Ditch your [student loan] Debt
June 11, 2009 11:31 AM   Subscribe

A short video explaining the new Income Based Repayment going into effect July 1st Your student loans might be more manageable soon. [courtesy of IBRinfo.org].
posted by mecran01 (47 comments total) 20 users marked this as a favorite
 
That's cool. My current student loan repayment schedule has my loans paid off around my 64th birthday. After that I expect to be able to enjoy two or three decades of loan-free living being able to retire to collect about $29 a month from what remains of Social Security. Thanks, Baby Boomers!
posted by exogenous at 11:37 AM on June 11, 2009 [3 favorites]


Thanks for the video. I'm crossing my fingers for the revised calculation, as the current formula double-counts income if you're married but does not consider your spouse's debt when calculating your monthly payments.
posted by Happydaz at 11:43 AM on June 11, 2009


Crazy as it sounds, I have a car loan and student loan for cheaper interest rates than my local credit union is charging for 30 year fixed mortgages. As long as I don't look at my Roth IRA, the economy has been doing well by me lately!
posted by pwnguin at 11:49 AM on June 11, 2009


What's mildly unnerving is that nobody at any of the student loan agencies I've called knows anything about this.
posted by mecran01 at 11:49 AM on June 11, 2009


How does this impact people who have consolidated loan, I wonder.
posted by absalom at 11:54 AM on June 11, 2009


Baby boomers are probably the best generation of americans around. Not only are their children required to take on up to $150k in debt to graduate with a degree in order to acquire employment at a median of $40k/yr, but they also require the younglings to pay into social security (that will be broke in 40 years) and their socialized medical expenses to further ensure their plush retirements. Anybody older than 50 is a dick.
posted by norabarnacl3 at 11:57 AM on June 11, 2009 [3 favorites]


I busted my hump for years to pay off my student loans. I didn't have a huge amount of debt in comparison to a lot of people I know (~$30k) but it took well over a decade for me to get out from under it.

I made my last payment 11 months ago and the sense of relief still hasn't faded. I fully support any reasonable program that helps people retire their student loan obligations but I wish that there had been some help for me when I was the one clicking 'submit' every month.
posted by djeo at 12:02 PM on June 11, 2009 [2 favorites]


According to the calculator, this stands to cut my payments roughly in half, saving me something like $7k/year. If this pans out it'll make a gigantic difference in my ability to save for retirement.

One small catch about the 25 year forgiveness: any loan principal forgiven may be considered taxable income.

How does this impact people who have consolidated loan, I wonder.

From what I can gather if you have a direct Federal consolidation loan then you should be eligible. I have no idea about private loan consolidation.
posted by jedicus at 12:05 PM on June 11, 2009


If you have consolidated loans under the direct loan program then this still applies to you. I've been making payments for a couple of years, but those won't count towards the 10-year forgiveness program.
posted by mecran01 at 12:06 PM on June 11, 2009


According to the calculator, my payments would go up.
posted by amro at 12:23 PM on June 11, 2009 [1 favorite]


Based on the information you have provided, you would probably not qualify for IBR.

What a great program! Hoorah!
posted by Big_B at 12:25 PM on June 11, 2009


According to the calculator, I probably don't qualify based on just my direct loans, but I actually have both direct and private loans, and the payments are more then what my cap would be if they were all direct.
posted by delmoi at 12:31 PM on June 11, 2009


You must be rich, Big B.
posted by Happydaz at 12:33 PM on June 11, 2009


Great. More reason for people to get useless degrees that in no way increase their competitiveness in the job market. Even better, I get to pay for them.

To everyone that uses this program to reduce their interest rates or eliminate their obligations: Please show a bit of appreciation that your education comes at my expense. In essence, I'm giving you a scholarship except I don't get to put my name on it. This is not the government giving you the gift of education, it's people like me paying for your education in addition to their own.

For reference, I declined admission to five of the top ten engineering schools in the United States because I didn't think I could afford the tuition. I went to a bottom-tier instate school instead. I seem to make a decent living regardless.
posted by saeculorum at 12:37 PM on June 11, 2009


Didn't they used to have something like this? When I was getting out of college 10 years ago, I swear my Direct loan had an income-contingent option.
posted by smackfu at 12:39 PM on June 11, 2009


You should have gone to a better school and just gotten a scholarship. I heard that there was this dude named saeculorum giving them out.
posted by ND¢ at 12:54 PM on June 11, 2009 [4 favorites]


So, everyone over 50 is a dick. I'm pretty sure everyone under 30 is a dick. Hmmm. Well, that significantly reduces the number of people in the world I have to care about but significantly increases the number of people I'll have to chase off my lawn between now and turning 50.
posted by spicynuts at 1:26 PM on June 11, 2009


After that I expect to be [...] able to retire to collect about $29 a month from what remains of Social Security.

