL payment is coming

[haapai]

Yup!  It looks like payments on Federal student loans will not be resuming in May as previously announced.  An e-mail between the Education Department and lenders has leaked and the ED has instructed lenders not to contact borrowers regarding the resumption of payments despite those lenders being legally required to contact borrowers multiple times prior to resuming payments.  So something has to be up. 

Here's the story from NPR.  It's short but dense and I recommend reading it instead of listening to it.  The link to the Politico story within that link appears to be paywalled, at least for me. 

What exactly is up is a darned good question that I wish I had the answer to.  This may be the lead up to a simple extension with obvious political motives.  This may be a pause done for bureaucratic reasons.  That is, the resumption of payments was always going to be a mess but the change of lenders is going to make it exponentially worse.  Or this might be a pause that precedes a very modest forgiveness program.  Personally, I think that last option is a long, long, long shot. 

So, how long do you think that this suspense will go on before the pause is officially announced?  Another three months would push the resumption of payments (and the bureaucratic disaster) out until August, which is definitely not November.  A six-month pause would get it into December, well past the election.  Which length of pause do you think is more likely and how do you think this hand will be played? 

[tractor]

I think they are hoping to ease some of the inflationary pain we are all feeling. However, all this additional pause does in kick the can down the road further, people need to start paying on their loan debts again. I'm sure most haven't been saving it up, it will effect their budget whenever payments are due again. I think skipping payments hurts in the long run more than to just keep sending them in.

Anyway, we continue to pay on my wife's, taking advantage of the 0% interest to gain some serious ground, and should have them knocked out by the end of the year.

[haapai]

You may have them knocked out before you are required to start repaying them.  Considering what a bureaucratic nightmare the resumption of payments is likely to be, you probably did something Phil-dumb but very good for your blood pressure.  If I were you, I'd be trying to figure out how to make the last payment prior to Thanksgiving.  It sounds time-value of money dumb but every minute spent on hold waiting for a student loan servicer to get to you or actually talking to one probably costs you five minutes of life. 

I am so damn glad that my loans are paid off.  I think that the re-start of payments will be a nightmare.

[Rukh O'Rorke]

Mar 15, 2022 15:10:11 GMT -5 tractor said:

I think they are hoping to ease some of the inflationary pain we are all feeling. However, all this additional pause does in kick the can down the road further, people need to start paying on their loan debts again. I'm sure most haven't been saving it up, it will effect their budget whenever payments are due again. I think skipping payments hurts in the long run more than to just keep sending them in.

Anyway, we continue to pay on my wife's, taking advantage of the 0% interest to gain some serious ground, and should have them knocked out by the end of the year.

I remain delighted with the pause.

there is no way that this is negatively impacting anyone because the interest is paused, every time the can is kicked, it's getting smaller via inflation erosion.

If some people take on extra payments or larger than they would have payments like a car or something, that is their own business and should not dictate what policy is set for everyone.

[stillmovingforward]

My DD1 estimates that the interest pause has saved her about $30,000. She'd be thrilled if it was extended.

[grumpyhermit]

Mar 15, 2022 23:51:34 GMT -5 stillmovingforward said:

My DD1 estimates that the interest pause has saved her about $30,000. She'd be thrilled if it was extended.

While I'm not personally in favor of a blanket forgiveness for student loan debt, as I don't think it does anything to address the actual problem, slashing or eliminating the interest on these loans would seem the obvious place to start. 

The rates for Unsub (~5%) and Plus (~6%) are ridiculous. 

[TheOtherMe]

Article in our local paper interviewed 5 people who have student loans to see how they spent the money.

One kept paying and her loans are now entirely paid off.  She said that albatross is now off her back.

Another used it as a down payment on a house.  How they expect to make the actual payments when the payments resume, I don't know.

The other 3 spent it.  

[raeoflyte]

I see a lot of student loans for people and only a couple of them I think will have any issues resuming payments.

[Rukh O'Rorke]

Mar 16, 2022 10:55:58 GMT -5 TheOtherMe said:

Article in our local paper interviewed 5 people who have student loans to see how they spent the money.

One kept paying and her loans are now entirely paid off.  She said that albatross is now off her back.

