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General Discussion => Welcome and General Discussion => Topic started by: RootofGood on October 08, 2013, 03:49:39 PM

Title: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 08, 2013, 03:49:39 PM
I wanted to separate this line of discussion from my "Hello, I am" introductory thread.  http://www.mrmoneymustache.com/forum/welcome-to-the-forum/hi-i-am-rootofgood!-retired-at-33-life-is-good!/

The discussion went off topic into a discussion of the ethical dimensions of using the Income Based Repayment plans for student loan debt.  Specifically, should you use the plan if you retire early, knowing that you may eventually have part of your debt forgiven?

With due respect, in this case, it seems like taking advantage of the system. Not frugality.

"Income-Based Repayment (IBR) is designed to reduce monthly payments to assist with making your student loan debt manageable. If you need to make lower monthly payments, this plan may be for you."

"To qualify for IBR, you must have a partial financial hardship."

I believe the plan is for someone without enough income to make payments on the standard repayment plan nor consumerism.

I think I would feel the same if OP received food stamps... He doesn't have the need. Just my opinion.
Fwiw, we were considering putting our loans on ibr, for a yr, as a strategy to repay them all. Maybe this is why OP is FI and I'm not (i'm too proud/stupid and will pay off my debts)

To each their own.  It's your life and your choice to participate in a particular repayment program that would benefit you. 

Thought experiment: (1) What if I were a stay at home dad, merely taking time off from work to raise my kids for the next 17 years?
(2) What if I decided to pursue writing as a career, and write when it fancies me. 

In either scenario (1) or (2), it is unlikely we would pay a materially different amount on our student loans versus simply "being retired". 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: NV Teacher on October 08, 2013, 04:46:27 PM
I would not purposefully keep my income low just to avoid repaying student loans.  For me that would be unethical. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Lans Holman on October 08, 2013, 05:10:38 PM
Interesting thought experiment but this discussion kind of reminds me of that scene from Office Space where Ron Livingston is explaining their scheme to Jennifer Aniston and she's continually making the point of "But it's not your money, and you're going to take it".
You borrowed money (in addition to all those other subsidies you discussed benefitting from) and now you're not going to pay it back, even though you could afford to.  I don't know that there is any hypothetical you can propose that gets you around that.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Dee18 on October 08, 2013, 05:26:41 PM
All the current loan repayment plans have minimums.  For public interest it's 120 months.  For PAYE it's 20 years. For IBR it's 25 years. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Numbers Man on October 08, 2013, 05:54:21 PM
I thought this article was relevant to the discussion. I believe the OP had mentioned that he would deal with the taxes when they came. I don't know what your balance is but I can see it mushrooming over the next 15 years (I believe the OP had said he had been making payments for ten years). While it make seem cool that you have found a loophole from paying off this loan (as a result of early retirement), the resulting tax bill might be a lot higher than you bargained for, but only the OP has all the numbers to do the math.

http://www.thedailybeast.com/articles/2013/02/27/the-hidden-trap-of-income-based-repayment.html
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 08, 2013, 06:30:14 PM
I thought this article was relevant to the discussion. I believe the OP had mentioned that he would deal with the taxes when they came. I don't know what your balance is but I can see it mushrooming over the next 15 years (I believe the OP had said he had been making payments for ten years). While it make seem cool that you have found a loophole from paying off this loan (as a result of early retirement), the resulting tax bill might be a lot higher than you bargained for, but only the OP has all the numbers to do the math.

http://www.thedailybeast.com/articles/2013/02/27/the-hidden-trap-of-income-based-repayment.html

This:

Quote
Of course, if this happens to enough people, I assume the government will change the rules, the way they did for the forgiven principle amount on short sales.

I'd say there is a good chance the forgiveness of indebtedness will not be taxed.  It will be a "completely unforeseen" shock to the first cohort of IBR participants and after hand wringing and head scratching, Congress will do what they do so well.

If not, the present value of my tax liability in 23 years is around $1200.  As a result, taxation of amount forgiven is not a significant concern. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Rural on October 08, 2013, 06:37:38 PM
Well, I'm on the public service plan. I'm also doing the public service, teaching at one of the lowest tuition, lowest debt colleges in the country.

I'm also doing it very well, partly because unlike some of my colleagues (by no means all), I'm there by choice, not by default. I make less than half of the median pay for folks in my position, even in ts low-paying state, so of course it's hard to get the best to work here. But here is where the first-generation students can afford college.

I don't think I have any real ethical dilemma, though it does bug me sometimes. What I'm doing is exactly what the program was designed to do, and if I'd agreed to teach here for ten years in exchange for the state or the feds paying the tuition upfront instead of after the fact, I don't think we'd be having this discussion.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 08, 2013, 06:43:39 PM
Well, I'm on the public service plan. I'm also doing the public service, teaching at one of the lowest tuition, lowest debt colleges in the country.

I'm also doing it very well, partly because unlike some of my colleagues (by no means all), I'm there by choice, not by default. I make less than half of the median pay for folks in my position, even in ts low-paying state, so of course it's hard to get the best to work here. But here is where the first-generation students can afford college.

I don't think I have any real ethical dilemma, though it does bug me sometimes. What I'm doing is exactly what the program was designed to do, and if I'd agreed to teach here for ten years in exchange for the state or the feds paying the tuition upfront instead of after the fact, I don't think we'd be having this discussion.

During my career, I've put in close to 10 years service that would qualify for PSLF, but elected not to participate in PSLF.  It didn't make sense since the IBR would satisfy my purposes without any risk I wouldn't put in 10 years or the PSLF program would change mid course. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Rural on October 08, 2013, 07:22:39 PM
Well, I'm on the public service plan. I'm also doing the public service, teaching at one of the lowest tuition, lowest debt colleges in the country.

I'm also doing it very well, partly because unlike some of my colleagues (by no means all), I'm there by choice, not by default. I make less than half of the median pay for folks in my position, even in ts low-paying state, so of course it's hard to get the best to work here. But here is where the first-generation students can afford college.

I don't think I have any real ethical dilemma, though it does bug me sometimes. What I'm doing is exactly what the program was designed to do, and if I'd agreed to teach here for ten years in exchange for the state or the feds paying the tuition upfront instead of after the fact, I don't think we'd be having this discussion.

During my career, I've put in close to 10 years service that would qualify for PSLF, but elected not to participate in PSLF.  It didn't make sense since the IBR would satisfy my purposes without any risk I wouldn't put in 10 years or the PSLF program would change mid course.

Fair enough if that's your choice, but there really is no risk since the PSLF requires the IBR to begin with. If the one doesn't work out, the other is already in place.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 08, 2013, 07:31:07 PM
Fair enough if that's your choice, but there really is no risk since the PSLF requires the IBR to begin with. If the one doesn't work out, the other is already in place.

There is risk in my situation.  I have a FFEL stafford loan through a local lender.  I would have to consolidate to a Direct Loan to participate in PSLF.  The local lender offers a 2.25% discount on interest rate for paying on time and using autodraft to pay.  I have a 0.75% interest rate locked in for the 30 year term.  It would go to 3% with the Direct Loan. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Rural on October 08, 2013, 07:33:53 PM
Fair enough if that's your choice, but there really is no risk since the PSLF requires the IBR to begin with. If the one doesn't work out, the other is already in place.

There is risk in my situation.  I have a FFEL stafford loan through a local lender.  I would have to consolidate to a Direct Loan to participate in PSLF.  The local lender offers a 2.25% discount on interest rate for paying on time and using autodraft to pay.  I have a 0.75% interest rate locked in for the 30 year term.  It would go to 3% with the Direct Loan.

Ah, that does make a difference. All of my loans were direct, so I don't know much about how the Staffords work(ed). Sounds like you got a good one with that interest rate.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: hoodedfalcon on October 08, 2013, 08:21:40 PM
I don't think it is possible to have put in 10 years that would qualify for PSLF since the program has only been around for a few years. No one has yet qualified for forgiveness, and won't until maybe 2017 or 2018 I think? I guess what you are saying is you worked for 10 years before retiring, and that job was in public interest?

I don't think there is an easy answer to this question. Of course, IBR and PSLF are two completely different things. I think there is something disingenuous about retiring with debt, using IBR to qualifying for very low or no payments, and just riding it out. I am also concerned that the ab/use of IBR in this fashion will result in the program being shut down. It does "reward" the indebted person the lower their income is, but for folks who really use the program as it was intended (to avoid people defaulting on student loans), I don't know many of those people who wouldn't take a raise if offered.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 08, 2013, 08:50:52 PM
I don't think it is possible to have put in 10 years that would qualify for PSLF since the program has only been around for a few years. No one has yet qualified for forgiveness, and won't until maybe 2017 or 2018 I think? I guess what you are saying is you worked for 10 years before retiring, and that job was in public interest?

I don't think there is an easy answer to this question. Of course, IBR and PSLF are two completely different things. I think there is something disingenuous about retiring with debt, using IBR to qualifying for very low or no payments, and just riding it out. I am also concerned that the ab/use of IBR in this fashion will result in the program being shut down. It does "reward" the indebted person the lower their income is, but for folks who really use the program as it was intended (to avoid people defaulting on student loans), I don't know many of those people who wouldn't take a raise if offered.

You are correct in that I was counting my total time worked in a job that today qualifies for PSLF. 

As for your second part, "folks who really use the program as it was intended": who knows what the intent is?  It seems starving artists or writers, or aspiring actors  (who opted out of potentially high paying jobs to follow their "passion") would benefit financially from IBR just as much as I would. 

IBR actually reduced our payments while we were both working full time by about 33%.  I don't think we ever felt like our loan payments were unreasonably high or unbearable. But it doesn't make sense to turn down legitimate programs that you qualify for.  I wouldn't forego tax credits or deductions that I qualify for.  If I qualified for cash for clunkers or the $8000 new homebuyer's credit (when these programs existed), I wouldn't turn these down either. 





Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Mazzinator on October 08, 2013, 08:58:36 PM
Quote
Hi, my wife and I have over $100k in student loan debt.  We don't plan on paying much of it back because we are in the Income Based Repayment plan and gosh darn it I'm retired so our income is low enough where our monthly payment will be zero.  We also have 3 kids so that helps in the payment calculation formula (it is based on household size).  23.5 more years and they will forgive any balance not repaid. 

Once the kids leave the house over the next 17 years our repayment may creep up from zero to something higher, but probably no more than a couple thousand per year max (if we have tons of income from dividends and IRA withdrawals).

The 10 year Public Service Loan Forgiveness looks very sweet if you can stomach 10 years of working for the government or a non profit.  I opted not to choose that path even though I worked for the govt.  In hindsight it was a smart choice because I was only at the government job for 2.5 years. 

This IBR/PSLF program is awesome if your income happens to be low (due to crappy pay or your mustachian ability to craft a stream of income).  Couple this with Obamacare subsidies and it literally pays to look poor on your 1040.

I don't understand?? Your SL have only been on IBR for 2.5 years?? Or your wifes?? When did you guys graduate??
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 08, 2013, 09:10:17 PM
Quote
Hi, my wife and I have over $100k in student loan debt.  We don't plan on paying much of it back because we are in the Income Based Repayment plan and gosh darn it I'm retired so our income is low enough where our monthly payment will be zero.  We also have 3 kids so that helps in the payment calculation formula (it is based on household size).  23.5 more years and they will forgive any balance not repaid. 

Once the kids leave the house over the next 17 years our repayment may creep up from zero to something higher, but probably no more than a couple thousand per year max (if we have tons of income from dividends and IRA withdrawals).

The 10 year Public Service Loan Forgiveness looks very sweet if you can stomach 10 years of working for the government or a non profit.  I opted not to choose that path even though I worked for the govt.  In hindsight it was a smart choice because I was only at the government job for 2.5 years. 

This IBR/PSLF program is awesome if your income happens to be low (due to crappy pay or your mustachian ability to craft a stream of income).  Couple this with Obamacare subsidies and it literally pays to look poor on your 1040.

I don't understand?? Your SL have only been on IBR for 2.5 years?? Or your wifes?? When did you guys graduate??

I'm not sure when we got on IBR.  Probably close to 2 years ago.  I had looked at it for a few years prior and saw the PSLF prior to starting my most recent government employment. 

Both our student loans are on IBR.  They look at the total marital student loan balance and total household AGI to determine your monthly payment.  We each graduated undergrad and law school between 2000 and 2005 (different dates for each of us as Mrs RootofGood worked in between undergrad and law school).  In other words, we have each paid student loans for 9-10 years.  I think we had deferrals during law school, so I'm not counting that time. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: hoodedfalcon on October 08, 2013, 09:14:17 PM
I don't think it is possible to have put in 10 years that would qualify for PSLF since the program has only been around for a few years. No one has yet qualified for forgiveness, and won't until maybe 2017 or 2018 I think? I guess what you are saying is you worked for 10 years before retiring, and that job was in public interest?

I don't think there is an easy answer to this question. Of course, IBR and PSLF are two completely different things. I think there is something disingenuous about retiring with debt, using IBR to qualifying for very low or no payments, and just riding it out. I am also concerned that the ab/use of IBR in this fashion will result in the program being shut down. It does "reward" the indebted person the lower their income is, but for folks who really use the program as it was intended (to avoid people defaulting on student loans), I don't know many of those people who wouldn't take a raise if offered.

You are correct in that I was counting my total time worked in a job that today qualifies for PSLF. 

As for your second part, "folks who really use the program as it was intended": who knows what the intent is?  It seems starving artists or writers, or aspiring actors  (who opted out of potentially high paying jobs to follow their "passion") would benefit financially from IBR just as much as I would. 

IBR actually reduced our payments while we were both working full time by about 33%.  I don't think we ever felt like our loan payments were unreasonably high or unbearable. But it doesn't make sense to turn down legitimate programs that you qualify for.  I wouldn't forego tax credits or deductions that I qualify for.  If I qualified for cash for clunkers or the $8000 new homebuyer's credit (when these programs existed), I wouldn't turn these down either.

IBR was intended for those experiencing economic hardship, so I think the intent was pretty clear. If you look at the law that enacted IBR, the terms default and default aversion are used. I don't think your starving artist example really proves your point, since by virtue of the "starving" part of the artist, they probably are experiencing a financial hardship. I think financial independence/early retirement does not really equal partial financial hardship/risk of default.

No doubt there is a loophole in the definition. You have found it. Perhaps 25 years goes by without that loophole closing. You could get lucky.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Mazzinator on October 08, 2013, 10:47:49 PM
Look, i'm not going to act like the IP and try to find posts to poke holes through your arguement. And i'm not trying to negate all the great saving/investing you've done. I'm just trying to ask you to reconsider repaying all your SLs.

Because you bought something (an education) on credit (SLs) and now you have no intention of repaying your debt. You could've very easily (i suppose) cash flowed your educations, instead you chose SLs.

IBR is a repayment plan, not a tax credit/deduction.

Another reason to repay it, is because you can!!!

Because you like other languages, we have a word here in HI.. Pono.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: dragoncar on October 08, 2013, 10:52:53 PM
I don't see a problem.  You make an agreement, you uphold your end.  That's ethical.  I believe in maximizing your personal outcomes within the confines of the law.  If you don't like the law, vote to change it.  Same reason why I often vote for measures that will increase my personal tax burden but I still take all allowable deductions.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 09, 2013, 07:38:54 AM
I don't see a problem.  You make an agreement, you uphold your end.  That's ethical.  I believe in maximizing your personal outcomes within the confines of the law.  If you don't like the law, vote to change it.  Same reason why I often vote for measures that will increase my personal tax burden but I still take all allowable deductions.

Glad to see at least one voice thinking in the same way.  I made an agreement.  I am repaying per my agreement.  Some years the IBR formula says we pay zero (when we have a bunch of kids listed as dependents, and moderately low income).  Some years the repayment will be small but non zero (when kid #1 and #2 are out of the house).  If our investments do really well, we may end up paying many thousands per year.   

Based on my latest financial model, we will pay between $700 and $3100 per year in years 2026-2036 (an eleven year period).  Our total payments over that period will be around $19000 (future year dollars). 

The payment is strictly based on AGI, federal poverty level, and household size.  Our federal lawmakers could easily modify the terms of the IBR and forgiveness plan. 

Possible modifications to prevent "wealthy" early retirees from "exploiting" the IBR are simple and numerous:

Just off the top of my head.  Maybe Congress, in their infinite largesse, can wipe out my student loan debt in exchange for a little bill drafting assistance...  Although their butts seem to be fully occupied by all the thumbs firmly lodged therein.  Feel free to forward my suggestions to your political representatives. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Gin on October 09, 2013, 08:44:00 AM
I didn't have any student loans so forgive my ignorance.  When you signed the loans were you planning to pay them back?  If they didn't have this program would you have borrowed so much money?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: johlstei on October 09, 2013, 09:02:18 AM
It's not very mustachian to give money away when you don't have to. Your lender wouldn't hesitate to take such a deal if they were in your position, no reason you should see it any differently. There's no pride to be had by choosing the worse outcome for you and everyone you know when given a choice. The lender knew you had this option when they gave you the loan.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 09, 2013, 09:27:30 AM
I didn't have any student loans so forgive my ignorance.  When you signed the loans were you planning to pay them back?  If they didn't have this program would you have borrowed so much money?

Yes to both. 

The bulk of my loans paid for law school and were incurred in the 2001-2004 period. 

When I was evaluating whether to borrow the money, a number of positives persuaded me it was good debt. 

The loan terms were very appealing at the time, and the IBR repayment program made them even better. 

It has me seriously considering funding strategies for my children's college education.  For example, why not live it up for 9-10 years, do some study abroad, spend a semester in Paris, whatever.  Maybe get a masters or PhD.  Rack up $180,000 in student loan debt.  Work for a public service job for 10 years (any job!), have all debt forgiven. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 09, 2013, 09:42:24 AM
The would-be moralists here remind me of the choads who were ranting and screaming about the presumed lack of character of the benighted souls who were walking away from seriously underwater homes (strategic default).  You all do understand that both OP and the strategic defaulters are playing by the rules of the game right?  You do understand that we 'Merkins live in a society where we are incented and allowed to do the economically most rational thing as long as we color inside the lines?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 09, 2013, 09:49:24 AM
The would-be moralists here remind me of the choads who were ranting and screaming about the presumed lack of character of the benighted souls who were walking away from seriously underwater homes (strategic default).  You all do understand that both OP and the strategic defaulters are playing by the rules of the game right?  You do understand that we 'Merkins live in a society where we are incented and allowed to do the economically most rational thing as long as we color inside the lines?

Thanks for the comment.  I'm not sure what some would suggest I do.  Exit the IBR program, knowing that I qualify?  Gratuitously send Uncle Sam a big five figure check in year 24 right before my loans will be forgiven? 

One thing I am very confident about is my ability to spend and manage money more efficiently than 535 individuals in Washington D.C.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Fletch on October 09, 2013, 09:50:01 AM
This would be against my own personal ethics (same for the hypotheticals of stay-at-home dad and lazy writer) to not repay the loan I took out* because I've vaguely met the requirements and it falls within the boundaries of the law. But the plan does seem to be legal, and my own principles have nothing to do with that, so go for it.

I'm a little confused how you managed work in public service and make 10 years of payments if you are only 33 and there were 3 years of law school in there where your UG loans were in deferment (so I assume you weren't earning an income in law school). To make 10 years of payments on your law school loans would also also mean you graduated law school at 23, unless I am misunderstanding the timeline.

