Author Topic: $1,000,000 student loan!  (Read 2558 times)


MudDuck

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Re: $1,000,000 student loan!
« Reply #1 on: July 30, 2018, 09:59:12 AM »
...which does not include undergrad:

"After high school, Mr. Meru, who is Mormon, spent two years on a mission in Brazil, then returned to the U.S. to complete his undergraduate degree at Brigham Young University in Utah. He paid his college tuition with money from his parents and by waiting tables at the Old Spaghetti Factory near the school’s Provo campus."

KodeBlue

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Re: $1,000,000 student loan!
« Reply #2 on: July 30, 2018, 10:14:08 AM »
...which does not include undergrad:

"After high school, Mr. Meru, who is Mormon"

Sorry I just couldn't resist.

ETA: that's not a dig against people who are LDS, but people who have $1M in student loans.

AlanStache

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Re: $1,000,000 student loan!
« Reply #3 on: July 30, 2018, 10:20:27 AM »
Do I dare look into the articles comments section?

MudDuck

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Re: $1,000,000 student loan!
« Reply #4 on: July 30, 2018, 10:53:43 AM »
AlanStache, there are surprisingly few comments in support of this fuckery. Likely because he is, per the article, so egregiously irresponsible.

skp

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Re: $1,000,000 student loan!
« Reply #5 on: July 30, 2018, 11:55:32 AM »
Interesting comments.  There's a lot of sympathetic comments  going on in the main section of this forum in Do you have sympathy for young people who have amassed large amounts of college debt.

MudDuck

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Re: $1,000,000 student loan!
« Reply #6 on: July 30, 2018, 12:27:22 PM »
I do often feel sympathetic towards young people who amass student debt. It's so difficult to overcome such a poor start, and in some cases, it can't be avoided.

That said, this guy is really hard to feel bad for. Did you read the article? He made, and continues to make, extremely irresponsible choices at every step along the way. 

OtherJen

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Re: $1,000,000 student loan!
« Reply #7 on: July 30, 2018, 12:32:36 PM »
I do often feel sympathetic towards young people who amass student debt. It's so difficult to overcome such a poor start, and in some cases, it can't be avoided.

That said, this guy is really hard to feel bad for. Did you read the article? He made, and continues to make, extremely irresponsible choices at every step along the way.

Right?! And he was an adult who had already completed undergrad when he made the first of these choices. He makes $225K per year. His wife inherited the down payment on their $400K home (for which her mother had to cosign). He's not even paying enough on his loans to cover the interest each month. I'm finding it really hard to dredge up any sympathy for these people.

therethere

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Re: $1,000,000 student loan!
« Reply #8 on: July 30, 2018, 12:33:55 PM »
I do often feel sympathetic towards young people who amass student debt. It's so difficult to overcome such a poor start, and in some cases, it can't be avoided.

That said, this guy is really hard to feel bad for. Did you read the article? He made, and continues to make, extremely irresponsible choices at every step along the way.

He was/is gaming the system. He knows what he is doing and did it purposefully. I'm just not sure why he is bringing attention to himself by trying to be a student loan poster child. Pumping out kids, having stay at home mom, and buying new house when he was in grad school with no income. They did so while financing their life with student loans. These were conscious choices knowing he wasn't going to pay back that loan.

Google him. This guy goes on heli-boarding (snowboarding out of a helicopter) in random S American countries. He is bragging every step of the way. Hopefully karma will catch up one day.

AlanStache

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Re: $1,000,000 student loan!
« Reply #9 on: July 30, 2018, 01:00:25 PM »
I can see how he may have gotten into this halfway "honestly" and then realized he was F-ed then found the forgiveness method and realized it really did not matter how much debt he racked up. 

In someways the debt is like points on "whose line is it anyway" - it just does not matter; the bulk of the debt was compounded interest from within a made up system with arbitrary rules.  I might feel otherwise if he actually received 1mil. 