Another used it as a down payment on a house.  How they expect to make the actual payments when the payments resume, I don't know.

The other 3 spent it.  

why would you assume they'd have any issue making the payments?

[TheOtherMe]

Because reading the story, they were having problems making rent payments before.  Houses also come with the need for repairs etc.  

If you couldn't make your rent while paying on student loans, why would you think you can make a house payment?

[NomoreDramaQ1015]

Mar 16, 2022 13:41:17 GMT -5 TheOtherMe said:

Because reading the story, they were having problems making rent payments before.  Houses also come with the need for repairs etc.  

If you couldn't make your rent while paying on student loans, why would you think you can make a house payment?

I suppose it depends.  The house next to us which is literally the same square footage and layout as ours (it's a neighborhood of cookie cutter houses that went up post WWII for returning soldiers and their families) is going for ~$900 in rent a month.

Our mortgage is $585 a month.  That's $315 saved a month.   That's not chump change.

They are having a heck of a time keeping renters because it's so much cheaper to buy in our area.  House prices are going up but not nearly at the rate rent costs are.

[raeoflyte]

Mortgage companies are still qualifying people with student loan payments even though they aren't due right now. If they were able to save those payments for 1 to 2 years to use as a down payment they didn't really add it back in to the budget.

[TheOtherMe]

In the article, that particular couple lived somewhere in the Denver area.  I know that meant their rent was outrageous but so would a house payment.  They had bought under some first time homebuyer's program that required a very low down payment.  Less than 3% of a down payment.  

Unless the program also helped with interest rates, I would think they have a large mortgage payment, at least by my standards.

[Rukh O'Rorke]

I guess I usually just assume that people are making somewhat reasonable decisions and can figure things out as they go along.

With a couple especially, there are two people to figure it out, get extra job/s, get a better job/s, do the maintenance, etc. 

There is still a chance there will be further delays - while inflation continues to eat away at the principal vis a vis their income, and even some chance of actual princpal forgiveness before this is done.

I just don't see a good rationale for a couple to delay getting a house if they can and want to get one, and the bank approves which they did, when the rest is all just speculation on what and how the payments will resume.

And there is still all kinds of deferments and reduced payments and loan forgiveness options that they could consider/access if necessary/qualify for.

[raeoflyte]

Mar 16, 2022 14:08:10 GMT -5 TheOtherMe said:

In the article, that particular couple lived somewhere in the Denver area.  I know that meant their rent was outrageous but so would a house payment.  They had bought under some first time homebuyer's program that required a very low down payment.  Less than 3% of a down payment.  

Unless the program also helped with interest rates, I would think they have a large mortgage payment, at least by my standards.

Every mortgage payment I see these days are large by my standards. But so are their rent payments. It makes me glad I'm old and already bought my home, but definitely wonder how things can continue like this. I don't know if it's a good idea to wait and see if prices come down when they're going up so much each month and with interest rates going up buying they're losing buying power by waiting.

I'm certain they were qualified with a decent payment for their student loans, so it may pinch when payments resume but it shouldn't be a reason that they can't afford the mortgage. If they used the programs most common in the area, they are very low down payment loans, but the rates are reasonable.

[jerseygirl]

Grandson is looking at colleges he’s a junior
Tuition is really outrageous now and for most if not all private and out of state public colleges almost require loans - student plus parent
His cousins went to Virginia tech graduating about 10 years ago. Cost then for out of state about $25000 now it’s about $45000
And VT is reasonable compared to others. None of us want him to have loans, we’re (and him ) fortunate that he’ll have enough savings to pay for a SUNY college in state. But unless he takes out $80000 to almost $200000 in loans he wouldn’t be able to attend the colleges his parents grandparents uncles aunt or cousins attended. None of them had loans.
A sad situation

[movingforward]

My friend has been kicking this can down the road the last 2 years and it isn't helping. She needed a new car at the beginning of the pandemic. Despite my encouragement to get something "economical" because student loans payments are going to happen (they have not happened for her yet because she finished her degree a few months prior to covid), she went out and bought something she really can not afford. Now her rent is going up more than $300 a month. Everything in general is more expensive. I'm not sure where she is going to find the money to pay back her student loans, but she is 48 and has health issues. I doubt she will be able to work much past the age of 55. It's a financial disaster waiting to happen.