* in the student loan situation. For example, I have no problem with people walking away from an underwater mortgage because the bank still gets some form a repayment (the house).
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: seattlecyclone on October 09, 2013, 10:01:07 AM
The would-be moralists here remind me of the choads who were ranting and screaming about the presumed lack of character of the benighted souls who were walking away from seriously underwater homes (strategic default).  You all do understand that both OP and the strategic defaulters are playing by the rules of the game right?  You do understand that we 'Merkins live in a society where we are incented and allowed to do the economically most rational thing as long as we color inside the lines?

Indeed. When you get a mortgage, you're not agreeing that failing to make the monthly payments makes you a bad, immoral person. You're agreeing that you will either make monthly payments or allow your house to be foreclosed upon and auctioned off. Repayment and foreclosure are two equally valid options. You're no more of an immoral person for stopping your payments than the bank is for repossessing your house when you do. It's all part of the contract, a procedure that both parties agreed upon in advance.

I think the same is true for student loans. You agree to make the required payments. There's a provision in the contract where the required payments are lower for people with lower incomes. The government may not like that you intentionally reduced your income to reduce your payments, but it's part of the deal they agreed to when they loaned you the money, and they need to accept it.

Morality aside, I would question whether it's in someone's best interest to reduce their income in this way when they don't yet have enough savings to retire, since they're probably going to be better off with a higher salary and just making the full payments. But for someone who's already retired...more power to you for optimizing your loan payments in this way.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 09, 2013, 10:17:01 AM
This would be against my own personal ethics (same for the hypotheticals of stay-at-home dad and lazy writer) to not repay the loan I took out* because I've vaguely met the requirements and it falls within the boundaries of the law. But the plan does seem to be legal, and my own principles have nothing to do with that, so go for it.

I'm a little confused how you managed work in public service and make 10 years of payments if you are only 33 and there were 3 years of law school in there where your UG loans were in deferment (so I assume you weren't earning an income in law school). To make 10 years of payments on your law school loans would also also mean you graduated law school at 23, unless I am misunderstanding the timeline.

* in the student loan situation. For example, I have no problem with people walking away from an underwater mortgage because the bank still gets some form a repayment (the house).

I don't vaguely meet the requirements, I 100% meet the requirements without any question.  The "personal financial hardship" requirement is a formula, and I meet the formula's requirements. 

Yes, I graduated law school at 23.  I have only worked directly in public service (for a governmental employer) for around 7 years, which is why I said I was "close to" 10 years in my comments.  I worked during the school year and during summers for various governmental employers during high school and during my combined 6 years in undergrad and law school. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 09, 2013, 10:49:05 AM
This would be against my own personal ethics (same for the hypotheticals of stay-at-home dad and lazy writer) to not repay the loan I took out* because I've vaguely met the requirements and it falls within the boundaries of the law. But the plan does seem to be legal, and my own principles have nothing to do with that, so go for it.

I'm a little confused how you managed work in public service and make 10 years of payments if you are only 33 and there were 3 years of law school in there where your UG loans were in deferment (so I assume you weren't earning an income in law school). To make 10 years of payments on your law school loans would also also mean you graduated law school at 23, unless I am misunderstanding the timeline.

* in the student loan situation. For example, I have no problem with people walking away from an underwater mortgage because the bank still gets some form a repayment (the house).

I don't vaguely meet the requirements, I 100% meet the requirements without any question.  The "personal financial hardship" requirement is a formula, and I meet the formula's requirements. 

Yes, I graduated law school at 23.  I have only worked directly in public service (for a governmental employer) for around 7 years, which is why I said I was "close to" 10 years in my comments.  I worked during the school year and during summers for various governmental employers during high school and during my combined 6 years in undergrad and law school.

And some of us overachievers went to grad school while working part time.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 09, 2013, 10:50:22 AM
The would-be moralists here remind me of the choads who were ranting and screaming about the presumed lack of character of the benighted souls who were walking away from seriously underwater homes (strategic default).  You all do understand that both OP and the strategic defaulters are playing by the rules of the game right?  You do understand that we 'Merkins live in a society where we are incented and allowed to do the economically most rational thing as long as we color inside the lines?

Thanks for the comment.  I'm not sure what some would suggest I do.  Exit the IBR program, knowing that I qualify?  Gratuitously send Uncle Sam a big five figure check in year 24 right before my loans will be forgiven? 

One thing I am very confident about is my ability to spend and manage money more efficiently than 535 individuals in Washington D.C.

I presume the father confessors want you to send big checks in and/or commit seppuku for daring to take advantage of a contractual provision of your loan agreement.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: geekette on October 09, 2013, 10:52:57 AM
Quote
One thing I am very confident about is my ability to spend and manage money more efficiently than 535 individuals in Washington D.C.
But it's not those 535 individuals who will be paying back your loan. It's me. And all those others who paid for what they got.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 09, 2013, 10:58:56 AM
Quote
One thing I am very confident about is my ability to spend and manage money more efficiently than 535 individuals in Washington D.C.
But it's not those 535 individuals who will be paying back your loan. It's me. And all those others who paid for what they got.

Google "tragedy of the commons."
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Fletch on October 09, 2013, 11:23:35 AM


I don't vaguely meet the requirements, I 100% meet the requirements without any question.  The "personal financial hardship" requirement is a formula, and I meet the formula's requirements. 

Yes, I graduated law school at 23.  I have only worked directly in public service (for a governmental employer) for around 7 years, which is why I said I was "close to" 10 years in my comments.  I worked during the school year and during summers for various governmental employers during high school and during my combined 6 years in undergrad and law school.

And some of us overachievers went to grad school while working part time.

Yes, and some overachievers work full time while going to graduate school, but he said his loans were in deferment for that time, so it makes sense that he wasn't earning income then.

Ignore my timeline comment, it is just unusual to graduate law school that early. The thread seems to be conflating the PSLF 10-year track (which was my "vaguely" reference) and the 25-year IBR track. I still don't agree with the ethics of it, but I agree that is not your "fault" for taking advantage of it; it is poorly written legislation. I absolutely agree with some kind of asset test or adjustment for non-earned income.
I'm not sure this will still be a legitimate funding opportunity for your kids education down the road though, seems like such leaky legislation would sink before then.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 09, 2013, 11:32:10 AM
Quote
One thing I am very confident about is my ability to spend and manage money more efficiently than 535 individuals in Washington D.C.
But it's not those 535 individuals who will be paying back your loan. It's me. And all those others who paid for what they got.

I pay taxes into the general fund just like you.  I'm sure I "pay" for things for you that I don't want to. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Gin on October 09, 2013, 11:41:53 AM
I think it is morally wrong.  I wouldn't do it.  If you qualified for free or reduced lunches for your kids in school would you participate in that too?  The money comes from the taxpayors.  Yes, we are all taxpayors you included but if we all did it where would the money come from to pay for it?  Telling kids to live it up and study abroad and rack up the loans they can just work for govt. for 10 yrs and all loans are forgiven sounds shady.  As much as people complain of goverentment wasting money isn't this just adding to it beacuse it is losing money on your loan. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 09, 2013, 12:10:29 PM
I think it is morally wrong.  I wouldn't do it.  If you qualified for free or reduced lunches for your kids in school would you participate in that too?  The money comes from the taxpayors.  Yes, we are all taxpayors you included but if we all did it where would the money come from to pay for it?  Telling kids to live it up and study abroad and rack up the loans they can just work for govt. for 10 yrs and all loans are forgiven sounds shady.  As much as people complain of goverentment wasting money isn't this just adding to it beacuse it is losing money on your loan.

I looked into the free and reduced price lunches for my children.  We do not qualify as they look at gross income and not AGI or take home pay (Mrs RootofGood still works for now).  I refuse to lie about our income (that would be unethical and illegal), so I did not apply for free/reduced price lunch.  We will likely qualify for reduced price lunches at some point, and I will probably apply at that point. 

Unfortunately we can't opt out of our government's redistribution system completely, so I have chosen to make the most of a system I don't fully agree with.  To each their own.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Mazzinator on October 09, 2013, 12:25:11 PM
Ok, so i see a bit of mixed reviews...maybe i am the idiot here, or i just spent toooo many years following Ramsey (and many other PF people who say "pay off your debt first")

And OP, i really am not trying to take away from all the great shit you've done, but i did think long and hard at this, from my own situation, and it just "felt wrong" which is why i was soo surprised that you did it and you were sorta bragging about it.

And although i still do kinda feel it's a bit unethical, i also feel like maybe that has been my downside (worrying too much about things other than the numbers) And because i asked you to reconsider...i'm now asking myself to reconsider.

Anyone care to look at my situation???

http://www.mrmoneymustache.com/forum/ask-a-mustachian/should-we-change-sl-repayment-plans/msg138447/#msg138447
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: ace1224 on October 09, 2013, 12:39:51 PM
I think it is morally wrong.  I wouldn't do it.  If you qualified for free or reduced lunches for your kids in school would you participate in that too?  The money comes from the taxpayors.  Yes, we are all taxpayors you included but if we all did it where would the money come from to pay for it?  Telling kids to live it up and study abroad and rack up the loans they can just work for govt. for 10 yrs and all loans are forgiven sounds shady.  As much as people complain of goverentment wasting money isn't this just adding to it beacuse it is losing money on your loan.

I looked into the free and reduced price lunches for my children.  We do not qualify as they look at gross income and not AGI or take home pay (Mrs RootofGood still works for now).  I refuse to lie about our income (that would be unethical and illegal), so I did not apply for free/reduced price lunch.  We will likely qualify for reduced price lunches at some point, and I will probably apply at that point. 

Unfortunately we can't opt out of our government's redistribution system completely, so I have chosen to make the most of a system I don't fully agree with.  To each their own.
i think this whole situation is more messed up than okay.  not illegal though.  you are working the system, so kudos for that.  but i still think its slightly fucked up.  reduced lunch is for people who need it, not people who worked the system right.  stuff like this makes me feel more right wing everyday.
on the other hand i will admit i am slightly impressed and wished i too did not give a shit and just worked the system. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 09, 2013, 12:49:05 PM
Unfortunately we can't opt out of our government's redistribution system completely, so I have chosen to make the most of a system I don't fully agree with.  To each their own.