But it is not like he will FIRE, even with the forgiveness after a bunch of years he will still have a large tax bill that he will likely have to pay off over time at interest.

talltexan

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Re: $1,000,000 student loan!
« Reply #10 on: August 01, 2018, 06:41:25 AM »
It seems as though he's gamed the system, but it's a high-risk path. Suppose his earning power were suddenly removed by a fatal or incapacitating accident? Would the loan forgiveness still happen if he couldn't perform the work component? Would the assets he's built up (home equity, retirement accounts) be seized by creditors?

His stay-at-home spouse could be in serious trouble if one of those remote scenarios should occur.

GuitarStv

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Re: $1,000,000 student loan!
« Reply #11 on: August 01, 2018, 07:03:39 AM »
I do often feel sympathetic towards young people who amass student debt. It's so difficult to overcome such a poor start, and in some cases, it can't be avoided.

That said, this guy is really hard to feel bad for. Did you read the article? He made, and continues to make, extremely irresponsible choices at every step along the way.

He was/is gaming the system. He knows what he is doing and did it purposefully. I'm just not sure why he is bringing attention to himself by trying to be a student loan poster child. Pumping out kids, having stay at home mom, and buying new house when he was in grad school with no income. They did so while financing their life with student loans. These were conscious choices knowing he wasn't going to pay back that loan.

Not excusing his actions (which are obviously pretty ridiculous), but why is the system set up in such a way that it's so easy to game?

Why is a million dollars an acceptable amount to take out in student loans?  In what world is selling a house to someone with no income a good idea?  Why are we relying on the honour system to keep people in check financially?

ducky19

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Re: $1,000,000 student loan!
« Reply #12 on: August 01, 2018, 07:08:22 AM »
I do like that the loan forgiveness is treated as ordinary income, so if he lets it balloon into $2 mil by the time it's forgiven, he'll at least be on the hook for the tax bill on it. Not sure what the odds are that it will get paid, but at least the IRS are a little more aggressive at debt collection than the average student loan lender...

therethere

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Re: $1,000,000 student loan!
« Reply #13 on: August 01, 2018, 07:24:10 AM »
It seems as though he's gamed the system, but it's a high-risk path. Suppose his earning power were suddenly removed by a fatal or incapacitating accident? Would the loan forgiveness still happen if he couldn't perform the work component? Would the assets he's built up (home equity, retirement accounts) be seized by creditors?

His stay-at-home spouse could be in serious trouble if one of those remote scenarios should occur.

If he dies, loans will be discharged.
If he is disabled, his income is zero and payments will be zero.
Hell he could take a year off and live off his accounts and payments will drop to zero.
Loan forgiveness would still happen with no delay.
Primary home and retirement accounts are generally not able to be seized by creditors.

So his life is actually pretty safe. Especially if he has any life insurance.

jinga nation

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Re: $1,000,000 student loan!
« Reply #14 on: August 01, 2018, 09:27:57 AM »
It seems as though he's gamed the system, but it's a high-risk path. Suppose his earning power were suddenly removed by a fatal or incapacitating accident? Would the loan forgiveness still happen if he couldn't perform the work component? Would the assets he's built up (home equity, retirement accounts) be seized by creditors?

His stay-at-home spouse could be in serious trouble if one of those remote scenarios should occur.

If he dies, loans will be discharged.
If he is disabled, his income is zero and payments will be zero.
Hell he could take a year off and live off his accounts and payments will drop to zero.
Loan forgiveness would still happen with no delay.
Primary home and retirement accounts are generally not able to be seized by creditors.