I'm still baffled as to the reason she even got this online degree. She has been with the same company for 20 years and has no plans to leave. The degree hasn't done a thing for her career.

She has always had some money issues. Fifteen years ago we were making the exact same amount of money, lived in the same apartment complex and even had similar cars. She always seemed to struggle financially while I was fine and able to save. Fast forward to now and I have definitely jumped ahead in my career, own a home, etc. I know overall I am better off financially now and I try to help her when I can, but over the course of our 20 year friendship she has made some really dumb mistakes. The one thing I can say is that she does have a 401K and has contributed the minimum amount for the match. Hopefully, she will have "something" for retirement. I just hope she can actually work long enough to collect social security.

Anyway, that went off the rails...

[mamasita99]

I certainly haven’t run out and replaced my student loan payment with another monthly obligation. I’ve been making those payments to my savings account so I can make wiser money decisions down the road.
I owe a Lot in student loans. Im just grateful the balance isn’t getting bigger during this time. Even when I was making payments, it wasn’t really going down much with the interest. The proverbial drop in the bucket.

[Ava]

mamasita99
I didn't know you had large student loans.
Good for you for saving the monthly payment.
I agree, when the balance is high it doesnt make sense to send the money to the SL. It won't change things much.

[Ava]

I'm grateful for the payment and interest pause we've had for the last 2 years.
I will be even more grateful if they extend the pause. But this isn't the solution.

The system is broken and needs a total overhaul. We have to think not only of those who have loans now, but also of future students, so they don't end up in the same spot we're in.

It makes me laugh when I read comments saying "pay your debt, deadbeat", etc.
It's a total lack of understanding of the situation we're in. If those people went to school many years ago, or didn't go to school at all, they don't understand the unfairness of this.
I'm not a deadbeat. I pay my mortgage, my car loan and all my bills on time.

Student loan debt was sold to me as a means to an end and as "good" debt.
It's not good debt. Interest accumulates daily. When I was still in school, my interest was already capitalizing on my unsubsidized loans. I had no means to pay them then. And mine are all federal loans. And I went to in-state local universities, living in my condo while attended, and working full time to support myself. There wasn't enough to pay tuition, otherwise I would have done it. 

By the time I graduated and started paying, I had to go into IDR. Interest continued to accumulate and capitalize. 
Once I got a couple of raises, I sat down and made some calculations. If I paid $350 a month, I was able to cover the interest and avoid debt increases. It was a huge sacrifice, and my balance was going down maybe $5 a month with that monthly payment.
It's scary to be in that situation, and I hope there are some changes to the system so I don't have to go back to that.
Of course, inflation plays a part and the $350 now is not the same as $350 in 2020, but it's still a huge sacrifice for me.

To me, the solution would be to start subsidizing state schools so tuition is free, and for current debtors to be put on an IDR plan, with interest at 0%, and the loan balance forgiven after 10 years.

[The Walk of the Penguin Mich]

Mar 20, 2022 11:02:29 GMT -5 Ava said:

I'm grateful for the payment and interest pause we've had for the last 2 years.
I will be even more grateful if they extend the pause. But this isn't the solution.

The system is broken and needs a total overhaul. We have to think not only of those who have loans now, but also of future students, so they don't end up in the same spot we're in.

It makes me laugh when I read comments saying "pay your debt, deadbeat", etc.
It's a total lack of understanding of the situation we're in. If those people went to school many years ago, or didn't go to school at all, they don't understand the unfairness of this.
I'm not a deadbeat. I pay my mortgage, my car loan and all my bills on time.

Student loan debt was sold to me as a means to an end and as "good" debt.
It's not good debt. Interest accumulates daily. When I was still in school, my interest was already capitalizing on my unsubsidized loans. I had no means to pay them then. And mine are all federal loans. And I went to in-state local universities, living in my condo while attended, and working full time to support myself. There wasn't enough to pay tuition, otherwise I would have done it. 

