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I hear a lot of news about student loan debt. How its affecting graduates and causing massive problems for them.
Do these people not know about the Income Based Repayment program or is it much harder to get approved for than I think?
I will have 35K in loans when I get my BS but I'm not worried about it. If I get a low paying job I'll just get the payment amount reduced using the IBR plan.
Anyone had any experience with it? Or thoughts about it?
Last edited by MetropolitanTN; 08-03-2011 at 12:24 PM..
Reason: Typo
I think its positives slightly outweigh its negatives. It can help a lot of people avoid defaulting if they cannot find decent paying work, but you'll end up paying more in the long run as it basically allows for more time to pay which lets more interest accrue.
To my understanding it is only applicable to federal loans, a lot of people who graduate with very large amounts of debt have taken out private loans, which generally have the higher interest rates anyways.
iBR has income restrictions..i dont qualify for IBR because my husband and I earned a high income last year (per the IRS) and we are above the cap for IBR inclusion. Plus, its only for federal loans, not private. I also read somewhere that even if the government forgives your loans after X years, you would be taxed on that forgiveness as it is considered income for tax purposes.
iBR has income restrictions..i dont qualify for IBR because my husband and I earned a high income last year (per the IRS) and we are above the cap for IBR inclusion. Plus, its only for federal loans, not private. I also read somewhere that even if the government forgives your loans after X years, you would be taxed on that forgiveness as it is considered income for tax purposes.
First, if there is a disparity between what you are earning now versus what you earned last year, you can submit alternate documentation of income (which you're required to do in the first year you enter IBR anyway). The payment amount should be based on your projected income for this year rather than your prior income. You would only use your tax return from last year if your income is substantially the same for this year.
Also, if you and your husband file seperately, they will consider only your income on your student loan. If you have heretofore filed jointly, consider filing seperately going forward. You may lose some tax benefits but the loss of benefits is minimal if you both have at least a modest income; and if your husband has a comfortable income the loss of benefits will be more than offset by the reduction in your student payments.
The taxability of loan forgiveness is being taken up by Congress. I haven't paid much attention to it but they may only make it non-taxable for those who get the 10-years-and-done forgiveness program offered to those in the public sector or public interest positions. All of which of course depends on whether the bill ever makes it to a vote.
I hear a lot of news about student loan debt. How its affecting graduates and causing massive problems for them.
Do these people not know about the Income Based Repayment program or is it much harder to get approved for than I think?
I will have 35K in loans when I get my BS but I'm not worried about it. If I get a low paying job I'll just get the payment amount reduced using the IBR plan.
Anyone had any experience with it? Or thoughts about it?
Have you heard of interest? IBR will allow you to pay an affordable amount - sort of - however, it will not stop interest from accruing. It is entirely possible to end up owing twice what you borrowed, and just barely be able to make the IBR payment, but not actually pay any principal down. And the longer it continues, the worse it gets. Also, if you have a spouse, then they take that person's income into consideration as well when calculating the IBR amount. In my case, I don't even qualify for an affordable payment through that program. They also don't care if you have kids or a mortgage or whatever.
I am doing the IBR. They take your income and number of dependents into consideration to set a 'cap' on the max amount you should pay each month - regardless of what your total debt is. You are supposed to update them each year on income and dependents. It's true that the interest will make it more costly in the long run. ... unless you work as a 'public servant' , in which case after 10 years of on time monthly payments the rest will be forgiven. I qualify for that, since I work at a public university. So my embarrassingly massive student loans will wind up costing me not much more than my car did when it was new.
IBR is only available on federal loans and I suspect that many individuals overwhelmed by 5 or 6 figures in student loans may be dodging their loan servicer. This is however not in their best interest.
Important to note that majority of people who went on to graduate school exhausted federal loans and supplemented the costs of their education by taking alternative loans, like private loans. Private loans, although not federally guaranteed meaning no tax money is used to fund them, are not dischargeable in bankruptcy, do not have same consumer protections as fed loans, can go into default the first day payment is late (depending on promissory note agreement) and have limited, if any, forbearance and deferral options. Unlike federal loans, the private loans are also not forgiven at death of borrower leaving co-borrowers and/or heirs responsible for the debt. Interest rates are variable, cannot be fixed leaving borrowers at the mercy of the interest rates for next 20-30 years. Give rockbottom interest rates now, likely the current monthly payment is the lowest it will ever be, which makes for those who even understand their loans wonder if they can't afford them now how will they ever be able to do so.
While average student loan debt for undergrads is around 24K, this still means that about 700,000 people (1/2 percent) hold over 100K in fed loans. Importantly, when you look at masters and higer degree graduates, the average student debt load is much higher and hence so are the payments. This may not be such a huge problem if not for the fact that wages have fallen and in many professions there is a surplus of grads in relationship to entry level positions. Current unemployment rate amount 18-24 year olds on AVERAGE is hovering around 14%. Obviously the rates are much higher in some areas of the country than others, but bottom line that leaves a lot of people in dire straits nd the IBR program on its own does not solve these people's problems. What is needed for these people is debt forgiveness, such as rolling back bankruptcy laws to pre-2005 where private student loans were dischargeable in bankruptcy. The individuals would still have to meet the stringent bankruptcy laws to qualify and suffer the 10 year negative impact on their credit scores, but it would release those individuals from a burden that they could not realistically satisfy over the next 3 decades. When you are in a no-win no future situation there is not only no incentive to do your best but also the emotional and psychological turmoil leads many people into self-destructive paths. We need this release valve. Ironically, private student loan lenders, can and some already have declared bankruptcy, wiped their slates clean and restarted new businesses and yet their borrowers remain on the hook even past their lifetime.
Last edited by toobusytoday; 08-05-2011 at 02:23 PM..
Reason: removed link
How are you not worried about your student loans? I plan on paying them ASAP as soon as I get a job even if that means getting a cheap apartment and not buying a car until I'm 30.
Do you know how much interest you'll end up paying? I think that I will graduate with about 20k and I'm freaking out already!! I think I'm gonna start paying at least the interest while I'm still in school.
How are you not worried about your student loans? I plan on paying them ASAP as soon as I get a job even if that means getting a cheap apartment and not buying a car until I'm 30.
Do you know how much interest you'll end up paying? I think that I will graduate with about 20k and I'm freaking out already!! I think I'm gonna start paying at least the interest while I'm still in school.
Yea you are correct. The interest, over the long term, is what is going to kill you. I know some people who pay hundreds in INTEREST on their student loans. Imagine that. That 20-30k if paid over the next 20-30 years will cost you about 70-100k+ in interest alone. Just imagine what you could buy with that.
Most college over promise and over sell the potential of college simply to justify the RIP OFF tuition rates.
The fact of the matter is that you can learn 99% of what you learned in college by going to the library and getting a FREE library card. Simply read the books there.
I've been to college and personally I think the tuition does not justify what you get in return. The degree you get aint worth much (in the real world) and what you learn is nothing special (can learn it on your own EASILY).
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