Ding, ding, ding, we have a winnah!!!

Actually, I would not want to opt out of the system.  I believe in a social safety net for one and all, myself included.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Undecided on October 09, 2013, 01:06:13 PM

i think this whole situation is more messed up than okay.  not illegal though.  you are working the system, so kudos for that.  but i still think its slightly fucked up.  reduced lunch is for people who need it, not people who worked the system right.  stuff like this makes me feel more right wing everyday.
on the other hand i will admit i am slightly impressed and wished i too did not give a shit and just worked the system.

Most Americans have children intending to support them, but it doesn't stop them from claiming them as dependents on their taxes, or claiming the child care credits where available, or education credits, etc. I don't see much of an ethical difference w/ the OP's plan, but I don't see a lot of condemnation of those other maneuvers.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: CommonCents on October 09, 2013, 01:09:22 PM
You asked about the ethics rather than legality of this situation, so I'll focus on that in my answer, using two major ethical theories.

Kant simplified says one should only do what you can apply to all. You can't create special rules for you. So imagine if everyone did this action, would it work?  You can plug in any action - lying (no, if everyone lied then no one would believe anyone and the world would be more difficult), kindness (yes, great), or doing this method of failing to pay back loans (no).

Utilitarianism on the other hand cares more about the ends - the result, than how you get there. You consider what creates the greatest happiness - you not paying back (high happy for just one person but a lot of little unhappiness for many taxpayers).   I think again its a no.  Utilitarianism would be ok with setting off the atomic bomb possibly, to avoid more deaths in WWII. Kant on the other hand would not.

So based on this I would say its not ethical. Sorry if not explained well, typing on iPhone at airport.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 09, 2013, 01:22:18 PM
Well, I'm on the public service plan. I'm also doing the public service, teaching at one of the lowest tuition, lowest debt colleges in the country.

I'm also doing it very well, partly because unlike some of my colleagues (by no means all), I'm there by choice, not by default. I make less than half of the median pay for folks in my position, even in ts low-paying state, so of course it's hard to get the best to work here. But here is where the first-generation students can afford college.

I don't think I have any real ethical dilemma, though it does bug me sometimes. What I'm doing is exactly what the program was designed to do, and if I'd agreed to teach here for ten years in exchange for the state or the feds paying the tuition upfront instead of after the fact, I don't think we'd be having this discussion.

During my career, I've put in close to 10 years service that would qualify for PSLF, but elected not to participate in PSLF.  It didn't make sense since the IBR would satisfy my purposes without any risk I wouldn't put in 10 years or the PSLF program would change mid course.

Am I the only one who views the PSLF as completely separate from IBR?  I think of the PSLF as a benefit – an inducement to work in areas of high need, by paying off your loan after 10 years of service.  It's not that different than a ROTC scholarship. 

IBR, on the other hand, is definitely and specifically for cases of financial hardship.  I can't say what I would do in someone else's shoes for sure, but I would be very squeamish about claiming financial hardship after having decided that you had saved enough money to retire early. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: dragoncar on October 09, 2013, 02:08:14 PM
I agree it's very similar to the strategic default discussion.  Does anyone here hold separate views between strategic default and "purposeful" IBR?  Note that, as others mention, it may not even be economically beneficial to purposely keep your income low.  Likely a person with high earning potential would come out ahead just doing standard repayment (consider that Lawyers at bi firms can easily save $100k/year.)

I don't have a problem with the public paying for education.  See the mythical lands of Europe, where the grad shool is heavily subsidized.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Mr.Macinstache on October 09, 2013, 03:27:30 PM
I think it is morally wrong.  I wouldn't do it.  If you qualified for free or reduced lunches for your kids in school would you participate in that too?  The money comes from the taxpayors.  Yes, we are all taxpayors you included but if we all did it where would the money come from to pay for it?  Telling kids to live it up and study abroad and rack up the loans they can just work for govt. for 10 yrs and all loans are forgiven sounds shady.  As much as people complain of goverentment wasting money isn't this just adding to it beacuse it is losing money on your loan.

Agree with this. It's ironic you're complaining about Congress managing money while you yourself are 'ok' with adding to the problem by exploiting a loophole.

All I am hearing that you are somehow entitled to it (because you choose to work in public service?), and the fact you found a loophole somehow justifies it as OK in your mind..CommonCents is right that this is utilitarian and a society with that mindset creates nothing good. And libertarians are called selfish? Ha.

You made a voluntary choice to take loans and enter contracts. Nothing on their end was breached, I think you have an obligation. Also to go as far as using a free lunch program when you obviously can afford it? Just because you can doesn't mean you should. I think its shameful.

Do you consider yourself a charity?

Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: seattlecyclone on October 09, 2013, 04:18:33 PM
You made a voluntary choice to take loans and enter contracts. Nothing on their end was breached, I think you have an obligation.

He has an obligation to repay the loan according to the terms of the contract that both parties entered into voluntarily. Nobody is breaching a contract here. The terms of the loan specifically allow for the borrower to have lower monthly payments in the event his income is below a certain threshold. His income is below that threshold. He's opting to pay less as is his right under the contract.

If I were offering a loan I wouldn't write terms like that into the contract. But the federal government did. Complain to your representatives if you wish to get the loan terms changed for future borrowers. I think that's an entirely reasonable thing to do, because people in RootOfGood's situation seem to have no real need to have their debt forgiven. It's totally reasonable for a taxpayer to expect the rules to limit loan forgiveness only to those who truly cannot afford to repay the loan in full. That said, I do not fault him one bit for choosing the cheapest option allowed under the terms of the contract he signed.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: hoodedfalcon on October 09, 2013, 04:54:59 PM
You made a voluntary choice to take loans and enter contracts. Nothing on their end was breached, I think you have an obligation.

He has an obligation to repay the loan according to the terms of the contract that both parties entered into voluntarily. Nobody is breaching a contract here. The terms of the loan specifically allow for the borrower to have lower monthly payments in the event his income is below a certain threshold. His income is below that threshold. He's opting to pay less as is his right under the contract.

If I were offering a loan I wouldn't write terms like that into the contract. But the federal government did. Complain to your representatives if you wish to get the loan terms changed for future borrowers. I think that's an entirely reasonable thing to do, because people in RootOfGood's situation seem to have no real need to have their debt forgiven. It's totally reasonable for a taxpayer to expect the rules to limit loan forgiveness only to those who truly cannot afford to repay the loan in full. That said, I do not fault him one bit for choosing the cheapest option allowed under the terms of the contract he signed.

Just a point of clarification - IBR did not exist when OP took out his loans, so no, it was not a part of the contract. IBR is a relatively new repayment program designed for individuals experiencing a partial financial hardship.

The problem is with the definition of "partial financial hardship" since it does not accurately reflect the true economic status of a particular individual. It is merely concerned with AGI, and there are plenty of times that AGI does not reflect wealth. I don't believe anyone who passed this law had early retirement on the brain. I think they were more concerned with things like mass default during an economic crisis. I think the statutory language reflects that, even if the definitions do not.

I see this as exalting form over substance, personally. But in ethical matters, all that matters is if OP can sleep at night. Apparently that isn't a problem. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: dragoncar on October 09, 2013, 05:32:23 PM
You made a voluntary choice to take loans and enter contracts. Nothing on their end was breached, I think you have an obligation.

He has an obligation to repay the loan according to the terms of the contract that both parties entered into voluntarily. Nobody is breaching a contract here. The terms of the loan specifically allow for the borrower to have lower monthly payments in the event his income is below a certain threshold. His income is below that threshold. He's opting to pay less as is his right under the contract.

If I were offering a loan I wouldn't write terms like that into the contract. But the federal government did. Complain to your representatives if you wish to get the loan terms changed for future borrowers. I think that's an entirely reasonable thing to do, because people in RootOfGood's situation seem to have no real need to have their debt forgiven. It's totally reasonable for a taxpayer to expect the rules to limit loan forgiveness only to those who truly cannot afford to repay the loan in full. That said, I do not fault him one bit for choosing the cheapest option allowed under the terms of the contract he signed.

Just a point of clarification - IBR did not exist when OP took out his loans, so no, it was not a part of the contract. IBR is a relatively new repayment program designed for individuals experiencing a partial financial hardship.

The problem is with the definition of "partial financial hardship" since it does not accurately reflect the true economic status of a particular individual. It is merely concerned with AGI, and there are plenty of times that AGI does not reflect wealth. I don't believe anyone who passed this law had early retirement on the brain. I think they were more concerned with things like mass default during an economic crisis. I think the statutory language reflects that, even if the definitions do not.

I see this as exalting form over substance, personally. But in ethical matters, all that matters is if OP can sleep at night. Apparently that isn't a problem.

Just because it wasn't in the original loan agreement doesn't mean the agreement wasn't modified by consolidation after 2007.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: hoodedfalcon on October 09, 2013, 06:07:10 PM
You made a voluntary choice to take loans and enter contracts. Nothing on their end was breached, I think you have an obligation.

He has an obligation to repay the loan according to the terms of the contract that both parties entered into voluntarily. Nobody is breaching a contract here. The terms of the loan specifically allow for the borrower to have lower monthly payments in the event his income is below a certain threshold. His income is below that threshold. He's opting to pay less as is his right under the contract.

If I were offering a loan I wouldn't write terms like that into the contract. But the federal government did. Complain to your representatives if you wish to get the loan terms changed for future borrowers. I think that's an entirely reasonable thing to do, because people in RootOfGood's situation seem to have no real need to have their debt forgiven. It's totally reasonable for a taxpayer to expect the rules to limit loan forgiveness only to those who truly cannot afford to repay the loan in full. That said, I do not fault him one bit for choosing the cheapest option allowed under the terms of the contract he signed.

Just a point of clarification - IBR did not exist when OP took out his loans, so no, it was not a part of the contract. IBR is a relatively new repayment program designed for individuals experiencing a partial financial hardship.

