Author Topic: $170,000 Student Loan Disaster  (Read 12819 times)

ew_513

  • 5 O'Clock Shadow
  • *
  • Posts: 3
$170,000 Student Loan Disaster
« on: March 06, 2017, 02:14:40 PM »
Hi All,

I'm new to the forum and new to the Money Mustache blog, but I'm really motivated to learn and get my finances in order.

I could use some advice with my student loan situation. I have to admit I'm really embarrassed to be posting this, because my loans are huge source of regret. I graduated with an MFA in 2012 and $148,795 in student loans from NYU. I struggled to find a well paying job from 2012-2015. I now have a job making $42,000-ish after taxes. I occasionally get freelance writing gigs and have used that money to completely pay off other debts/save.

My loans are both federal loans and I have been enrolled in the IBR program since I graduated in 2012. I always assumed I would just pay my monthly bill and in 25 years it would be forgiven. Again, embarrassed to admit this, I just realized two things - 1. My monthly IBR payment is dramatically less than the amount of accruing interest, so the loan is quickly ballooning and 2. I just realized this year the forgiven amount will be taxable.

I feel doomed. Because the monthly interest is so high, I think I'd have to pay $1500 or more month to even make a dent. And I'd have to pay that amount monthly for the next few decades.

I don't know how I can save/invest and also payoff my student loans. I'm wondering if my only option is to stick with IBR and hope they change the tax rule in the next 20 years?

Any advice would be greatly appreciated. Thank you in advance!

rubybeth

  • Handlebar Stache
  • *****
  • Posts: 1402
  • Location: Midwest
Re: $170,000 Student Loan Disaster
« Reply #1 on: March 06, 2017, 02:36:17 PM »
Any chance that your work qualifies you for Public Student Loan Forgiveness? https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service It sounds like you are on the REPAYE plan, is that correct? https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven Even with the amount forgiven being considered taxable that year that the loans are forgiven, depending on your interest rate and income over the next 20 years, it could still be a good deal, you just have to do the math: http://www.finaid.org/loans/forgivenesstaxability.phtml

Are your loans consolidated? If not, see if they can be, if that would lower the interest rate. I am guessing some here will recommend to refinance with some place like SoFi, but I would be one who would strongly urge you NOT to do that, because private consolidation does not give you the same protections as government loans.

In your case, I am not sure I would throw any extra funds at your student loans because your payments probably aren't even paying down the principle and only going toward interest, and might tackle pre-tax savings (401k and IRA) to lower your taxable income and thus, get your loan payments down even more. With that amount of debt and a lower income, your options are pretty much to increase your income and try to pay it off, or hope forgiveness works out and tackle your other financial goals.
« Last Edit: March 06, 2017, 02:38:03 PM by rubybeth »

aspiringnomad

  • Pencil Stache
  • ****
  • Posts: 809
Re: $170,000 Student Loan Disaster
« Reply #2 on: March 06, 2017, 09:52:40 PM »
This is far from my area of expertise, but based on the numbers I'd agree with rubybeth. Unless you find a job that pays significantly more than your current job, IBR seems the way to go for now. Otherwise, half your take home is going towards your loans and as you say, only making a small dent in the principal. I also agree that you should look for a job that qualifies for PSLF.

More importantly, try not to get discouraged. From your short post you can clearly write well, and the world is still very much in need of that skill. Work hard at getting promoted, and keep your eye out for more freelancing gigs and jobs that pay better and/or qualify for PSLF.

ew_513

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: $170,000 Student Loan Disaster
« Reply #3 on: March 06, 2017, 10:37:11 PM »
Thank you all for this advice! I really appreciate it!

TheDudeReturns

  • 5 O'Clock Shadow
  • *
  • Posts: 36
Re: $170,000 Student Loan Disaster
« Reply #4 on: March 06, 2017, 11:29:07 PM »
Go on REPAYE/PAYE. Screw thinking about paying off those loans. Pay the minimum amount and hope they are discharged later.

marty998

  • Walrus Stache
  • *******
  • Posts: 6433
  • Location: Sydney, Oz
Re: $170,000 Student Loan Disaster
« Reply #5 on: March 07, 2017, 05:07:22 AM »
Go on REPAYE/PAYE. Screw thinking about paying off those loans. Pay the minimum amount and hope they are discharged later.

I do not believe this is not an acceptable mindset to approach any debt. As a taxpayer I am horrified at this thought (and I don't even live in the US, but the same applies here in Aus to our higher education loans).

If you incur a debt you should repay it. Regardless of whether the lender is your friend, a retail store, a company, a bank or the government / taxpayer.

ew_513 - get some experience in your job, climb the career ladder and earn to pay off the debt.

Do you really want to continue making repayments in 20 years time? If you can find a way to pay down $20,000 per year, you could have it cleared well before then.

HoundDog

  • 5 O'Clock Shadow
  • *
  • Posts: 20
Re: $170,000 Student Loan Disaster
« Reply #6 on: March 07, 2017, 05:26:48 AM »
I don't know what type of writing you do, but there are certainly some freelance writers making six figures. Maybe you could ramp up your part-time freelance work, or even do it full-time. To make the higher amounts you'd probably need to be doing business writing.

Iplawyer

  • Bristles
  • ***
  • Posts: 308
Re: $170,000 Student Loan Disaster
« Reply #7 on: March 07, 2017, 06:42:32 AM »
Go on REPAYE/PAYE. Screw thinking about paying off those loans. Pay the minimum amount and hope they are discharged later.

I do not believe this is not an acceptable mindset to approach any debt. As a taxpayer I am horrified at this thought (and I don't even live in the US, but the same applies here in Aus to our higher education loans).