By the time I graduated and started paying, I had to go into IDR. Interest continued to accumulate and capitalize. 
Once I got a couple of raises, I sat down and made some calculations. If I paid $350 a month, I was able to cover the interest and avoid debt increases. It was a huge sacrifice, and my balance was going down maybe $5 a month with that monthly payment.
It's scary to be in that situation, and I hope there are some changes to the system so I don't have to go back to that.
Of course, inflation plays a part and the $350 now is not the same as $350 in 2020, but it's still a huge sacrifice for me.

To me, the solution would be to start subsidizing state schools so tuition is free, and for current debtors to be put on an IDR plan, with interest at 0%, and the loan balance forgiven after 10 years.

State schools ARE subsidized.  The problem is that many states have cut the subsidies over the years to the point that something needs to cover those cuts, thus a tuition increase.  

For instance, state funding in 2018 was $6.6 billion less than what it was in 2008.  

[Lizard Queen]

It's not really fair to the rest of the population to have to pay to completely subsidize college education.  Though, I think it's shameful how much state funding has dropped. I also don't think it's fair to simply erase student loan debt, though I could go with getting rid of interest on the debt.

[Rukh O'Rorke]

Mar 20, 2022 13:42:54 GMT -5 Lizard Queen said:

It's not really fair to the rest of the population to have to pay to completely subsidize college education.  Though, I think it's shameful how much state funding has dropped. I also don't think it's fair to simply erase student loan debt, though I could go with getting rid of interest on the debt.

why?

is it in the same vein as it's completely unfair to non-parent people to give those with children huge EITC and refundable tax deductions?

or unfair to single retirees when married people can claim more social security on their spouses record, then swith to their record at 70 for a larger payout?

or......

I think you see where I'm going here....

[TheOtherMe]

Life is not fair.  I am in favor of forgiving maybe $50,000 of student loans, but not all of it.

I might even qualify that so that it was for loans taken out by kids, not adults--something like under age 26.  It wouldn't apply to loans parents signed for.  Parents are should be educated enough to do their research as should adults.  

My taxes already go to a ton of things I don't support.  This is another one.  All debt should not be forgiven.

I have no problem with making the first two years of college at a community college free.  I do have problems with totally forgiving every dime of loans adults signed for.

Parents are not obligated to send their kids to college.  They can teach their kids about how loans work and let the kid decide if they want to take on the debt.  

BIL and sister had 4 kids.  They knew they couldn't pay for all 4 to go to college so they paid for none to go to college but they all have college degrees and student loans that dad explained to them.  

I know my niece, the oldest, has completely paid hers off.  I wouldn't be surprised if the MBA/CPA has paid his off.

I know the PhD and the one who went on the 7 year plan have not paid theirs off.  The one on the 7 year plan isn't even working in the profession he went to school for.

[Lizard Queen]

Mar 20, 2022 14:02:10 GMT -5 Rukh O'Rorke said:

Mar 20, 2022 13:42:54 GMT -5 Lizard Queen said:

It's not really fair to the rest of the population to have to pay to completely subsidize college education.  Though, I think it's shameful how much state funding has dropped. I also don't think it's fair to simply erase student loan debt, though I could go with getting rid of interest on the debt.

why?

is it in the same vein as it's completely unfair to non-parent people to give those with children huge EITC and refundable tax deductions?

or unfair to single retirees when married people can claim more social security on their spouses record, then swith to their record at 70 for a larger payout?

or......

I think you see where I'm going here....

Because some people make sacrifices to pay for college, pay off their debt, or choose less expensive options rather than taking on this debt. Debt forgiveness incentives taking on as much debt as possible, without regard to trying to keep costs down in any way. There is a limit to what our country can afford to pay for.

No, EITC is not fair, but income and wealth inequality are a destabilizing force within a society, so they help alleviate that somewhat. Childhood poverty is detrimental over a lifetime.  I also don't know of any EITC that pays out $100,000's to anyone, but could be wrong.

[pulmonarymd]

College is the best way to improve the conditions of people who are born poor. People with a college degree makes 100s of thousand more than people with a high school education. Making it more cost prohibitive for the poor will make income inequality worse. In addition, talented individuals who were born poor may not have the chance to get into higher paying occupations without college. 50 years ago people could at least work and make enough to attend a state school. That is no longer possible.

