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Author Topic: HR 4170 Loan Forgiveness Act  (Read 18750 times)
bash217
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« Reply #15 on: April 13, 2012, 3:51:48 AM »

The proposal is that after 10 years of making proper payments based on whatever repayment plan you pay under, the rest will be forgiven. There is also a cap for new borrowers of approximately 50,000 USD eligible for forgiveness, to ensure they don't go hog wild.

Payments already made would be counted for the 10-year requirement. Currently loans are forgiven after 25 years. So for people who ended up spending some money on their education, such as me, I might be rid of the monthly payments by the age of 39, rather than 54. With some student loan rates at 6.8% this is no joke--Together with Mr. (Dr.) Bash, we pay about 400 USD per month in interest.
That not exactly how I'd recommend it be done, but I have to admit it sounds very attractive for my situation.  However, given that Republications seem to get to call all the shots these days, I don't imagine that the bill will pass. 
I think you are right. But how would you recommend it be done? It's an interesting debate. So many people are defaulting on their student loans because of inability to pay due to long-term unemployment. I don't think anyone is happy about this situation. I'm not sure who wins here (at least among those on this thread who are apparently strongly against any form of forgiveness). The amount of interest well-intended people are paying is really incredible. I know I am one of the lucky ones, and I want to pay my loans. But what if I hadn't gotten a decent job?

I think for me personally the worst of it is how difficult the service providers are to work with (I live overseas). I want to follow the rules and pay correctly. But I don't know how they could administer this very important, large-scale system (direct loans servicing, specifically) any more poorly than they do. A Google search shows so many horror stories regarding how the outsourced service providers mismanage direct loans; I am confident from my own difficulties with dealing with them that this is not all whining. (For example, it typically takes them 3-4 months to file paperwork against due dates of 2 months, and if you submit paperwork early, they refuse it, because they haven't asked for it yet.) If the government wants their money back, they could take some tips from say, the credit card companies, when it comes to administering the repayment program (websites, workflows, etc.). It's not rocket science. It's so weird to me how their choices contribute to the problem, here. Probably a handful of these people who have defaulted just can't get a non-robot on the phone to get their account in normal operating mode. But that's just my two cents.
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bash217
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« Reply #16 on: April 13, 2012, 3:56:35 AM »

Currently loans are forgiven after 25 years. So for people who ended up spending some money on their education, such as me, I might be rid of the monthly payments by the age of 39, rather than 54. With some student loan rates at 6.8% this is no joke--Together with Mr. (Dr.) Bash, we pay about 400 USD per month in interest.

When I'm 64, not 54. Me no do math good!

When I get older, paying off loans, many years from now...
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monsterx
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« Reply #17 on: April 13, 2012, 8:31:48 AM »

Well, when I rule the world, it will be done through reducing the interest rates on the loans, maybe even to zero.  Thus , the payments would drop accordingly.  This would mean that a young person trying to start a family will see the benefit right away, when it is most needed, instead of having to wait until old age, but still make it clear that if you borrow, you've got to pay it back, so as to keep borrowers under control.  There could be more forgiveness of lower earners and less for high earners, as well.  I might also make a law which makes the universities which the borrowers attended help out a little with what all this forgiveness is costing, but only for high-tuition schools, and only for their own borrowers who are having their loans forgiven.
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pedanterast
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« Reply #18 on: April 13, 2012, 9:01:17 AM »

When I rule the world, higher education will be free to the qualified, consistent with its negative incremental overall cost.  Of course I paid hardly any tuition and only took out loans as a way of investing on margin, but I still wish I hadn't paid them off so soon.
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glowdart
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« Reply #19 on: April 13, 2012, 10:24:35 AM »

The proposal is that after 10 years of making proper payments based on whatever repayment plan you pay under, the rest will be forgiven. There is also a cap for new borrowers of approximately 50,000 USD eligible for forgiveness, to ensure they don't go hog wild.

Payments already made would be counted for the 10-year requirement. Currently loans are forgiven after 25 years. So for people who ended up spending some money on their education, such as me, I might be rid of the monthly payments by the age of 39, rather than 54. With some student loan rates at 6.8% this is no joke--Together with Mr. (Dr.) Bash, we pay about 400 USD per month in interest.
That not exactly how I'd recommend it be done, but I have to admit it sounds very attractive for my situation.  However, given that Republications seem to get to call all the shots these days, I don't imagine that the bill will pass. 