If you incur a debt you should repay it. Regardless of whether the lender is your friend, a retail store, a company, a bank or the government / taxpayer.

ew_513 - get some experience in your job, climb the career ladder and earn to pay off the debt.

Do you really want to continue making repayments in 20 years time? If you can find a way to pay down $20,000 per year, you could have it cleared well before then.
+ 100000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
I'm appalled at this attitude.  Somebody has to pay for it.

Cpa Cat

  • Handlebar Stache
  • *****
  • Posts: 1586
Re: $170,000 Student Loan Disaster
« Reply #8 on: March 07, 2017, 07:01:28 AM »
Most of the people I know who are in the worst shape with student loans are people with MFAs. I think it's unconscionable that universities are even permitted to allow students to go into that kind of debt for fine arts degrees. So while I'm normally appalled at people who don't want to pay their loans, I make an exception for MFAs - because they fell for a con job. That degree works out for maybe 10% of students - maybe fewer, and the universities know it. But they pretend like everything is going to work out for students who are passionate and artistic enough. Passion and art don't pay $200,000 of student loan debt.

Focus on the payoff date and start saving for your eventual tax bill. You may not be able to pay off your student loans. Or you might, if you aggressively save as others have suggested. In either case, save the money first. Things can change and you might be in a position sometime to save that $20,000 a year and actually pay these off, so don't be afraid of pay raises or career advancement.

ReadySetMillionaire

  • Handlebar Stache
  • *****
  • Posts: 1145
  • Location: The Buckeye State
Re: $170,000 Student Loan Disaster
« Reply #9 on: March 07, 2017, 07:16:40 AM »
Go on REPAYE/PAYE. Screw thinking about paying off those loans. Pay the minimum amount and hope they are discharged later.

I'm going to second this. Ignore the student loan police poo-pooing about "oh the taxpayers boo hoo the taxpayers."  Pay as little towards you loans as humanly possible.

Take a night and read the following threads in their entirety:

http://forum.mrmoneymustache.com/ask-a-mustachian/250k-student-debt/

http://forum.mrmoneymustache.com/ask-a-mustachian/psa-to-those-with-high-student-loans-repaye-(new-repayment-plan)-starts-today/

http://forum.mrmoneymustache.com/ask-a-mustachian/intentionaly-omitting-student-loans-from-net-worth-(ibr)/

http://forum.mrmoneymustache.com/welcome-to-the-forum/to-payoff-student-loans-or-not-(bc-hillary)/


Anybody telling you to pay your loans off doesn't know what they are talking about.

Cheers.

Iplawyer

  • Bristles
  • ***
  • Posts: 308
Re: $170,000 Student Loan Disaster
« Reply #10 on: March 07, 2017, 08:26:21 AM »
Just because others don't pay off their loans doesn't mean it is the right thing to do.  Why sign the documents saying you'll pay them back when you won't?  Somebody owes that money and if they are forgiven they are forgiven by those of us who pay very high tax rates. Or they are included in the money that the government borrows that will be foisted on your 5 children.  I'm going to be just fine - but the growing government debt isn't good for most.

ReadySetMillionaire

  • Handlebar Stache
  • *****
  • Posts: 1145
  • Location: The Buckeye State
Re: $170,000 Student Loan Disaster
« Reply #11 on: March 07, 2017, 08:46:08 AM »
Just because others don't pay off their loans doesn't mean it is the right thing to do.  Why sign the documents saying you'll pay them back when you won't?  Somebody owes that money and if they are forgiven they are forgiven by those of us who pay very high tax rates. Or they are included in the money that the government borrows that will be foisted on your 5 children.  I'm going to be just fine - but the growing government debt isn't good for most.

I've already stated this fact in other student loan threads with you, but the documents I signed expressly provided that I could utilize income-based repayment to repay my loans.  I (and anyone else utilizing REPAYE, IBR, PSLF, etc.) is repaying the terms of the loan in exact accordance with the terms of the loan if they are utilizing an income-based repayment plan.

The fact that you are a lawyer and  continue to dance around express terms of a contract because you feel a certain way is both legally incorrect (i.e., parol evidence, contract integration, etc.) and dumbfounding to your fellow lawyer here.

Cheers.

therethere

  • Pencil Stache
  • ****
  • Posts: 730
Re: $170,000 Student Loan Disaster
« Reply #12 on: March 07, 2017, 08:52:05 AM »
Have you done a run through to see what your expected tax burden would be? I mean depending on your income at that time I don't think the amount will be as high as you think. I would work on saving that amount instead. Yes, you can pay off your loans with a lot of sacrifice but you're already 5 years into repayment. With accelerated payments I'm guessing it will be 10+ years of throwing every penny at the loan. You are better off just keeping your AGI down to keep IBR payments down and save up the cash to pay off your tax burden.

In most cases I'd advocate paying off the loan as totally possible (engineers, doctors, lawyers, etc.) but with an arts degree you are going to have limited income for a few more years. Unless you spend all your free time hustling for extra cash. That's just not a life worth living for 10 years IMHO.


2Birds1Stone

  • Walrus Stache
  • *******
  • Posts: 5542
  • Age: 1
  • Location: Earth
  • K Thnx Bye
Re: $170,000 Student Loan Disaster
« Reply #13 on: March 07, 2017, 09:11:54 AM »
I can't believe that someone who took on $150k in debt to get an MFA is being encouraged to unload that burden on someone else. What ever happened to owning your choices in life?

OP, I feel like you should post a case study to get more detailed advice. You can do it!

therethere

  • Pencil Stache
  • ****
  • Posts: 730
Re: $170,000 Student Loan Disaster
« Reply #14 on: March 07, 2017, 09:20:51 AM »
I can't believe that someone who took on $150k in debt to get an MFA is being encouraged to unload that burden on someone else. What ever happened to owning your choices in life?