Rich people will always find a way to pay for school. We need to find a way for those at the bottom of the economic ladder can get a college education without going into ridiculous amounts of debt. Sacrificing by giving up lattes won’t do it

[Rukh O'Rorke]

Mar 20, 2022 15:15:13 GMT -5 Lizard Queen said:

Mar 20, 2022 14:02:10 GMT -5 Rukh O'Rorke said:

why?

is it in the same vein as it's completely unfair to non-parent people to give those with children huge EITC and refundable tax deductions?

or unfair to single retirees when married people can claim more social security on their spouses record, then swith to their record at 70 for a larger payout?

or......

I think you see where I'm going here....

Because some people make sacrifices to pay for college, pay off their debt, or choose less expensive options rather than taking on this debt. Debt forgiveness incentives taking on as much debt as possible, without regard to trying to keep costs down in any way. There is a limit to what our country can afford to pay for.

No, EITC is not fair, but income and wealth inequality are a destabilizing force within a society, so they help alleviate that somewhat. Childhood poverty is detrimental over a lifetime.  I also don't know of any EITC that pays out $100,000's to anyone, but could be wrong.

you don't think that financial barriers to education contribute to wealth inequities? 

[Lizard Queen]

Mar 20, 2022 16:06:56 GMT -5 Rukh O'Rorke said:

Mar 20, 2022 15:15:13 GMT -5 Lizard Queen said:

Because some people make sacrifices to pay for college, pay off their debt, or choose less expensive options rather than taking on this debt. Debt forgiveness incentives taking on as much debt as possible, without regard to trying to keep costs down in any way. There is a limit to what our country can afford to pay for.

No, EITC is not fair, but income and wealth inequality are a destabilizing force within a society, so they help alleviate that somewhat. Childhood poverty is detrimental over a lifetime.  I also don't know of any EITC that pays out $100,000's to anyone, but could be wrong.

you don't think that financial barriers to education contribute to wealth inequities? 

They can more directly be addressed via grants than loans.

[pulmonarymd]

Also by supporting public college to the degree it was in the past

[obelisk]

Mar 20, 2022 11:02:29 GMT -5 Ava said:

I'm grateful for the payment and interest pause we've had for the last 2 years.
I will be even more grateful if they extend the pause. But this isn't the solution.

The system is broken and needs a total overhaul. We have to think not only of those who have loans now, but also of future students, so they don't end up in the same spot we're in.

It makes me laugh when I read comments saying "pay your debt, deadbeat", etc.
It's a total lack of understanding of the situation we're in. If those people went to school many years ago, or didn't go to school at all, they don't understand the unfairness of this.
I'm not a deadbeat. I pay my mortgage, my car loan and all my bills on time.

Student loan debt was sold to me as a means to an end and as "good" debt.
It's not good debt. Interest accumulates daily. When I was still in school, my interest was already capitalizing on my unsubsidized loans. I had no means to pay them then. And mine are all federal loans. And I went to in-state local universities, living in my condo while attended, and working full time to support myself. There wasn't enough to pay tuition, otherwise I would have done it. 

By the time I graduated and started paying, I had to go into IDR. Interest continued to accumulate and capitalize. 
Once I got a couple of raises, I sat down and made some calculations. If I paid $350 a month, I was able to cover the interest and avoid debt increases. It was a huge sacrifice, and my balance was going down maybe $5 a month with that monthly payment.
It's scary to be in that situation, and I hope there are some changes to the system so I don't have to go back to that.
Of course, inflation plays a part and the $350 now is not the same as $350 in 2020, but it's still a huge sacrifice for me.

To me, the solution would be to start subsidizing state schools so tuition is free, and for current debtors to be put on an IDR plan, with interest at 0%, and the loan balance forgiven after 10 years.

In receiving your degree including your student loans was this a degree to increase your salary or was this a hobby, meaning with your degree why it did not change your job.  If this degree was not intended for a job change then why do you think the loans should be forgiven.  At your age with a mortgage you were not mistaken in  taking student loans.