Except that the Republicans are the ones who passed the first iteration of the 10-year plan for public service employees.  If you can wrap it in a flag, then it might fly. 

And, the loans are only forgiven if you have anything left after making payments based on your income level for 10 years (or 25, if you're on that plan).  The premise behind the current iteration of this and the new proposal is that it'll sound good, but most people will still end up paying off their total loan amount.  The carrot of "loan forgiveness" gets them off of the 30-year repayment plan and onto the 10-year plan.  But if your payments are based on your income, then you might not have anything left after 10 years.  Or you might... and it will be a relief for those who will, certainly.   
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monsterx
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« Reply #20 on: April 13, 2012, 10:37:59 AM »

Except that the Republicans are the ones who passed the first iteration of the 10-year plan for public service employees.  If you can wrap it in a flag, then it might fly. 

If you can make it into a way to score partisan points against Obama, then it might fly.  That's the only thing they seem to be interested in doing these days.
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msparticularity
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« Reply #21 on: April 15, 2012, 12:15:13 AM »


2) Student loan interest rates are much lower now than they would be if students could default (assuming they would get loans at all). There's a reason students can get a 4% student loan while having a credit card that charges them 20%. While you can foreclose a house or repossess a car, you cannot repossess human capital. Rather, that's going to pay off in future earnings (certainly so on average), hence why giving students loans to pay for their education makes sense from a policy perspective.

This assessment is incorrect on a very important point; Congress, in its wisdom, passed a law a few years ago guaranteeing a minimum interest rate of 6.5% to 8.5% (depending upon the loan type) on student loans--even when actual interest rates are far lower. Many of us from earlier generations (including me) were able to consolidate at rates around 3% in the early 2000s, but this option is now gone for this generation of graduates--all so we can be quite certain that the banks will make enough money. (Keep in mind here that the banks run no risk at all; the loans are federally guaranteed.)

Furthermore, thanks to lobbying efforts, student loans continue to be available for attendance at for-profit institutions that are predatory/deceptive and completely fail to provide the actual education promised. Students of lower socioeconomic status are disproportionately affected since they lack the social and educational capital to evaluate their options. These loans are the source of a great deal of the current problem.
« Last Edit: April 15, 2012, 12:15:55 AM by msparticularity » Logged

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bash217
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« Reply #22 on: April 15, 2012, 12:57:24 AM »


2) Student loan interest rates are much lower now than they would be if students could default (assuming they would get loans at all). There's a reason students can get a 4% student loan while having a credit card that charges them 20%. While you can foreclose a house or repossess a car, you cannot repossess human capital. Rather, that's going to pay off in future earnings (certainly so on average), hence why giving students loans to pay for their education makes sense from a policy perspective.

This assessment is incorrect on a very important point; Congress, in its wisdom, passed a law a few years ago guaranteeing a minimum interest rate of 6.5% to 8.5% (depending upon the loan type) on student loans--even when actual interest rates are far lower. Many of us from earlier generations (including me) were able to consolidate at rates around 3% in the early 2000s, but this option is now gone for this generation of graduates--all so we can be quite certain that the banks will make enough money. (Keep in mind here that the banks run no risk at all; the loans are federally guaranteed.)

Furthermore, thanks to lobbying efforts, student loans continue to be available for attendance at for-profit institutions that are predatory/deceptive and completely fail to provide the actual education promised. Students of lower socioeconomic status are disproportionately affected since they lack the social and educational capital to evaluate their options. These loans are the source of a great deal of the current problem.

Yes. From my own perspective, even the call to consolidate "to make things easier" for borrowers today seems exploitative. As I understand the options, the overall interest rate for people such as myself would rise by 1%. And with direct loan servicing being much more poorly managed than private bank loans, it seems very unlikely that consolidation would make life more convenient. So young people have been encouraged to view their education as an investment while the costs have skyrocketed and jobs have disappeared, and then they are encouraged to consolidate, which only adds to the overall debt. Student loans just made a lot more sense 10-15 years ago then they do today.
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ex_mo
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« Reply #23 on: April 18, 2012, 12:54:18 PM »

How is this different from the current plan/law?  http://studentaid.ed.gov/PORTALSWebApp/students/english/PSF.jsp 

Just that it lowers the interest rate?

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bash217
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« Reply #24 on: April 19, 2012, 12:01:28 AM »

How is this different from the current plan/law?  http://studentaid.ed.gov/PORTALSWebApp/students/english/PSF.jsp 

Just that it lowers the interest rate?