OP, I feel like you should post a case study to get more detailed advice. You can do it!

Have you ever been burdened to pay almost 2k a month to a loan for years on end to pay it off with nothing tangible coming in return? That's 50% of his PRETAX salary. So live in poverty and be miserable for 10 years. Or hustle non-stop for 10 years. Or, use the tools that have been provided as a result of predatory student loans and unsubstantiated tuition increases.

Would you say the same thing to someone who is 150k in credit card debt? No, you would advocate bankruptcy.

What about people who were severely underwater on their homes.  Would you tell them to suck it up and work themselves to the bone hustling on all their free time to keep a house? No, most people would say start short sale or foreclosure and get back on your feet.

Use the tools that have been provided to get the best possible outcome for yourself. No one else is going to look out for you.

2Birds1Stone

  • Walrus Stache
  • *******
  • Posts: 5542
  • Age: 1
  • Location: Earth
  • K Thnx Bye
Re: $170,000 Student Loan Disaster
« Reply #15 on: March 07, 2017, 09:34:01 AM »
I can't believe that someone who took on $150k in debt to get an MFA is being encouraged to unload that burden on someone else. What ever happened to owning your choices in life?

OP, I feel like you should post a case study to get more detailed advice. You can do it!

Have you ever been burdened to pay almost 2k a month to a loan for years on end to pay it off with nothing tangible coming in return? That's 50% of his PRETAX salary. So live in poverty and be miserable for 10 years. Or hustle non-stop for 10 years. Or, use the tools that have been provided as a result of predatory student loans and unsubstantiated tuition increases.

Would you say the same thing to someone who is 150k in credit card debt? No, you would advocate bankruptcy.

What about people who were severely underwater on their homes.  Would you tell them to suck it up and work themselves to the bone hustling on all their free time to keep a house? No, most people would say start short sale or foreclosure and get back on your feet.

Use the tools that have been provided to get the best possible outcome for yourself. No one else is going to look out for you.

This is the kind of reasoning that encourages people to get fingerpainting degrees at private universities, buy houses they can barely afford, and rack up tons of consumer debt in the first place.

I would not encourage someone who blew $150k on jet ski's and jet setting to declare bankruptcy. People like that deserve to face the music.

Housing may be the exception, on a case by case basis. Being underwater on a house is no excuse to not have to pay the mortgage. Sure you could lose a job and if you have to sell and move then it might be a lackluster situation, but just because you decided to purchase a house worth X and now it's worth 50% of X, should not put that burden on other people.

People cried about the housing bubble bursting in 2007, the student loan, and auto loan bubble is going to be even worst.

I have to laugh at people who condone this behavior. Carry on ;)

Simpli-Fi

  • 5 O'Clock Shadow
  • *
  • Posts: 98
Re: $170,000 Student Loan Disaster
« Reply #16 on: March 07, 2017, 12:51:02 PM »
Yes, you fell for the perfect corporate slavery con.

Do not wait for your debt to be forgiven
Do not start a gofundme page

Work your ace off and live with in your means.  Pay back your loans and teach others from your mistakes and accomplishments.

khangaroo

  • 5 O'Clock Shadow
  • *
  • Posts: 92
  • Age: 30
  • Location: Clackamas, OR
    • My Blog
Re: $170,000 Student Loan Disaster
« Reply #17 on: March 07, 2017, 03:02:05 PM »
Read Dave Ramsey's The Total Money Makeover and listen to his podcast. You need an entire shift in your personal finance paradigm.

I personally would have a hard time living my life over 20 years as part of an income payment plan with that huge cloud over my head.

There's a pretty strong divide here and I'm with the "you signed the loan, you own the loan" group. Pull up your pants and get to work, nobody put you in this hole except for yourself so dig yourself out.

mozar

  • Magnum Stache
  • ******
  • Posts: 2988
Re: $170,000 Student Loan Disaster
« Reply #18 on: March 07, 2017, 03:23:49 PM »
I am firmly in the camp of ibr, bankruptcy, or whatever it takes to get relief for reasons I won't get into here. But psychologicaly I couldn't live with that burden for 20 years. I took out a 135000 and was making 54000 a year with a year spent unemployed which nets to a similar amount to what you are making. It took me 5 years to pay off 100k and I've been paying the rest at a more leisurely rate. Can you take a hybrid approach, like pay off all the high interest onesfirst and then go from there?

therethere

  • Pencil Stache
  • ****
  • Posts: 730
Re: $170,000 Student Loan Disaster
« Reply #19 on: March 07, 2017, 03:33:42 PM »
Yes. The key is to run the numbers. Do what is best for you. Ignore the moral argument for now until you are on good financial footing. Then sure if you want to take the moral high ground pay down your loans. But right now you are going into more debt every month. I think everyone can agree that is a bad thing. Right?!... So figure out what payment plan is best for you considering your current cash flow, potential life changes within the immediate 1-5 years (big move, marriage, etc?),  and your job/salary prospects. Get to know the ins and outs of any repayment programs and how that fits in with your life.

Only then will you have a good idea of how much potential money you have to throw at the loan and whether that is really the right step.


therethere

  • Pencil Stache
  • ****
  • Posts: 730
Re: $170,000 Student Loan Disaster
« Reply #20 on: March 07, 2017, 03:37:37 PM »
Yes. The key is to run the numbers. Do what is best for you. Ignore the moral argument for now until you are on good financial footing. Then sure if you want to take the moral high ground pay down your loans. But right now you are going into more debt every month. I think everyone can agree that is a bad thing. Right?!... So figure out what payment plan is best for you considering your current cash flow, potential life changes within the immediate 1-5 years (big move, marriage, etc?),  and your job/salary prospects. Get to know the ins and outs of any repayment programs and how that fits in with your life.