The problem is with the definition of "partial financial hardship" since it does not accurately reflect the true economic status of a particular individual. It is merely concerned with AGI, and there are plenty of times that AGI does not reflect wealth. I don't believe anyone who passed this law had early retirement on the brain. I think they were more concerned with things like mass default during an economic crisis. I think the statutory language reflects that, even if the definitions do not.

I see this as exalting form over substance, personally. But in ethical matters, all that matters is if OP can sleep at night. Apparently that isn't a problem.

Just because it wasn't in the original loan agreement doesn't mean the agreement wasn't modified by consolidation after 2007.

Sure. But I was addressing what seattlecyclone stated above. I am probably trying to make a distinction that doesn't really matter, other than to avoid misinterpretation of IBR. Also, I don't believe OP consolidated his loans, but that isn't really the point. Consolidation is not required for IBR (though it is for PSLF). You could apply for IBR regardless of the original contract terms (assuming other qualifications are met).

I mean, the only reason we are having this discussion about the ethics of this situation is because OP is planning on using the program in a manner allowed by law but (arguably) not the intended purpose of the program.

Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: mlipps on October 09, 2013, 07:02:37 PM
I agree it's very similar to the strategic default discussion.  Does anyone here hold separate views between strategic default and "purposeful" IBR?  Note that, as others mention, it may not even be economically beneficial to purposely keep your income low.  Likely a person with high earning potential would come out ahead just doing standard repayment (consider that Lawyers at bi firms can easily save $100k/year.)

I don't have a problem with the public paying for education.  See the mythical lands of Europe, where the grad shool is heavily subsidized.

I see them differently. For one, there is significantly more analysis that goes into giving someone a mortgage versus a student loan, for better or worse. If the creditor poorly assessed the value of a home, both present and future, that's on them as much as the borrower. Plus, they can take back the house which has at least some value to them.

On the other hand, student loans are almost a public good, intended to give access to education. Granted, they're not perfect, but that's at least the general intent of the program. There's a lot less assessment of credit worthiness & return on investment and lot more  of an emphasis on general access to higher education in the intent.

I'm not saying I necessarily think using IBR as Root of Good is is immoral. I haven't made a single payment on my subsidized loans since graduating in May 2011 and currently my IBR payments are based on my income from 2011 (hint, about 1/4 of my income now, and that's totally discounting what my husband makes). So far be it from me to argue. But I'm not sure that IBR can be directly correlated to strategic default.

Also, can I just say, that the thing that drives me nuts about student loans is that they're not FAIR because they keep changing the rules. I'm more pissed that Root of Good got to take out subsidized loans for grad school at an effective .75% rate and I can't get anything but unsubsidized at 7 something. Not to mention how I am one year off from qualifying for the income based repayment plan (not that I need it, it's just aggravating). I just wish Congress could make up their minds already.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: TrulyStashin on October 09, 2013, 07:48:39 PM
You asked about the ethics rather than legality of this situation, so I'll focus on that in my answer, using two major ethical theories.

Kant simplified says one should only do what you can apply to all. You can't create special rules for you. So imagine if everyone did this action, would it work?  You can plug in any action - lying (no, if everyone lied then no one would believe anyone and the world would be more difficult), kindness (yes, great), or doing this method of failing to pay back loans (no).

Utilitarianism on the other hand cares more about the ends - the result, than how you get there. You consider what creates the greatest happiness - you not paying back (high happy for just one person but a lot of little unhappiness for many taxpayers).   I think again its a no.  Utilitarianism would be ok with setting off the atomic bomb possibly, to avoid more deaths in WWII. Kant on the other hand would not.

So based on this I would say its not ethical. Sorry if not explained well, typing on iPhone at airport.

+1

Lawyers are so adept at justifying unethical but legal behavior.  I'm a lawyer so I'm familiar with this particular rabbit hole.  This is an example that illustrates the truth of the old saying "Just because it's legal, doesn't mean it's ethical."

I'm not sure why you posted this thread in the first place.  Perhaps you're proud of this but I sense an undercurrent of desire for approval from a frugal community.

I can't help you with that.  This reeks of entitlement and exploitation.  I gotta go open a window.   
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 09, 2013, 08:26:59 PM
Lawyers are so adept at justifying unethical but legal behavior.  I'm a lawyer so I'm familiar with this particular rabbit hole.  This is an example that illustrates the truth of the old saying "Just because it's legal, doesn't mean it's ethical."

I'm not sure why you posted this thread in the first place.  Perhaps you're proud of this but I sense an undercurrent of desire for approval from a frugal community.

I started this thread because another thread was drifting off topic, and this particular topic seemed like a popular topic that warranted further discussion.  Based on the responses, I think I am on ethically sound ground using IBR.  Some agree with me, some disagree. 

I'm proud of the fact that I understand the program well enough to use it to my economic advantage.  I'm not proud of the system of sloshing money around to higher education seekers and then not requiring pay back.  It's not fair to the cash buyers.  I see IBR (or the forgiveness part at least) and PSLF as welfare for the middle class that isn't needed in the current form.

As I have stated, I have no problem with Congress modifying the program to exclude the class of people that includes me (no bills of attainder, please).  In the meantime, I expect everyone to use existing and future government programs to the maximum extent permissible by law.  That's how people work - rational economic behavior.  How could I ever judge someone for making an economically rational choice (as long as they don't resort to lying, cheating, fraud or misrepresentation to achieve their purposes)?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: NumberJohnny5 on October 09, 2013, 10:02:56 PM
Are you hiding assets? Hiding income from the IRS? Lied anywhere on the application for loan forgiveness? No? Then I say there's no moral dilemma here.

Does the law specifically say "Only those who are unable to work, or are otherwise unable to earn enough to repay the loan in full may take advantage of this program."? If it does...ok, I change my answer. You're taking advantage of the program. But if it merely looks at income, and you truthfully declare all income...I still see no issue.

Even programs like school lunches, food stamps, etc; do you fit their criteria? If yes, then no problem. If not, then don't lie and try to get it anyways. The only time morals would (should?) come into it, is if you're going to an actual charity, i.e. a food bank. The government is not a charity. Neither are banks, or most other large corporations (even some charities aren't actually charities, but that's another discussion).
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Nords on October 09, 2013, 11:07:47 PM
I think you guys are missing the point among all of the ethics preaching.

The government suckered RootofGood.  They convinced him to go to college and stay there.  They paid him to get a degree and an education and then find a job.  Once he did all of that, he was so brainwashed that he became a productive member of society and bought stuff to keep the economy going and paid taxes.  He kept this up for years, and in his apparent blissful ignorance he overlooked a whole slew of ways to bilk the govt out of more "free" programs, all while he slaved away to pay more taxes and build the consumer economy.  Not only that, but he even procreated more little future taxpayers.  Score for the govt!

As we know, the govt could care less whether he repays every penny of his loan (plus interest, deferrals, and phantom income).  The govt just cared about making sure that he didn't bump along the dregs of society on minimum-wage jobs and sucking down welfare or other assistance programs.  He followed the rules like a good little taxpayer.  He stayed out of the safety net, contributed to the GDP, and (along the way) helped dump a little cash back into the govt coffers. 

Let's examine the ethics of my govt-funded education.  I borrowed nearly $125K of the government's money for my college (1978-1982).  Then I borrowed at least that much more to get a graduate degree (1986-89).  I never paid any of it back.  In fact, while I was at college I was paid hundreds of dollars per month.  During the 20 years afterward (1982-2002, including graduate school) the government paid me over [Dr. Evil voice] ONE MILLION DOLLARS [/Evil] (much of it tax-free) to learn how to kill people and break things.  Yet for two decades I never took advantage of any opportunities to do any of the things I'd been trained & paid to do.  Now they'll pay me a pension for the rest of my life, providing that I refrain from killing people and breaking things.  Your tax dollars at work, folks.

By your ethical standards, should I cut off my pension and pay back all of your tax dollars?  Or will someone thank me for my service?

So why not thank RootofGood for his service, and wish him well as he stays off the welfare rolls?  He just followed the rules and did as he was trained to do, and we should be grateful that he's been such a productive member of society.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 10, 2013, 02:03:30 AM
Nords, that is impressive satire.  You had me going there for a while.  Nicely done.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: markbrynn on October 10, 2013, 06:37:39 AM
My two cents:

If everybody tries to play the system or find the loopholes, then it all falls apart. If that's what you want in your house, town, country, planet, then sure it's your right to do it because it's not illegal.

My favourite example is health care. Under most health care systems you can visit the doctor as often as you want. Sometimes free or sometimes with a co-payment. Either way, it's not enough to pay the doctor's salary or costs for all the materials and medicine you might use. Individually, it might be great to go to the doctor when you get the sniffles; or to get physical therapy instead of exercising yourself to reduce problems. For a society as a whole it's a killer. It's one of the reasons why health care costs so much in some places. Use something when you need it, not because it's "free".

I get it that your government sucks and screw them, but exploiting loopholes does not hurt any of the "idiots" who make the laws. It hurts your neighbours (who pay more taxes). If you don't care about your neighbours, that's fine, but then don't expect them to care about you. Make sure you have the biggest walls and the biggest guns.

Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: CommonCents on October 10, 2013, 07:03:57 AM
You asked about the ethics rather than legality of this situation, so I'll focus on that in my answer, using two major ethical theories.

Kant simplified says one should only do what you can apply to all. You can't create special rules for you. So imagine if everyone did this action, would it work?  You can plug in any action - lying (no, if everyone lied then no one would believe anyone and the world would be more difficult), kindness (yes, great), or doing this method of failing to pay back loans (no).

Utilitarianism on the other hand cares more about the ends - the result, than how you get there. You consider what creates the greatest happiness - you not paying back (high happy for just one person but a lot of little unhappiness for many taxpayers).   I think again its a no.  Utilitarianism would be ok with setting off the atomic bomb possibly, to avoid more deaths in WWII. Kant on the other hand would not.