So his life is actually pretty safe. Especially if he has any life insurance.
Most life insurance policies have caveats for extreme activities and will not pay out. Either he hasn't read his policy or he's got one that specifically covers his activities.

robartsd

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Re: $1,000,000 student loan!
« Reply #15 on: August 01, 2018, 10:42:05 AM »
But it is not like he will FIRE, even with the forgiveness after a bunch of years he will still have a large tax bill that he will likely have to pay off over time at interest.
I didn't cross the paywall to read the article. It sounds like he is on REPAYE or some similar payment plan (10% of discretionary income - based on the numbers I see he is paying 8.5% of total income). Perhaps income adjusted repayment plans should require higher percentages of higher incomes. If this loan qualified for forgiveness as of the balance given at the beginning of the article the federal income tax on the forgiveness bill would be about $370k (18.5 years of his current payment). I'm not sure if you have to take loan forgiveness when you qualify for it - it would be easier for someone in his situation to just keep making income based payments for the rest of his life. The IRS interest on $370k is almost as much as he is currently paying.

AlanStache

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Re: $1,000,000 student loan!
« Reply #16 on: August 01, 2018, 11:01:08 AM »
But it is not like he will FIRE, even with the forgiveness after a bunch of years he will still have a large tax bill that he will likely have to pay off over time at interest.
I didn't cross the paywall to read the article. It sounds like he is on REPAYE or some similar payment plan (10% of discretionary income - based on the numbers I see he is paying 8.5% of total income). Perhaps income adjusted repayment plans should require higher percentages of higher incomes. If this loan qualified for forgiveness as of the balance given at the beginning of the article the federal income tax on the forgiveness bill would be about $370k (18.5 years of his current payment). I'm not sure if you have to take loan forgiveness when you qualify for it - it would be easier for someone in his situation to just keep making income based payments for the rest of his life. The IRS interest on $370k is almost as much as he is currently paying.

He will own 2mil when it is all forgiven; I remember the number 700k being associated with the IRS and the forgiveness, dont recall if that was the total taxable income of total tax owed.  Factor of 3 difference....  Agree that this system needs some adjustments for high income persons.

therethere

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Re: $1,000,000 student loan!
« Reply #17 on: August 01, 2018, 11:07:48 AM »
Does anyone actually think people will be on the hook for the full amount tax bill? I know that's how it's written right now...  But I don't have any confidence that when the first round of people go through whining about owing 20k in taxes randomly one year that they won't come up with another provision to forgive some amount of tax or spread out payments.

Giving people "affordable" payments for 25 years while expecting you to save up for a five-figure tax bill seems very unlikely to me. I see the tax bill provision more as a deterrent for people to not game the system like this. But those who "need" the system won't be able to pay the tax bill. But maybe you're on to something in that they just won't be eligible to get the forgiveness and are forced to stay on IBR forever.

AlanStache

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Re: $1,000,000 student loan!
« Reply #18 on: August 01, 2018, 11:14:36 AM »
Does anyone actually think people will be on the hook for the full amount tax bill? I know that's how it's written right now...  But I don't have any confidence that when the first round of people go through whining about owing 20k in taxes randomly one year that they won't come up with another provision to forgive some amount of tax or spread out payments.

Giving people "affordable" payments for 25 years while expecting you to save up for a five-figure tax bill seems very unlikely to me. I see the tax bill provision more as a deterrent for people to not game the system like this. But those who "need" the system won't be able to pay the tax bill. But maybe you're on to something in that they just won't be eligible to get the forgiveness and are forced to stay on IBR forever.

I was under the impression the IRS would work out payment plains for people who could not make the lumpsum amount owed.

Njdealguy

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Re: $1,000,000 student loan!
« Reply #19 on: August 01, 2018, 12:20:29 PM »
I ran a calculation that if he sets aside 1k per month and invests it for a 6% rate of return, doing so for 25 years should bring him close to the 700k tax bill that would come up when the loan balance is forgiven.  Calculates to 658k after 25 years based on 6% rate of return and 706k based on 6.5%.   If he bumps up his monthly investment to $1250 a month, then would need just a 5% rate of return to attain 700k.  Not factoring in taxes on the investment gains so of course these rates of return are based on after tax.

 Doing this might be easier than trying to repay the whole principal balance as messed up as it is in this system.