Only then will you have a good idea of how much potential money you have to throw at the loan and whether that is really the right step.

Here's a good article I just saw:    http://www.redtwogreen.com/use-income-based-repayment-plan-pay-off-student-loans-quickly/
And this guy is helping others run the numbers on other student loan repayment plans to make a choice but you can download a spreadsheet that might help you (I have not looked at it at all but thought it would be a good resource for you to learn more)    https://millennialmoola.com/2016/08/29/student-loan-analysis-tool/

TrulyStashin

  • Handlebar Stache
  • *****
  • Posts: 1030
  • Location: Mid-Sized Southern City
Re: $170,000 Student Loan Disaster
« Reply #21 on: March 08, 2017, 07:43:17 AM »
Strongly consider Public Service Loan Forgiveness. 

Get a job teaching (public school) or at a non-profit and pay the minimum.  After 10 years your loans are forgiven and all those nattering on about the morality of personal responsibility can suck it because you've been in PUBLIC SERVICE so you've earned the forgiveness.


BTH7117

  • 5 O'Clock Shadow
  • *
  • Posts: 71
  • Location: Washington, DC
Re: $170,000 Student Loan Disaster
« Reply #22 on: March 08, 2017, 08:37:36 AM »
Strongly consider Public Service Loan Forgiveness. 

Get a job teaching (public school) or at a non-profit and pay the minimum.  After 10 years your loans are forgiven and all those nattering on about the morality of personal responsibility can suck it because you've been in PUBLIC SERVICE so you've earned the forgiveness.

I agree with TrulyStashin.  Have you considered a public service job?  At $42,000 salary right now, I bet you could find public interest work for comparable pay.  Even if it is not your "dream job," the benefits may be worth it to you.  Your loans would be discharged tax free after 10 years of consecutive payments, at least under the current structure.

fredbear

  • Stubble
  • **
  • Posts: 112
Re: $170,000 Student Loan Disaster
« Reply #23 on: March 08, 2017, 08:58:09 AM »
Most of the people I know who are in the worst shape with student loans are people with MFAs. ...

I'd like to see the universities be required originate the loans any way they pleased from their own budgets, with all such loans dischargeable in bankruptcy.  Even university finance officers would soon realize the cruelty in loaning money for useless degrees, since the pain would fall upon the university rather than the students they are now condemning to a lifetime of debt slavery. 

ew_513

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: $170,000 Student Loan Disaster
« Reply #24 on: March 08, 2017, 10:43:47 AM »
Thanks for the advice everyone, you've given me a lot to think about. Much appreciated.

mm1970

  • Walrus Stache
  • *******
  • Posts: 6760
Re: $170,000 Student Loan Disaster
« Reply #25 on: March 08, 2017, 11:28:56 AM »
I can't believe that someone who took on $150k in debt to get an MFA is being encouraged to unload that burden on someone else. What ever happened to owning your choices in life?

OP, I feel like you should post a case study to get more detailed advice. You can do it!
Meh, you know, it's shades of gray for me.

For one thing, there's no way this person is ever going to be paying that off on their currently salary - the costs are more than half of their gross pay.  That's ridiculous.
Second, there's the whole system that encourages student loans that is just really predatory.
Then, there's the fact that interest keeps on accruing even if you aren't unemployed
And finally, no bankruptcy.

Honestly, the deck is completely stacked in favor of the banks here, and you are fooling yourself if you think otherwise.  I am fully supportive of the IBR (AND the fact that the income is taxable later).  While I really don't see how this person can pay off their loans, they SHOULD be able to save up enough to pay the taxes in that amount of time.

That said, of COURSE you should pay your debts if you can.  But sometimes, you can't.  Sometimes, you make a dumb-ass mistake when you are still a fucking CHILD (under 18) or at least "not fully able to make good decisions and without the guidance of actual adults".

PDXTabs

  • Handlebar Stache
  • *****
  • Posts: 1245
  • Age: 36
  • Location: Vancouver, WA, USA
Re: $170,000 Student Loan Disaster
« Reply #26 on: March 08, 2017, 12:23:57 PM »
Just because others don't pay off their loans doesn't mean it is the right thing to do.  Why sign the documents saying you'll pay them back when you won't?  Somebody owes that money and if they are forgiven they are forgiven by those of us who pay very high tax rates. Or they are included in the money that the government borrows that will be foisted on your 5 children.  I'm going to be just fine - but the growing government debt isn't good for most.

Every contract has a penalty clause which spells out in plain-ish language what will happen if you fail to keep up your end of the bargain. That is what you are agreeing to, nothing more. Additionally you live in a nation of laws which govern all contracts, whether you like it or not.

It is no more dishonest to use the IBR than a 401(k), IRA, or refundable tax credit. All of them reduce tax revenue and all of them are the law of the land. The OP is in no way violating the social contract by taking advantage of them. If you want to talk about things that are un-American we could talk about the fact that bankruptcy was an important right going back to the founding of the nation because the founders knew what English debtors' prisons were like. We could talk about the fact that student loan debt was dischargeable under bankruptcy until 2005.

KittyFooFoo

  • Stubble
  • **
  • Posts: 112
  • Age: 32
  • Location: NYC
Re: $170,000 Student Loan Disaster
« Reply #27 on: March 08, 2017, 12:29:55 PM »
God damn, politics bring out the worst in people.