So based on this I would say its not ethical. Sorry if not explained well, typing on iPhone at airport.

+1

Lawyers are so adept at justifying unethical but legal behavior.  I'm a lawyer so I'm familiar with this particular rabbit hole.  This is an example that illustrates the truth of the old saying "Just because it's legal, doesn't mean it's ethical."

I'm not sure why you posted this thread in the first place.  Perhaps you're proud of this but I sense an undercurrent of desire for approval from a frugal community.

I can't help you with that.  This reeks of entitlement and exploitation.  I gotta go open a window.

Ironically, I'm a lawyer (and an ethicist - Masters in Bioethics). I know, know, it's an oxymoron.

OP, let me try putting it a different way. If you see a child drowning in a kiddie pool and no one else around, and you could save with no harm to yourself (except maybe wet shoes and pant hems), it may be legal to keep walking*, but it isn't ethical.

Also, as a note, many talk about the morality of this action rather than the ethics as asked. Many ethicists consider these slightly different questions.

*In all states but VT I believe, which has a Good Samaritan law last I looked.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: seattlecyclone on October 10, 2013, 08:31:03 AM
CommonCents, I'm curious where you would draw the line as an ethicist. Your Kantian test of whether the student loan program would work if everyone behaved in this manner seems to be a good starting point, but I see so many situations where it might not hold up. What else might you apply it to? Before claiming a tax credit designed for low-income people, should an early retiree consider whether the system would collapse if everyone retired early and claimed that same tax credit? Taking it one step farther, you could make the argument that the system would collapse (and perhaps is already collapsing) if people continue to pay the bare minimum of what the law demands in taxes, since revenue is currently so much less than expenditures. Then might Kantian principles demand that everyone should voluntarily pay as much tax as they think they can afford until the deficit is closed, even if that amount is significantly more than required?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 10, 2013, 09:27:09 AM

Ironically, I'm a lawyer (and an ethicist - Masters in Bioethics). I know, know, it's an oxymoron.

Really?  Do people throw rotten vegetables at you?  Do small children follow you in the street and laugh?

You must have heard a lot of lawyer jokes.  Any favorites?

My favorite economist joke is the three econometricians that go hunting.  They see a deer and one shoots, missing a yard to the left.  The second shoots, missing a yard to the right.  The third jumps up and down shouting "we hit it TWICE!"
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: CommonCents on October 10, 2013, 11:08:27 AM

Ironically, I'm a lawyer (and an ethicist - Masters in Bioethics). I know, know, it's an oxymoron.

Really?  Do people throw rotten vegetables at you?  Do small children follow you in the street and laugh?

You must have heard a lot of lawyer jokes.  Any favorites?

My favorite economist joke is the three econometricians that go hunting.  They see a deer and one shoots, missing a yard to the left.  The second shoots, missing a yard to the right.  The third jumps up and down shouting "we hit it TWICE!"

My dad made sure to share every one he could find, so I would go in eyes open. :). Only he says they aren't jokes - they're true stories.

A doctor is at a party with a lawyer and a woman comes up to interrupt with a small medical issue. The doctor answers then turns to the lawyer and complains about how annoying that is. "You must get it all the time too - what do you do?"  "Easy," the lawyer replies, "I just send them a bill after and they never ask me again."  "Great idea," the doctor says enthusiastically.  The next day, the doctor received a bill from the lawyer: "$50 - advice"
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: CommonCents on October 10, 2013, 11:15:25 AM
CommonCents, I'm curious where you would draw the line as an ethicist. Your Kantian test of whether the student loan program would work if everyone behaved in this manner seems to be a good starting point, but I see so many situations where it might not hold up. What else might you apply it to? Before claiming a tax credit designed for low-income people, should an early retiree consider whether the system would collapse if everyone retired early and claimed that same tax credit? Taking it one step farther, you could make the argument that the system would collapse (and perhaps is already collapsing) if people continue to pay the bare minimum of what the law demands in taxes, since revenue is currently so much less than expenditures. Then might Kantian principles demand that everyone should voluntarily pay as much tax as they think they can afford until the deficit is closed, even if that amount is significantly more than required?

Yes re early retiree. Or not stealing to qualify by falsifying docs.
Re voluntarily paying more, that requires rather a leap from not enough revenue to paying more rather than other options such as cutting costs, raising taxes etc. it doesn't follow that to universalize the action you must pay in extra.

Happy to chat in more depth in about a week and half when I get back from vacation (no internet on it).
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 10, 2013, 11:20:36 AM

Ironically, I'm a lawyer (and an ethicist - Masters in Bioethics). I know, know, it's an oxymoron.

Really?  Do people throw rotten vegetables at you?  Do small children follow you in the street and laugh?

You must have heard a lot of lawyer jokes.  Any favorites?

My favorite economist joke is the three econometricians that go hunting.  They see a deer and one shoots, missing a yard to the left.  The second shoots, missing a yard to the right.  The third jumps up and down shouting "we hit it TWICE!"

My dad made sure to share every one he could find, so I would go in eyes open. :). Only he says they aren't jokes - they're true stories.

A doctor is at a party with a lawyer and a woman comes up to interrupt with a small medical issue. The doctor answers then turns to the lawyer and complains about how annoying that is. "You must get it all the time too - what do you do?"  "Easy," the lawyer replies, "I just send them a bill after and they never ask me again."  "Great idea," the doctor says enthusiastically.  The next day, the doctor received a bill from the lawyer: "$50 - advice"

Very good one.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: NumberJohnny5 on October 10, 2013, 03:32:36 PM
Discussions that revolve around someone taking "advantage" of a "loophole" always brings up timeshare presentations in my mind.

If everyone took advantage of the timeshare presentation, i.e. spend 90 minutes of their time, get a free meal, plus $100 or so in tickets/meal vouchers/cash, and not actually buy a timeshare...the whole system would completely collapse. But the system works fine, thrives even. Why? Because they've run the numbers. They know that there will be some people (in this case, most people) who don't buy a timeshare. They know that most people will try to work the system (do note, that most people who end up buying, probably had every intention of not buying and simply working the system). They also know that some people will lie (you don't have to bring proof of income, just pinky-swear that you make the minimum annual salary that they require). What happens if too many people take advantage of the system? They change it. They could require proof of income, and/or lower the gifts you get.

So it is with this government program. The government wants you to get a college degree. They also want to make sure you are a productive member of society. They could push you to a path that'll lead to crushing student loan debt for the rest of your life (which, many could argue, is exactly what the gov did for a long time). Instead they say "hey, get this awesome degree, and if for some reason you don't make enough money to pay it back...that's ok, we'll call it even after X years". And also "Oh, btw, if you work a job that most people wouldn't, we'll also forgive the loan after X years." They should know that there'll be a number of people that work the system, and also a number of people that plan on working the system but end up doing exactly what the gov wanted all along. If it turns out that too many people are "abusing" the system, then the system will simply change. Well, at least it "should" change.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Mazzinator on October 10, 2013, 03:50:10 PM
Nords, if i understand you correctly, i think you fall under the category of "you received a benefit from your employer" If you work for me, for x years, i will pay off your sl/pay for your education. If you work for me for xx years, i will give you a pension. You earned it by working!!

IBR is not the same. It is not an employee benefit, tax exemption, tax credit and this is not pslf. IBR has nothing to do with working for the gov or not or how many years.

It's closer to bankruptcy.* He bought something and now is going to pay it back, even though he has the means to pay it back. How many people would file, then come on here and say "woo hoo!! I'm debt free..just filed bankruptcy, finally have a $0 net worth, yippee"

I think it differs from the mortgage example where you can give back your house. There is no assessed value that changes over time.

Quote
If it turns out that too many people are "abusing" the system, then the system will simply change.

So it's ok to abuse the system??


*i realize there are differences with filling bankruptcy.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: NumberJohnny5 on October 10, 2013, 04:12:08 PM
So it's ok to abuse the system??

Oops, thought that was quoting me...double-checked and it wasn't. Already made this response though, it'd be a shame to let it go to waste.

I don't see it as abusing.. The people making the system should have calculated just how it'd work, and have a good buffer in case they were wrong. And I'd be surprised if the conversation when coming up with this legislation didn't go something along the lines of:

Person 1 "Well, won't a lot of people try to work the system, getting a free education and then just stop working?"

Person 2 "I'm sure a lot of people will plan on working the system, but then they'll get caught up in the 'American Dream' and be nice little consumers, and will thus have to keep working."

Person 1 "Ok, what about those that succeed on abusing the system?"

Person 2 "Oh, the 0.5% that could still work, but decide they can retire early instead? A statistical anomaly. This program is projected to cause many more people to get a college education, earn more, and thus pay more in taxes; it's worth the chance that a few people clock out early. In fact, the program would still be successful even if 15% took advantage in the manner you suggest; they're still earning more money for a bit and paying higher taxes during that period, we're taxing them on investment income, plus they did repay part of their loans."

Person 1 "But what if more than 15% decide to..."

Person 2 "You're giving the American public too much credit! They won't. But even if they did, we'd just change the program, either directly or indirectly."

Person 1 "How could we change it indirectly?"

Person 2 "Oh, we'll figure out a way to charge a higher tax on people living mostly on a low investment income. Naturally, we'll make sure it doesn't affect us."

Person 1 "Of course not, that'd be just absurd!"

*In unison* "Hahahahahahaha!"
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Mazzinator on October 10, 2013, 04:28:31 PM
Quote
Oops, thought that was quoting me...double-checked and it wasn't. Already made this response though, it'd be a shame to let it go to waste.

I was quoting you :)

Anyways, i see what you're saying, that it's built into the cost, blah blah blah...

My problem is with the "abusing" or taking "advantage" of the system and calling it "frugality." I just don't see it as a good thing.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: NumberJohnny5 on October 10, 2013, 04:49:45 PM
I was quoting you :)

So you did...man, I'm just not awake this morning. So the obvious thing to do is gather up the family in a big steel cage and go barreling towards other huge steel cages at high rates of speed, hopefully we'll narrowly avoid the oncoming ones by a foot or two.