It's always nice to see optimism in young people these days.
posted by Solon and Thanks at 1:29 PM on June 11, 2009



Didn't they used to have something like this? When I was getting out of college 10 years ago, I swear my Direct loan had an income-contingent option


They still do. Income based is just ore generous to the borrower, it seems.
posted by dilettante at 1:35 PM on June 11, 2009


To everyone that uses this program to reduce their interest rates or eliminate their obligations: Please show a bit of appreciation that your education comes at my expense. In essence, I'm giving you a scholarship except I don't get to put my name on it. This is not the government giving you the gift of education, it's people like me paying for your education in addition to their own. saeculorum

I feel so bad about your situation I can't stop sobbing.

Actually, the tuition at many state schools is already subsidized. At our institution even the students who don't receive scholarships are still having 50 percent of their tuition funded by the state. So basically, you got the free ride and then want to slam the door shut before anyone else can hop on. Stay classy!
posted by mecran01 at 1:50 PM on June 11, 2009 [3 favorites]


More reason for people to get useless degrees that in no way increase their competitiveness in the job market. Even better, I get to pay for them.

I think, in general, most people once they start their careers want to make as much money as possible. However, when you're a student and making decisions about careers and committing to loans, you have very little concept of how much money you'll make in the future. It's not that hard to massively miscalculate and end up with more debt than you can handle at the age of 22, and these loans are not dischargeable into bankruptcy as other bad borrowing decisions made by older more "responsible" adults are.

So consider these loan programs as something that makes up for the fact that they can't be wiped out like other loans.

Somehow, I manage to both have a good salary, minimal loans and yet also a distinct lack of resentment -- empathy, even! -- for people who get in over their heads.
posted by deanc at 1:53 PM on June 11, 2009 [2 favorites]


It told me I have to pay more than I pay now.

Am I getting away with something here?

If so, please don't tell.
posted by krikkit261 at 2:08 PM on June 11, 2009 [1 favorite]


Even better, I get to pay for them.

The number of things we are paying for now that are due to others carelessness is almost enough to make you go Republican.
posted by smackfu at 2:13 PM on June 11, 2009


For reference, I declined admission to five of the top ten engineering schools in the United States because I didn't think I could afford the tuition. I went to a bottom-tier instate school instead. I seem to make a decent living regardless.

The cruel truth is that an engineering degree at any given state school is much more valuable for future earnings than a history degree at a very expensive liberal arts college.
posted by smackfu at 2:19 PM on June 11, 2009


Based on the information you have provided, you would probably not qualify for IBR.

What a great program! Hoorah!


Same here. The best part is that my federal loan is less than a quarter of my total debt burden from college. I can't wait to see what they come up with for "affordable" healthcare.
posted by HumuloneRanger at 2:37 PM on June 11, 2009


The cruel truth is that an engineering degree at any given state school is much more valuable for future earnings than a history degree at a very expensive liberal arts college.

Not true, because the prestigious investment banks and management consulting firms focus their recruiting on those very expensive/prestigious colleges, even for students with history degrees. Engineering degrees are overrated money-wise and only seem valuable because the amount of money you make on day 1 after you graduate college is a lot more than your peers will make. I mean, engineering degrees are great for a lot of other reasons, but if all you want to do is make a lot of money, you can do a lot better elsewhere.
posted by deanc at 2:45 PM on June 11, 2009 [1 favorite]


I wouldn't argue that Ivy League is worth it. I'm talking about the #50-150 places in the ranking of private schools, which cost almost as much but have very little of the benefit. You're just never recouping that $100k, and there are much better ways to spend that money, and end up at the same place.
posted by smackfu at 3:56 PM on June 11, 2009


I mean, engineering degrees are great for a lot of other reasons, but if all you want to do is make a lot of money, you can do a lot better elsewhere.

I think the point was not that you can't do better, but that you can't do better with a History degree.

As someone with a history degree from a very expensive liberal arts college, I would tend to agree with that statement.
posted by Civil_Disobedient at 4:00 PM on June 11, 2009


No, deanc's point was that history majors from Harvard can do better than EEs from Direction1 Direction2 State University, because history majors from Harvard can become investment bankers, consultants, and other very high paying financial workers, and engineers from schools unknown in New York can't.