JustGettingStarted1980

  • Bristles
  • ***
  • Posts: 377
Re: $170,000 Student Loan Disaster
« Reply #28 on: March 08, 2017, 12:49:07 PM »
Just because others don't pay off their loans doesn't mean it is the right thing to do.  Why sign the documents saying you'll pay them back when you won't?  Somebody owes that money and if they are forgiven they are forgiven by those of us who pay very high tax rates. Or they are included in the money that the government borrows that will be foisted on your 5 children.  I'm going to be just fine - but the growing government debt isn't good for most.

Every contract has a penalty clause which spells out in plain-ish language what will happen if you fail to keep up your end of the bargain. That is what you are agreeing to, nothing more. Additionally you live in a nation of laws which govern all contracts, whether you like it or not.

It is no more dishonest to use the IBR than a 401(k), IRA, or refundable tax credit. All of them reduce tax revenue and all of them are the law of the land. The OP is in no way violating the social contract by taking advantage of them. If you want to talk about things that are un-American we could talk about the fact that bankruptcy was an important right going back to the founding of the nation because the founders knew what English debtors' prisons were like. We could talk about the fact that student loan debt was dischargeable under bankruptcy until 2005.

As a former carrier of >250K in student debt, I remember that 2005/2006 law very fondly. That law absolutely murdered me. That law took away my right to consolidate my loans at the going rate of 1% it would have been in 2008 (after the financial crisis) when I completed graduate school and forced me to pay out 6+% instead. Probably cost me an extra $65,000 all together in that blatant money grab.

WGH

  • Stubble
  • **
  • Posts: 104
  • Location: Houston, TX
Re: $170,000 Student Loan Disaster
« Reply #29 on: March 08, 2017, 01:16:52 PM »
Have you ever been burdened to pay almost 2k a month to a loan for years on end to pay it off with nothing tangible coming in return? That's 50% of his PRETAX salary. So live in poverty and be miserable for 10 years. Or hustle non-stop for 10 years. Or, use the tools that have been provided as a result of predatory student loans and unsubstantiated tuition increases.

Would you say the same thing to someone who is 150k in credit card debt? No, you would advocate bankruptcy.

What about people who were severely underwater on their homes.  Would you tell them to suck it up and work themselves to the bone hustling on all their free time to keep a house? No, most people would say start short sale or foreclosure and get back on your feet.

Use the tools that have been provided to get the best possible outcome for yourself. No one else is going to look out for you.

Seconded. You get one life OP you can waste it trying to please the morality police or you can do whatever is necessary to get out of this debt. Short of marrying rich or finding a significantly higher income I would definitely look into the PSLF program and hope and pray the bankruptcy laws get loosened up in the interim.

Good luck.

ickhos

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Re: $170,000 Student Loan Disaster
« Reply #30 on: March 08, 2017, 05:28:32 PM »
Banks have an army of actuaries that estimate how many borrowers will default. The cost of defaults is already built into the interest rates, it won't be passed down for generations of Americans.

If you intended to pay the loan when you signed the papers, you're in the ethical clear. That you default now is unrelated to that.

jmwagner5

  • 5 O'Clock Shadow
  • *
  • Posts: 61
Re: $170,000 Student Loan Disaster
« Reply #31 on: March 08, 2017, 05:48:22 PM »
While I don't disagree with the principle of sticking with IBR and hoping that the debt will be forgiven or can be discharged through bankruptcy, does it make sense to plan out your life with that in mind? Those options currently do not exist (so far as I know) and I do not see the government moving backwards on this issue with so much student loan debt currently on the books.

It just makes sense to me to plan for the worst in this case while still doing everything in your power to maximize your life despite this challenge. 

Hargrove

  • Pencil Stache
  • ****
  • Posts: 717
Re: $170,000 Student Loan Disaster
« Reply #32 on: March 08, 2017, 07:55:07 PM »
25 years is how long people get for murder. There have been laws that made contracts this injurious to participants illegitimate.

"Oh but you signed it you signed it you DESERVE it!"

Nothing is more obnoxious than someone who doesn't have a stake in the situation or care about the person who does, telling them they deserve to suffer. When payday lenders preyed on military servicemen and women who basically sucked at finance and contracts, Congress actually said "you know what you can't... you can't do that." They added "you assholes" under their breaths later. They did that because personal good and social good are not the same damned thing. It's why the Coast Guard may rescue your dumbass even though you took a dingy out in a storm or chilled in the path of a hurricane - because we don't want to live in a society where you deserve to fucking die for stupid and even alas preventable mistakes.

PS - if you want to police your fellow citizens because they might cost you 14 cents in taxes, maybe you should demand that universities disclose jobs available vs degrees awarded to a national database. Or you know, maybe you should fight that we teach finance in high school. That is, instead of saying "sucks to be you" to somebody asking for help.

OP: You have to make it big or do the public service option. 10 years for what will by then be close to 200k is like making 62k+ a year instead of 42k. Not taking public service seems insane unless you go into a high-paying business, tech, or sales job right away. Phoning in the next 25 years of your life is an atrocious plan.
« Last Edit: March 08, 2017, 08:00:34 PM by Hargrove »

Reynolds531

  • Bristles
  • ***
  • Posts: 298
Re: $170,000 Student Loan Disaster
« Reply #33 on: March 08, 2017, 09:01:07 PM »
The idea that universities should clearly spell out real world outcomes is maybe the smartest thing I've seen posted on this site.

VladTheImpaler

  • Stubble
  • **
  • Posts: 214
Re: $170,000 Student Loan Disaster
« Reply #34 on: March 08, 2017, 09:24:17 PM »
+1
I was just going to tell the self righteous morality police to STFU
...Glad the rest of you are more articulate than me.

For Gods sake, use every tool given to you in this life, the government and the corporation's sure do.

