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One could setup a bank account deposit say $500 and then schedule automated payment of $0.10 to the student loan / lender every month in perpetuity. Leave the country so you would not technically be in default nor ever made to pay the accrued interest.
Uh you are in default when and if you fail to repay the loan per the terms agreed upon in the promissory note. If your agreed upon payment is higher than 0.10 you would be in default once you did not meet the original terms
I thought the profile of the first guy was pretty hilarious:
The philosophy major concedes that his student loan balance of around $20,000 isn’t as large as the burden shouldered by many other borrowers, but he said his difficultly finding a college-level job in the U.S. has made that debt oppressive nonetheless. “If you’re not making a living wage,” Haag said, ”$20,000 in debt is devastating.” He struggled to come up with the $300 a month he owed. The first work he found after he graduated from the University of Northern Colorado in 2011 — when the recession’s effects were still palpable — was on-again, off-again hours at a factory, unloading trucks and constructing toy rockets on an assembly line. He then went back to school to pursue a master’s degree in comparative literature at the University of Colorado Boulder.
I get the whole "follow your dreams" thing but you've got to have a plan to put bread on your table, especially if starting in a debt hole to get there. Then as a solution to lack of earnings potential with his career track borrow even more to pile a comparative literature degree on top of that already almost useless philosophy degree? Sheesh.
So he can't pay off the debt from the first student loan, so gets another student loan on top of the one he cant' pay off?
With some (if not all) gov't backed loans you can get a lower hardship payment established.
That hardship payment won't in any way be enough to pay off the loan in ten 10 years. But even so, IF you pay on time for 10 years, (and I think that includes no deferments), I believe a person can get the rest of the loan forgiven.
On one hand that's establishing a program that lets a person borrow more money than you already know you're going to make them back back. That's sort of crazy.
But at least it gets SOME of the money back, and allows the person to maintain the loan in good standing.
I don't know if I'd call that smoke and mirrors, but it is what it is.
With some (if not all) gov't backed loans you can get a lower hardship payment established.
That hardship payment won't in any way be enough to pay off the loan in ten 10 years. But even so, IF you pay on time for 10 years, (and I think that includes no deferments), I believe a person can get the rest of the loan forgiven.
On one hand that's establishing a program that lets a person borrow more money than you already know you're going to make them back back. That's sort of crazy.
But at least it gets SOME of the money back, and allows the person to maintain the loan in good standing.
I don't know if I'd call that smoke and mirrors, but it is what it is.
I was on one of those programs for about a year to lower my payments.* it's 20 years, not 10. Extended income contingent payments or whatever. The payments increase over time.
The formulas they use generally amount to paying the principal back, or at least pretty close to it. APR on student loans is pretty high - even the government backed ones are typically 5-8% APR. Iirc mine were 5.8% and 6.7%.
Private student loans are even worse - they have credit card level interest rates in the double digits.
Elizabeth Warren is one of the few politicians who talks about this - the government actually makes pretty decent profit off of people who pay their student loans over the standard terms. The private student loan banks are making great bank.
Whether they should is another question.
*I had $36k of student debt and 24k of car debt when I came out of college. When I realized what my situation was, I requested the lowest payment possible on my student loans, then doubled & tripled down on the car payments like a fiend. The minimum car payments were not negotiable while the student loans were. After the car was paid off I then put the same amount in interest-bearing accounts until it was enough to pay the student loans in a lump sum. Saved a decent amount on student loan interest that way.
All told it took me just under 4 years of living low to do that.
Had I paid the 10 year term I'd have paid in thousands more.
Last edited by redguard57; 06-07-2019 at 10:01 PM..
Private student loans are even worse - they have credit card level interest rates in the double digits.
I found that to be the opposite, as a parent.
The first year, I naively took out a Parents Plus loan at 8.5%. Federal loan.
After that someone told me, no, don't do that, have your kid apply for a loan through a private lender and you be the co-signer. You'll get a lower rate.
Used Wells Fargo, which gave a lower rate--to start. After a certain amount of time, it would go up.
I ended up refinancing all of it into one big loan at around 6% from a different private lender--same deal, my daughter applied for the loan, I cosigned. Had ten years to pay it all off, but when I retired, I took a part-time job, and used the money from the PT job to kill it all in less than three years.
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