My problem is with the "abusing" or taking "advantage" of the system and calling it "frugality." I just don't see it as a good thing.

Would you have a problem with a frugal person who went to a timeshare presentation (and did so honestly, they meet the minimum requirements) with no intention of buying a timeshare, and simply getting a free breakfast and some Disney tickets? I wouldn't, and thus I find no problem with someone taking advantage of other similar setups. If you would...then it makes sense that you'd feel the same toward people taking advantage of other similar setups.

Off-topic just a bit, I am surprised that a forum with so many INTJs has so many people advocating making financial decisions based on emotions, rather than cold (unfeeling) hard logic. One should move out of his parents' home because he needs to grow up, though it would obviously be a hit to his finances. One should not take advantage of various government programs that facilitate early retirement because...um...that's not what they were meant to do? One should pay on a mortgage for a foreclosed house because...well the house is gone so...it's moral or something. I just don't get the whole "well, emotions say this, so that's that" which, if we follow that course of (il)logic, shouldn't we say "well, emotions say to buy this new car, so that's that"?

You do know that every new car you don't buy, is helping to put Americans out of work (foreign or domestic car, they're so intertwined; domestic cars have foreign parts, foreign cars are assembled domestically, etc.)? Wouldn't it be more moral if we go spend all our money so our fellow Americans can all have jobs? Yes, faulty logic for sure, but with a hint of truth. Which is how I see the other arguments.

Sorry, rant over, please continue.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 10, 2013, 08:40:04 PM
Ironically, I'm a lawyer (and an ethicist - Masters in Bioethics). I know, know, it's an oxymoron.

OP, let me try putting it a different way. If you see a child drowning in a kiddie pool and no one else around, and you could save with no harm to yourself (except maybe wet shoes and pant hems), it may be legal to keep walking*, but it isn't ethical.

Also, as a note, many talk about the morality of this action rather than the ethics as asked. Many ethicists consider these slightly different questions.

*In all states but VT I believe, which has a Good Samaritan law last I looked.

Hey, I saved 4 lives last summer!  I didn't jump into the rip currents to save these suckers though.  The 2 guys that did that almost died themselves.  I waded back to shore, called for the water rescue, patiently waited as I had to explain to the guys I borrowed a cell from that their friend jumped in and might be dead.  Given my professional background, I knew exactly how to communicate with emergency personnel and guide them for the rescue (geographic position, location, address, where to access beach, distance to drowning swimmers, approx speed of water flow, etc).  Right place, right time, quick thinking under duress = 4 live people today.  It kind of ruined an hour or two of my afternoon, which sucked.  But I figure and hour or two of my time is worth four people's lives.  As a bonus, I got to see the Marine's Chinook rescue chopper get waived off since it didn't get to the scene until the 4th and final victim was being pulled out of the water.  Unfortunately, one of the four pulled out of the water was nearly unconscious, but I think he recovered.  I'll never forget one of the ambulance drivers telling me that if the rescue crews didn't get there exactly when they did, these folks likely would have drowned. 

I guess I could have made this up, but here's the link covering the day's excitement.  http://www.wnct.com/story/21013393/rescue-crews-pull-4-swimmers-at-north-topsail-beach

If I had a do-over, I would not jump into the rip tide to save the drowning swimmers because I know the rough stats on that type of rescue.  It usually creates more dead bodies for the recovery team.  And I was likely the best person to calmly coordinate getting the rescuers to the somewhat remote scene and instilling the gravity of the situation to the dispatcher (so they literally call the Marines and the Coast Guard and not just a park ranger). 

As for your hypothetical, not only would I save the kid drowning in the kiddie pool, I'd do it gladly and even get my shoes wet. 

Your analogy doesn't apply to the student loan situation.  I would have to work an additional ~3 years of my life to repay the student loans in full.  Those three years wouldn't be completely wasted, but I never really enjoyed work given the often quotidian nature of the work and the stresses I occasionally endured.  Working 3 years isn't like losing 3 years of my life completely, but there is a great diminution in my quality of life when I have to work (hence my pursuit of very early retirement). 

I work better with numbers.  I'm 33, I have 45 years of life expectancy remaining.  Should I waste 7% of my remaining life toiling away because I took a principled stand on a truly debatable matter of ethics?  If I had a 7% chance of losing my life (or a 100% chance of having a sucky life for 3 years), would I jump in to save the drowning kid in the pool?  More likely than not, but an entirely different hypothetical question, and not one as easily answered. 

For the limited purposes of this discussion, I'll proclaim that I am following my option 1 in my original post.  "I am a stay at home dad, merely taking time off from work to raise my kids for the next 17 years"  Surely no one would begrudge a father his right to properly raise his own children as he sees fit?  Besides, the higher quality future taxpayers I raise, the more revenue the federal government can expect. 

As long as I don't let my kids know the secret of IBR...  Should I tell the kids? - My next "Ethical Dimensions of..." post.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 10, 2013, 08:47:43 PM
Are you hiding assets? Hiding income from the IRS? Lied anywhere on the application for loan forgiveness? No? Then I say there's no moral dilemma here.

Does the law specifically say "Only those who are unable to work, or are otherwise unable to earn enough to repay the loan in full may take advantage of this program."? If it does...ok, I change my answer. You're taking advantage of the program. But if it merely looks at income, and you truthfully declare all income...I still see no issue.

Even programs like school lunches, food stamps, etc; do you fit their criteria? If yes, then no problem. If not, then don't lie and try to get it anyways. The only time morals would (should?) come into it, is if you're going to an actual charity, i.e. a food bank. The government is not a charity. Neither are banks, or most other large corporations (even some charities aren't actually charities, but that's another discussion).

That seems to sum up my take on the ethics in this situation. I am very careful to disclose everything they ask for, and clarify where there are unknowns.  I did that with the free/reduced school lunch program and determined by their strict (and new to me) criteria, we didn't qualify.  I could easily have filled out the forms without calling the program administrator to verify requirements.  I would have saved $576 each year on the kids' lunches. 

If my perjury was ever discovered, I could plead ignorance to the intricacies of their program.  It is highly unlikely we would ever have been pursued for fraud or for recovery of the wrongfully obtained benefits.  That is irrelevant to my decision making process.  It is fraud in my eyes regardless of the chance of being caught (unless the violations are so widespread and egregious, and known to authorities, and in spite of the knowledge not enforced). 

Many of these government programs and handouts aren't for the "poor"; they extend well into the middle class.  Maybe that is a confusion for some here? 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: DebtDerp on October 10, 2013, 09:56:04 PM
Many of these government programs and handouts aren't for the "poor"; they extend well into the middle class.  Maybe that is a confusion for some here?

I think I may be able to explain it to you. The problem some people have with your situation is that you are using the system to gain something (loan forgiveness) without offering something in return and without an actual need for the thing you are gaining. To many, and I would argue most, that is simply un-American. Our culture is one of self-reliance. There are many in this country that would be embarrassed if they had to rely on a Government subsidy let alone seek one out.

I speak from experience. In college, somehow, I qualified for food stamps. I never even considered applying for the program. In my view if I wasn’t able to feed myself then I was a failure. To you I was foolish to not use the system to my advantage. To others I was being responsible.

I still remember how defeated I felt when one month my junior year I had to ask my dad for $200 to make rent and I couldn’t pay him back for two weeks. I still stress constantly about the money I owe my parents for the portion of my tuition they paid when, in the credit crunch, no one would lend to me. Some of us just have it wired into us that we never want rely on the charity of others or a hand-out from the government.

Now don’t get me wrong, I support the program, but only for those that actually need it. Nobody can make the argument that ibr was meant for a person with over a million dollars in assets.

So hopefully that gives you an idea where others are coming from. It goes back to the deeply embedded American ideals of self-reliance and fierce independence.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: NumberJohnny5 on October 10, 2013, 10:34:54 PM
I speak from experience. In college, somehow, I qualified for food stamps. I never even considered applying for the program. In my view if I wasn’t able to feed myself then I was a failure. To you I was foolish to not use the system to my advantage. To others I was being responsible.

I remember my dad having financial problems around the time I was in High School. He'd say that he (or rather, us kids) could qualify for free school lunches (and maybe food stamps too, I dunno), but it was a source of pride that it was never "bad enough" that he had to stoop to that. I could never reconcile that...he's struggling, we're suffering ("suffering" is a relative term, I'd say we suffered more from the stress of the financial situation, we still had food/clothing/shelter); why wouldn't he want to avail of a program that was surely meant for people in our situation? And of course, he'd talk poorly about those who were better off than us and who had food stamps. Couldn't figure out if it was jealousy, or if it was so ingrained that anyone who took advantage of such a program must be immoral somehow (and I dared not ask what he felt of his parents getting food from the government).

And now I'm asking myself...why do we still feel this way? Is it simply an easy way to keep these programs in check (our lawmakers can either figure out exactly how to close every single loophole, ensuring that only those that truly need the program can take advantage of it...or just let society handle it by shaming those who take advantage of the program but didn't really "need" it)? Or perhaps the government would just love that everyone who qualifies for these programs to take advantage of them, making us more dependent on the government, and more willing to give up certain freedoms in exchange for being so well cared for.

Me...I'm a gonna take advantage of any program I can. And I'll try to not be afraid to let everyone know. If I "abuse" a program and it makes people angry, then they can write their representative, vote new people in who'll close the loophole(s), etc. So...am I being immoral for taking advantage of such programs, or super-moral for bringing these issues to light and giving them the chance to change the law (to stop all those people who were doing the same as me, but keeping a low profile).

I'll give a quick example. We weren't in the US at all last year. Not even for a second. We're still required to file taxes, so be it. Turns out, that we still qualify for the child tax credit of $1k per kid. The IRS gave us $2k for two kids, we never sat foot in the US, we didn't claim residency in the US, didn't pay a penny in taxes; there's really no reason they should give us the child tax credit.