TheDudeReturns

  • 5 O'Clock Shadow
  • *
  • Posts: 36
Re: $170,000 Student Loan Disaster
« Reply #35 on: March 09, 2017, 03:36:55 AM »
Always nice to see a comment set off the morality police! Been a few days and thought I'd log in to see what's up and can say I wasn't disappointed. Gotta be honest that this forum has been fairly piss at answering what I originally signed up for (seeking advice on how to get health insurance costs down as a self-employed person) but I always get a kick out of suggesting income based repayment in these loan threads and watching everyone swarm in!

Gonna be honest. Unless you are in a hard science where you need a lab, multi-million dollar equipment, etc. to learn, you are getting screwed paying even $1 for college. I do a lot of contract work with universities and you realize a lot on the business side. For one thing, how universities pay the majority of their adjunct teachers (who form most of their faculty) absolute piss to either develop or teach a class. Do the math. Intro level class with 50 - 100 students at $2k a pop. That is $50k - $100k. At even your *best* schools, the average non-superstar professor may make $10k. More realistically, $2k-$3k for a regular semester class. The school is gobbling up the rest of that money and you got yourself someone teaching the class who is probably on food stamps themselves (since they are too stupid to realize that academia is a sham and they just gotta do something with that worthless PhD in English). They predate on these professors who just have to be part of the "academy" and routinely pass them over for even the lowest level FT gigs.

If it pleases the morality police, I don't have a dollar in student loan debt myself (since I knew school was stupid in anything but a hard science and went for free), but ever since a late night search on a doctor's forum where I saw people with $200k, $300k, $500k, or more in debt effectively utilizing the income based loan system to keep more money to invest, I knew that it didn't make sense for the poor barista with a MA or office worker to eat rice and beans all day to pay off their loans. Hell, before there was this REPAYE system, I even read threads about doctors getting someone to take their online classes for them at a community college so that they could be "enrolled" and not pay a penny off on their loans. All the while they were stacking money to open their private practice or what have you.

Since I am just spewing junk, let me touch on something else. Think about our exalted leader MMM. Yeah he saved a shitton of his income, but he also got lucky making mega bucks ($100k+) just cause he was in the right place at the right time. Him and his wife both were making what, $100k a pop, for dev skills that are all outsourced to India nowadays. Shit changes. If he came out with a similar skillset adjusted for say "inflation" today, wouldn't be making nearly as much. I watch kids willing to move cross country wherever with *damn* good experience, skills, etc. in tech and they may just be at $10k+ more a year compared to just your plain old office grunt. Shit is tough out there and I don't blame people utilizing what is in the damn terms of their deal to try to make it all work.



« Last Edit: March 09, 2017, 03:38:55 AM by TheDudeReturns »

TheDudeReturns

  • 5 O'Clock Shadow
  • *
  • Posts: 36
Re: $170,000 Student Loan Disaster
« Reply #36 on: March 09, 2017, 03:51:30 AM »
Anyway OP, get your shit together and get on REPAYE (cuts interest rate in half). As you near year 19 and if you can switch back to PAYE, do so as that will let you discharge the loans earlier. Hell, I would almost say even see if you can take a year off that year to get in a super low income bracket. But really, a lot of these high debt kiddos will be in politics by then and I bet they will try to get that taxable event's impact cushioned in some way by then. Wouldn't hurt to start saving for retirement (to get your income even lower) either. Ready all of RSM's posts he links to and you'll be golden.

OvertheRainbow

  • 5 O'Clock Shadow
  • *
  • Posts: 54
Re: $170,000 Student Loan Disaster
« Reply #37 on: March 09, 2017, 03:54:43 AM »

Since I am just spewing junk, let me touch on something else. Think about our exalted leader MMM. Yeah he saved a shitton of his income, but he also got lucky making mega bucks ($100k+) just cause he was in the right place at the right time. Him and his wife both were making what, $100k a pop, for dev skills that are all outsourced to India nowadays. Shit changes. If he came out with a similar skillset adjusted for say "inflation" today, wouldn't be making nearly as much. I watch kids willing to move cross country wherever with *damn* good experience, skills, etc. in tech and they may just be at $10k+ more a year compared to just your plain old office grunt. Shit is tough out there and I don't blame people utilizing what is in the damn terms of their deal to try to make it all work.

Uh...no. He worked his ass off earning a marketable degree and worked his ass off some more in his job while saving shittons of money.

Yes, it is tough out there, but that doesn't excuse people from making idiotic decisions, such as getting a MFA for 170k in debt. People have to weigh their pros/cons and consider ROI before taking out the worst kind of debt there is: student loans.

TheDudeReturns

  • 5 O'Clock Shadow
  • *
  • Posts: 36
Re: $170,000 Student Loan Disaster
« Reply #38 on: March 09, 2017, 03:58:38 AM »
Ah shoot someone replied. Was gonna edit my post for some more details.

Anyway, this Reddit post sums things up better than I can:

He [read MMM] hardly acknowledges that he was lucky; his asset accumulation phase was greatly shortened by:

    Being able to go to college while it was still cheap enough to not require lots of student debt

    Getting a well-paying US engineering job in the mid 90s, prior to mass offshoring, higher unemployment, etc.

    Buying real estate at pre-bubble prices in the mid/late 90s

In short, a lot of his success was due to being born at a better time.

A US software engineer, finishing undergrad in 2010 through 2015, will most likely not be able to accumulate ~$500k in ~7 years as he did, nor will they be able to buy a house as affordably.

So the main problem with much of his advice is that it is non-repeatable. He probably knows that, but continues to say "hey look what I did & everyone else should too!" to sell a dream & become more famous. And to some FIers, that seems a little out-of-touch or disingenuous.