This isn't something surprising. Engineers have long been known to make shitloads more than anyone else right out of college, but by the time everyone is 40 by and large the A&S grads have caught up or passed them.
posted by ROU_Xenophobe at 5:08 PM on June 11, 2009 [2 favorites]


Holy crap, according to their calculator, my monthly payment would go down by almost $350! My total student debt isn't insanely high, but my income is quite insanely low. I hope this thing is for real.
posted by estherbester at 7:13 PM on June 11, 2009


I remain pessimistically optimistic that I will get a good monthly payment from this program.
posted by Gravitus at 8:05 PM on June 11, 2009


according to their calculator, my monthly payment would go UP 345 bucks a month. No thanks.
posted by bradth27 at 8:23 PM on June 11, 2009


Wow, this is really great news for me. I am currently disabled and have about 20,000 in student loans. My income is low and according to the calculator, my payments would be very affordable. Hopefully my health can improve to the point where I am able to work but that may never happen. The big decision I had to make this summer was whether to continue for another degree and go back to school in order to stave off the student loan payments, or focus on other priorities and hope some miracle happens in six months so I can afford to pay even though I can't work. A miracle! Now I can contemplate whether or not I continue with school for the right reasons, and not just get in more debt simply to avoid paying on debt now.
posted by Danila at 8:35 PM on June 11, 2009


I have to say that this would encourage me to go back to school to make me a more valuable person in my career path, enabling me to earn more and be a more productive citizen, especially since I am a civil servant and would be forgiven after 10 years. Thanks, federal government!
posted by Foam Pants at 10:14 PM on June 11, 2009


exogenous: "After that I expect to be able to enjoy two or three decades of loan-free living being able to retire to collect about $29 a month from what remains of Social Security."

That's 29 Old Dollars, too, not post-rebasement kilobucks. Good luck trying to spend those down at McCostco.

ROU_Xenophobe: "Engineers have long been known to make shitloads more than anyone else right out of college, but by the time everyone is 40 by and large the A&S grads have caught up or passed them."

The flip side of this (and I heard the "just you wait" line a lot when I was in school, at a liberal-arts institution) was that the engineer, provided he's living frugally and saving, will have a nest egg that the A&S guy will never match. Say he saves 10% of a $60k salary that ramps up to $90 or $100k at peak, starting immediately after graduation, and compare that to the hypothetical A&S student who goes to grad school, works himself out of debt for a decade, and finally gets ahead in the salary department — but is now 40 with very little in the bank.

E.g.:
• 22 y/o making $60k, 10% savings rate, invested very conservatively at 4.5%, getting average of 1.5% per year raise (so making $112k at retirement) = $897k nest egg.

• 40 y/o making $70k, 6% savings rate (because it's later in life, lot more expenses, bigger lifestyle to maintain), invested more aggressively at 6%, on the fast track at 7% per year raise (retiring at $320k) = $430k banked at retirement. To make it to age 75, he has to live on about 12% of the income he's used to. Ouch.

(The calculator I have doesn't allow for savings rates to change over time; if it did, I'd have the 40 y/o's ramp up very quickly, from say 6pct to 25 or higher as he starts to panic, but it's still not a winning strategy. The early start is key in pretty much every comparison I've ever seen run, unless the income disparity is truly staggering, and that's just not realistic even for a A&S grad from a good school.)

The engineer still gets the last laugh, if he starts saving early enough. He just has to turn the other cheek to the A&S guy's lifestyle for a few years there mid-life, and he can retire comfortably and continue doing whatever it is he's used to.
posted by Kadin2048 at 12:56 AM on June 12, 2009 [1 favorite]


I have $11,000 in loans and never even got a degree. In fact, I dropped out a week before graduating. Hilarious that I'll be paying them back til I'm dead.
posted by runcibleshaw at 1:26 AM on June 12, 2009


Really? Most people borrow more than $11k just on their car.
posted by smackfu at 6:50 AM on June 12, 2009 [1 favorite]


Thanks for posting this. This web site is the first one that finally shed light on the public service loan forgiveness program and how to access it for me! I wish I had known about this sooner so I could have transferred my loans from Sallie Mae to the Direct Loan Program sooner.
posted by knmr76 at 8:28 AM on June 12, 2009


Interesting; I've never heard anything about A&S degrees rising above engineering later in life. I'd be curious to see something more in-depth on that. Where does that boost come from?
posted by pwnguin at 9:47 PM on June 12, 2009


pwnguin: "Interesting; I've never heard anything about A&S degrees rising above engineering later in life. I'd be curious to see something more in-depth on that. Where does that boost come from?"