As your link mentions, Public Service Loan Forgiveness is only for people working for specific kinds of "public service" employers within the United States (and who worked with that employer while making 10 years of payments):

Qualifying employment is any employment with a federal, state, or local government agency, entity, or organization or a non-profit organization that has been designated as tax-exempt by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC).

My understanding is that U.S. public universities currently qualify, but private universities do not.

The HR 4170 bill is for other people (who use income-based repayment) to receive forgiveness after 10 years, who otherwise would only have loans forgiven after 25 years of repayment.
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narnceredir
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« Reply #25 on: April 19, 2012, 9:31:27 AM »


My understanding is that U.S. public universities currently qualify, but private universities do not.


Your understanding is incorrect.  Private universities are almost always non-profit institutions and tax-exempt.  Also, from http://studentaid.ed.gov/PORTALSWebApp/students/english/PSF.jsp#Q6:

Qualifying employment is any employment with a federal, state, or local government agency, entity, or organization or a non-profit organization that has been designated as tax-exempt by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC). The type or nature of employment with the organization does not matter for PSLF purposes. Additionally, the type of services that these public service organizations provide does not matter for PSLF purposes.

A private non-profit employer that is not a tax-exempt organization under Section 501(c)(3) of the IRC may be a qualifying public service organization if it provides certain specified public services. These services include emergency management, military service, public safety, or law enforcement services; public health services; public education or public library services; school library and other school-based services; public interest law services; early childhood education; public service for individuals with disabilities and the elderly. The organization must not be a labor union or a partisan political organization.
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bash217
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« Reply #26 on: April 19, 2012, 2:52:37 PM »

OK. I don't live in the United States (because I have not been offered any jobs there). So I am not eligible. And I still owe taxes there, because I am still a citizen.

Does working for a university outside of the United States reasonably bar one from forgiveness after 10 years of repayment?

If it was a matter of, "if you are a professor, then you don't have to pay until you are 64...." um...cool, I guess.

But I don't think that's what anyone is saying, at all.

It doesn't seem logical. It seems to also play into the offensive sense of self-entitlement discussed earlier, although maybe that doesn't matter to people, as long as everyone works, in higher ed, in the United States? (Hmmmm?)
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pedanterast
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« Reply #27 on: April 19, 2012, 7:28:58 PM »

OK. I don't live in the United States (because I have not been offered any jobs there). So I am not eligible.

You are oh for two now.  You don't have to live in the US to be eligible.  You could, for example, be working for the U.S. State Department on an overseas posting.  A friend of mine who works for them just got his remaining $42k balance forgiven.

None of this is a good idea, because it's a subsidy, and subsidies are never good ideas.
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bash217
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« Reply #28 on: April 20, 2012, 12:24:44 AM »

Sorry, what I meant to say is that I don't work for a U.S.-based employer.

I really didn't know that PSLF applies to everyone in higher ed in the United States. Some of the initial language suggested you were only eligible if you worked on a former reservation or something like that. But now it seems quite funny to me that people who have a benefit don't want other people to have a similar benefit. I guess that's what I get for serving foreigners.

$42K? Wow. I would really think that in the Foreign Service you would have to make the standard payments, due to income.
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anakin
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« Reply #29 on: April 20, 2012, 12:41:11 AM »

Some interesting assumptions and misconceptions here, which I suppose is to be expected - when I was researching the PSLF program, I got my hands on three different sets of documents, each of which made anything from minor to substantial errors. It took me a while - and a phone call to an incredibly helpful, awesomely patient and sick knowledgeable person to understand how it worked.

I have now completed the process and enrolled in PSLF. The requirements are:

1. Make 120 payments of the greater of: income-based repayment, income-contingent repayment, or accelerated payment. Every six months, I must get my uni HR people to sign a document affirming that I'm still an employee and have worked full-time or been on FMLA leave for 23 of the previous 26 months.
2. If/when I wind up at another uni, repeat the verification process. Payment will adjust upward as it is income-based.
3. My 120 payments do not need to be sequential. If I want to visit an ashram in three years and I take six months' leave, the clock just stops, it doesn't reset. If I want to start a microbrew, I continue to repay my student loan, of course, but sadly, the IRS does not consider brewery employees public servants. (I know, right??) If I get over my midlife crisis in time to go back to teaching, my next payment is credited to PSLF.
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