OP, get on that PAYE/REPAYE :P

OvertheRainbow

  • 5 O'Clock Shadow
  • *
  • Posts: 54
Re: $170,000 Student Loan Disaster
« Reply #39 on: March 09, 2017, 04:07:22 AM »
Ah shoot someone replied. Was gonna edit my post for some more details.

Anyway, this Reddit post sums things up better than I can:

He [read MMM] hardly acknowledges that he was lucky; his asset accumulation phase was greatly shortened by:

    Being able to go to college while it was still cheap enough to not require lots of student debt

    Getting a well-paying US engineering job in the mid 90s, prior to mass offshoring, higher unemployment, etc.

    Buying real estate at pre-bubble prices in the mid/late 90s

In short, a lot of his success was due to being born at a better time.

A US software engineer, finishing undergrad in 2010 through 2015, will most likely not be able to accumulate ~$500k in ~7 years as he did, nor will they be able to buy a house as affordably.

So the main problem with much of his advice is that it is non-repeatable. He probably knows that, but continues to say "hey look what I did & everyone else should too!" to sell a dream & become more famous. And to some FIers, that seems a little out-of-touch or disingenuous.


OP, get on that PAYE/REPAYE :P

Non-repeatable...for who?

Yes, I agree that college is getting ridiculously expensive and MMM was fortunate to be able to go school while prices were still reasonable. However, one can easily cut the amount of student loans by starting off at a community college, transferring to a state 4-year university, commuting and working while going to school. Too many kids are going to these expensive, for-profit or out-of-state schools. Many are living off their loans instead of getting a FT or PT job. And an even larger amount of getting degrees that have a low ROI.

My brother will have a decent amount of debt (under 30k), but he is graduating with a degree in engineering and already has a job offer making 77k base w/6 % 401k match. He is only 21 years old. And there are many other STEM majors out there getting great job offers. My other brother is majoring in physics and received a damn-near full ride. With a degree in physic and post-graduate studies, he has the potential to make a killing...without the student loans.

Yes, I agree, it is getting harder out there, but it isn't impossible or "non-repeatable."

andreamac

  • 5 O'Clock Shadow
  • *
  • Posts: 75
Re: $170,000 Student Loan Disaster
« Reply #40 on: March 09, 2017, 05:41:58 AM »
I'm in Canada so I don't understand all of the logistics but when I went to college (not university) I saw lots of people leaving high on the big once their student loans came in. While I worked part time, had two roomates and came out ahead.  How much of the 170K where living expenses vs school expenses? I think people need to be responsible for their life choices even at a young age. Maybe I'm being harsh but just my two cents...

OthalaFehu

  • 5 O'Clock Shadow
  • *
  • Posts: 72
    • OthalaFehu
Re: $170,000 Student Loan Disaster
« Reply #41 on: March 09, 2017, 07:41:12 AM »
Whether or not you consciously realize it or not, failing to pay your debt off will result in some internalized shame and guilt. There is no telling how this will manifest itself. Better to try to be honorable in all things. There are mechanisms for dealing with SL of this size. I was over $200k in debt from law school between me and dear wife. We are government lawyers not big money lawyers.

TheAnonOne

  • Handlebar Stache
  • *****
  • Posts: 1508
Re: $170,000 Student Loan Disaster
« Reply #42 on: March 09, 2017, 08:19:25 AM »
Ah shoot someone replied. Was gonna edit my post for some more details.

Anyway, this Reddit post sums things up better than I can:

He [read MMM] hardly acknowledges that he was lucky; his asset accumulation phase was greatly shortened by:

    Being able to go to college while it was still cheap enough to not require lots of student debt

    Getting a well-paying US engineering job in the mid 90s, prior to mass offshoring, higher unemployment, etc.

    Buying real estate at pre-bubble prices in the mid/late 90s

In short, a lot of his success was due to being born at a better time.

A US software engineer, finishing undergrad in 2010 through 2015, will most likely not be able to accumulate ~$500k in ~7 years as he did, nor will they be able to buy a house as affordably.

So the main problem with much of his advice is that it is non-repeatable. He probably knows that, but continues to say "hey look what I did & everyone else should too!" to sell a dream & become more famous. And to some FIers, that seems a little out-of-touch or disingenuous.


OP, get on that PAYE/REPAYE

Non-repeatable...for who?

Yes, I agree that college is getting ridiculously expensive and MMM was fortunate to be able to go school while prices were still reasonable. However, one can easily cut the amount of student loans by starting off at a community college, transferring to a state 4-year university, commuting and working while going to school. Too many kids are going to these expensive, for-profit or out-of-state schools. Many are living off their loans instead of getting a FT or PT job. And an even larger amount of getting degrees that have a low ROI.

My brother will have a decent amount of debt (under 30k), but he is graduating with a degree in engineering and already has a job offer making 77k base w/6 % 401k match. He is only 21 years old. And there are many other STEM majors out there getting great job offers. My other brother is majoring in physics and received a damn-near full ride. With a degree in physic and post-graduate studies, he has the potential to make a killing...without the student loans.

Yes, I agree, it is getting harder out there, but it isn't impossible or "non-repeatable."
I am only 1 data point but I graduated in 2011 with 60k worth of debt and now have 410k NW or abouts. AND I've done a few dumb things including about $100,000 in vehicles.

I am in software. 26 years old.

It's doable, even today. Even if I was half as lucky, without the cars id have a NW of 250k.

Frugal living is VERY powerful.