I know a fair number of people who got an undergraduate degree in a traditional A&S discipline purely as a stepping-stone to professional school. Lots of liberal arts schools basically sell themselves on this basis, too. (Look for the "percentage of students accepted to graduate school" metric printed in bigger type than the "percentage of students graduating with a job offer.")

At least some of these people do get substantial, baccalaureate-plus salaries when they do get out onto the job market. But in many cases they end up burdened by a lot of debt, and even if they or their family paid cash, have given up 3-7 years of productive time on further education. There is definitely a tradeoff.
posted by Kadin2048 at 12:08 PM on June 13, 2009


I'm really curious: for those of you whose payments are calculated to increase, what is your student loan like? Are most of them private?

Also, it doesn't appear to be a compulsory program, so won't you guys just not take it up?
posted by jacalata at 6:44 PM on June 13, 2009


I never had any student loans myself because Georgia Tech costs nothing, like all Georgia universities. But I'd like to know if these federal loans paid only for tuition & fees. Or if they also supported the students "lifestyle" (posh apartment, beer, etc.). Anyone know? I'd also like to know how this impacts banks that make student loans. Will Banks start taking grades & major into account more?

I support reducing the cost of education, but I wish they'd focus on current students, not people with student loan debt. I understand that kids can't predict their future income and this counters the lack of bankruptcy protection. But we're simply not buying anything by doing this. You can otoh "buy" many more educated people by reducing tuition costs for current students.

I mean, this pays for the people who didn't chicken out about taking student loans, while many potentially smarter kids did chicken out. Why not spend the money keeping the strongest students on track for a degree in the future?

I'd support a similar temporary cap on student loan payments & interest billed as "economic stimulus", but there are better spending options over the long run.
posted by jeffburdges at 2:16 AM on June 14, 2009


Another big problem : Your subsidizing the people with the least productive career choice, while making the engineers pay off much more of their debt. I suppose this might prove beneficial if fewer loans are given for non-technical majors, but I'm not sure that'll happen and it might over correct if it did.
posted by jeffburdges at 2:41 AM on June 14, 2009


jeffburdges: "I never had any student loans myself because Georgia Tech costs nothing, like all Georgia universities. But I'd like to know if these federal loans paid only for tuition & fees. Or if they also supported the students "lifestyle" (posh apartment, beer, etc.). Anyone know?"

My loans after undergraduate study came out to around 15 thousand. On a normal pay plan, that's 150 dollars a month. This paid for tuition, food, fees and housing. I didn't spring for "posh apartments" because there weren't any to be had, really. Even during my graduate studies, I paid 200 dollars a month in rent to be in walking distance of campus and the bars. They did build a huge 7 story condo down the street from me, but I gather that's mainly used by well-to-dos and the athletic department.

Technically, you're only allowed to cover living expenses and educational expenses with loans, but a) given the superpriority of student loans, nobody's checking b) it's not like you have a spending account you're cutting checks from your loan with. Your loan disbursement is given directly to the college, with the remainder issued to you in the form of a check with your name on it. Nobody can tell whether your beer money comes from the loan or a part time job.
posted by pwnguin at 2:45 AM on June 14, 2009


I never had any student loans myself because Georgia Tech costs nothing, like all Georgia universities.

Nowadays, GT will cost you $7500 per year for tuition and fees, $5000 for housing, and $3000 for a meal plan. That's instate, of course.
posted by smackfu at 6:10 AM on June 15, 2009


smakfu : I based my assertion that "Tech costs nothing" upon the fact the Hope covered all tuition for in-state students who maintained some modest GPA, like 3.0 maybe, and had no means testing. I assume that's still true? Did the lottery commissioners get even more corrupt? I didn't count housing but mine was maybe $3000 per year, minus some other fellowships. I graduated shortly before the change to semesters, 10ish years ago.

pwnguin : I've been told the standard of living of British university students dramatically increased as Britain migrated to using significant student loans to finance education, previously students were financed only by part time jobs and/or parents but the schools were all free.
posted by jeffburdges at 9:24 PM on June 17, 2009


I hope they don't start telling High School students about this... It will only increase the number of idiots who buy $200,000 political science undergraduate degrees to save the world, that won't help them get that $30,000 a year desk job they're destined for. Or for that matter the bastards who sell those degrees.
posted by Blasdelb at 11:19 AM on June 22, 2009


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