Sent from my SM-G935T using Tapatalk

NoStacheOhio

  • Handlebar Stache
  • *****
  • Posts: 2143
  • Location: Cleveland
Re: $170,000 Student Loan Disaster
« Reply #43 on: March 09, 2017, 08:29:21 AM »
Can we also talk about just how much money it is to pay 10, 20 or 25 years, even on IBR. Often, at the end of that period, you've already repaid the principal and some of the interest. The whole "but my tax dollars!" argument is pretty weak. Especially when the borrower is already earning money and paying their own taxes.

charis

  • Handlebar Stache
  • *****
  • Posts: 1731
Re: $170,000 Student Loan Disaster
« Reply #44 on: March 09, 2017, 09:48:58 AM »
Can we also talk about just how much money it is to pay 10, 20 or 25 years, even on IBR. Often, at the end of that period, you've already repaid the principal and some of the interest. The whole "but my tax dollars!" argument is pretty weak. Especially when the borrower is already earning money and paying their own taxes.

Exactly.  The moral argument is often that IBR/forgiveness is somehow shirking debt.  That is rarely the case.  Sure, a small percentage of people will abuse the program (see the doctors mentioned upthread) but that's true of any program being used by unethical people.  Most people, if they end up being eligible for forgiveness, will use the program to get by and will more than pay back their loan in the end.  Let's give the high horse a rest.

rubybeth

  • Handlebar Stache
  • *****
  • Posts: 1402
  • Location: Midwest
Re: $170,000 Student Loan Disaster
« Reply #45 on: March 09, 2017, 10:14:54 AM »
Can we also talk about just how much money it is to pay 10, 20 or 25 years, even on IBR. Often, at the end of that period, you've already repaid the principal and some of the interest. The whole "but my tax dollars!" argument is pretty weak. Especially when the borrower is already earning money and paying their own taxes.

Exactly.  The moral argument is often that IBR/forgiveness is somehow shirking debt.  That is rarely the case.  Sure, a small percentage of people will abuse the program (see the doctors mentioned upthread) but that's true of any program being used by unethical people.  Most people, if they end up being eligible for forgiveness, will use the program to get by and will more than pay back their loan in the end.  Let's give the high horse a rest.


Excellent point. For funsies, I did the chart for our OP, assuming the stated income and 7% interest rate. On REPAYE, OP will have paid about $202/mo. for 300 months, a grand total of $141,048, or very close to as much as she/he said that they borrowed (probably more as the income goes up and the payments adjust accordingly)! Funny how that works. <eye roll>

Here's the calculator so you can play along at home: https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action#view-repayment-plans
« Last Edit: March 09, 2017, 10:16:48 AM by rubybeth »

Tyson

  • Handlebar Stache
  • *****
  • Posts: 2384
  • Age: 47
  • Location: Denver, Colorado
Re: $170,000 Student Loan Disaster
« Reply #46 on: March 09, 2017, 10:30:48 AM »
Most of the people I know who are in the worst shape with student loans are people with MFAs. ...

I'd like to see the universities be required originate the loans any way they pleased from their own budgets, with all such loans dischargeable in bankruptcy.  Even university finance officers would soon realize the cruelty in loaning money for useless degrees, since the pain would fall upon the university rather than the students they are now condemning to a lifetime of debt slavery.

QFT!

Connemara

  • 5 O'Clock Shadow
  • *
  • Posts: 75
Re: $170,000 Student Loan Disaster
« Reply #47 on: March 09, 2017, 10:53:29 AM »
For those advocating the Public Service Loan Forgiveness program - what happens when 7 or 8 years into the program the Federal government changes the parameters? This has already happened.

https://www.americanbar.org/news/abanews/aba-news-archives/2016/12/aba_files_lawsuitag.html

This program is notorious for having minimal statutory or regulatory controls. Your loan is at the whim of the bureaucracy

charis

  • Handlebar Stache
  • *****
  • Posts: 1731
Re: $170,000 Student Loan Disaster
« Reply #48 on: March 09, 2017, 11:24:48 AM »
Can we also talk about just how much money it is to pay 10, 20 or 25 years, even on IBR. Often, at the end of that period, you've already repaid the principal and some of the interest. The whole "but my tax dollars!" argument is pretty weak. Especially when the borrower is already earning money and paying their own taxes.

Exactly.  The moral argument is often that IBR/forgiveness is somehow shirking debt.  That is rarely the case.  Sure, a small percentage of people will abuse the program (see the doctors mentioned upthread) but that's true of any program being used by unethical people.  Most people, if they end up being eligible for forgiveness, will use the program to get by and will more than pay back their loan in the end.  Let's give the high horse a rest.


Excellent point. For funsies, I did the chart for our OP, assuming the stated income and 7% interest rate. On REPAYE, OP will have paid about $202/mo. for 300 months, a grand total of $141,048, or very close to as much as she/he said that they borrowed (probably more as the income goes up and the payments adjust accordingly)! Funny how that works. <eye roll>

Here's the calculator so you can play along at home: https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action#view-repayment-plans

Does that 141K include the tax due on the forgiven amount?  That will be hefty amount for the larger loans.

charis

  • Handlebar Stache
  • *****
  • Posts: 1731
Re: $170,000 Student Loan Disaster
« Reply #49 on: March 09, 2017, 11:29:18 AM »
For those advocating the Public Service Loan Forgiveness program - what happens when 7 or 8 years into the program the Federal government changes the parameters? This has already happened.

https://www.americanbar.org/news/abanews/aba-news-archives/2016/12/aba_files_lawsuitag.html

This program is notorious for having minimal statutory or regulatory controls. Your loan is at the whim of the bureaucracy

I think there is already a thread and/or discussion elsewhere on this lawsuit and the conclusion was that the allegations were not that the parameters of the program had been changed, but that the plaintiffs were misled by the DOE into believing that their particular positions were qualified as public service.