Ok, chop chop, go rewrite some laws!
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: DebtDerp on October 10, 2013, 10:56:15 PM
I remember my dad having financial problems around the time I was in High School. He'd say that he (or rather, us kids) could qualify for free school lunches (and maybe food stamps too, I dunno), but it was a source of pride that it was never "bad enough" that he had to stoop to that. I could never reconcile that...he's struggling, we're suffering

Well, I can only speak for myself. I certainly was not struggling in College. I probably spent $100 each week at the bars (this was pre-MMM) and I certainly did not need help buying food.

Quote
And of course, he'd talk poorly about those who were better off than us and who had food stamps. Couldn't figure out if it was jealousy, or if it was so ingrained that anyone who took advantage of such a program must be immoral somehow (and I dared not ask what he felt of his parents getting food from the government).

Myself, I don't look down on others who use government programs whether I feel they deserve the program or not. I could never presume to know everything about a person's situation to make a complete and informed judgement. I don't think OP is a bad person for using IBR. I am merely saying that in my opinion he should not qualify for the program and even if I (me, personally) qualified I would not use it.

Quote
So...am I being immoral for taking advantage of such programs, or super-moral for bringing these issues to light and giving them the chance to change the law (to stop all those people who were doing the same as me, but keeping a low profile).

I have a hard time passing judgement on another persona and saying they are right or wrong for using a program (see above). I think all I can really say is that in a similar situation for me it would be wrong to use the program.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: TS on October 11, 2013, 04:20:49 AM
I am OK with you not repaying your loans because legally you are able to avoid doing so (especially as I'm not American, so I don't have to pay for them through my taxes).

But you asked whether your actions are ethical.  To answer that, I start from the position that a society wants to encourage ethical behaviour and discourage unethical behaviour.  So in your case, you can afford to repay your loans (either by working longer, or based on what you've posted in other threads, out of your existing assets which greatly exceed your loans).  Not repaying your loans mean that the cost is borne by taxpayers generally.  I'd suggest that most societies would encourage those who can afford to repay their loans to do so, and would want to discourage those who can afford to repay their loans from contriving their circumstances to avoid doing so.  That would suggest your behaviour is unethical. 

So the rules favour you now.  But the risk you take is that, sometime between now and when your loans are written off, the government decides that the risk posed by those taking advantage of the system is so great that they change the rules to stop this type of behaviour.  For your sake I hope they don't - although for the sake of the tens of millions of taxpayers who will instead bear the burden of your written off loans I hope they do!
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 11, 2013, 08:01:25 AM
So the rules favour you now.  But the risk you take is that, sometime between now and when your loans are written off, the government decides that the risk posed by those taking advantage of the system is so great that they change the rules to stop this type of behaviour.  For your sake I hope they don't - although for the sake of the tens of millions of taxpayers who will instead bear the burden of your written off loans I hope they do!

Even though it would harm me greatly financially, I would be 100% okay with the closure of this loophole or the complete elimination of the IBR program.  After all, as many here have said, when you borrow money, you should expect to pay it back. 

This commented is not in response to your comment specifically: I don't want to pay taxes to support handouts in general, and specifically not to mostly middle class and possibly upper class college or grad school graduates.  The same arguments being put forward that say "OP has the means to repay, whether that is deplete his assets, or work more" could be made for anyone* under the IBR.  What is to keep the starving artist** from getting a "real" job or two to pay the bills?  I couldn't care less whether the artist produces his art or works 80 hours per week flipping burgers (and then produces art), as long as he is repaying his own debt.

Same argument for writers**.  Great, you earned an MFA in Literature from an Ivy League and now you struggle to make $20,000/yr freelancing.  I refuse to work more hours to repay your student loan debt.  Learn a skill and work 80 hours per week if that is what it takes to repay your debt. 

I have never seen a single example of someone who couldn't make sacrifices and work in a different profession, or work harder, longer, and forever if necessary to repay their student loan debts.  To say "OP, you only have to work 3 years longer, but the starving artist or writer might have to work until they are 80!!" means nothing.  In that case, it is a difference of degree, and not a difference of kind. 

Pursuing your passion is great, but don't ask me, the taxpayer, to work at something I'm not passionate about so you can pursue your passions.  I'm not interested in that arrangement at all. 

Since I don't have enough money to actually buy my congressmen (I may have a large portfolio, but not that large), I have to resort to the best means of protest available.  My own form of non-violent civil disobedience - mocking the system of doling out others' cash to those that aren't in really need. 


*I'll except the terminally ill or seriously disabled from this category
** I'm just being an ass to artists and writers because I actually love them and appreciate the aesthetics they create to enliven our otherwise drab world.  However, the stereotypes of artists and writers make easy whipping boys.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Mr.Macinstache on October 11, 2013, 09:30:12 AM
Since I don't have enough money to actually buy my congressmen (I may have a large portfolio, but not that large), I have to resort to the best means of protest available.  My own form of non-violent civil disobedience - mocking the system of doling out others' cash to those that aren't in really need. 

So let me get this straight, you are protesting the system that yourself have taken advantage of and engaging in? So you don't have an ethical dilemma at all now? Why did it take so long for you to admit this?

I'm calling BS. I don't really buy it all.. on one hand you're bragging about exploiting these loopholes. Now your protesting it.

All I'm hearing are excuses trying justify some sort of legal theft and blaming everyone (like Congress) but yourself. This is why so many people are against a welfare system, because people like you take advantage of it. It screws it up for the people who actually need it.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: DebtDerp on October 11, 2013, 10:14:16 AM
The same arguments being put forward that say "OP has the means to repay, whether that is deplete his assets, or work more" could be made for anyone* under the IBR.  What is to keep the starving artist** from getting a "real" job or two to pay the bills?  I couldn't care less whether the artist produces his art or works 80 hours per week flipping burgers (and then produces art), as long as he is repaying his own debt.

Same argument for writers**.  Great, you earned an MFA in Literature from an Ivy League and now you struggle to make $20,000/yr freelancing.  I refuse to work more hours to repay your student loan debt.  Learn a skill and work 80 hours per week if that is what it takes to repay your debt. 

I have never seen a single example of someone who couldn't make sacrifices and work in a different profession, or work harder, longer, and forever if necessary to repay their student loan debts.  To say "OP, you only have to work 3 years longer, but the starving artist or writer might have to work until they are 80!!" means nothing.  In that case, it is a difference of degree, and not a difference of kind.

This is actually a really good point. Is someone more deserving of loan forgiveness if they knowingly took out huge loans without ever having the expectation of paying them back? Perhaps the larger question we should be asking is why don’t we offer a standard level of higher education to any individual that graduates high school at no cost to the individual (I know some states do this). Then those that seek better schools, more expensive programs, and additional education will have to pay for that through loans, scholarships, a job, etc. Then, maybe, we could do away with ibr altogether.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 11, 2013, 10:37:40 AM
Since I don't have enough money to actually buy my congressmen (I may have a large portfolio, but not that large), I have to resort to the best means of protest available.  My own form of non-violent civil disobedience - mocking the system of doling out others' cash to those that aren't in really need. 

So let me get this straight, you are protesting the system that yourself have taken advantage of and engaging in? So you don't have an ethical dilemma at all now? Why did it take so long for you to admit this?

I'm calling BS. I don't really buy it all.. on one hand you're bragging about exploiting these loopholes. Now your protesting it.

All I'm hearing are excuses trying justify some sort of legal theft and blaming everyone (like Congress) but yourself. This is why so many people are against a welfare system, because people like you take advantage of it. It screws it up for the people who actually need it.

Where is this need of which you speak?  How do we define "need"?  Congress has defined "need", and if we accept their definition, I am in need.  I'm okay availing myself of the freely given benefits, while concurrently disagreeing with the system that provides those benefits. 

I disagree with most "tax expenditures" (the costs of providing tax credits and deductions):
Here is a good illustration of our tax expenditures: http://www.economist.com/node/21553473

We spend $87 billion per year on the mortgage interest tax deduction.  Do we really need to subsidize the overconsumption of McMansions?  It wastes resources, hurts the environment, and doesn't even help those most in need (renters and lower income homebuyers with smaller mortgages who can't itemize on their 1040).  I would expect that everyone on this forum that disagrees with my usage of the IBR repayment plan would also opt out of the mortgage interest deduction on ethical grounds.  After all, you don't need the deduction.  Sell your house and move to a cheaper house if you can't afford your mortgage.  As a taxpayer, I'm not interested in subsidizing your lifestyle. 

Cap gains and dividends - $97 billion/yr.  Why is there any difference in this income versus earned income that is taxed at a hugely higher rate (including payroll taxes).  Again, on ethical grounds, you don't need the lower tax rate, so treat this income as earned income and pay the higher rate. 

Tax free employer provided health insurance - $197 billion/yr - Oh, don't feel like paying taxes on this employer provided benefit?  Too bad, you don't need the deduction, so add that amount to your earned income. 

On a different note, if you are FI, don't file for social security when the time comes.  If you don't need it, why should you bankrupt the system that is designed to provide a social safety net for those in need of support in old age. 

Getting into the question of "need" is a very tricky proposition.  When it comes to paying taxes or receiving benefits from the government, I focus on what the laws and regulations say.  I say that is ethical.  If everyone acted in this manner and it was detrimental, we, the people can change the laws (through our representatives).  I say that satisfies Kant's categorical imperative and the utilitarian notion of greatest good for all. 

Our system of laws outlines the social contract between the people and the government we have created.  If there are problems with the laws, don't blame the people for availing themselves of the existing laws.  Seek redress of your grievances with the broken system of laws. 

To touch on your comment about bragging about my reduced payments and potential forgiveness of debt, I wouldn't characterize it as bragging.  I mentioned it because it is an important government program that many here may benefit from.  If you consider it unethical to participate in the program, that is your choice, but some may be interested in learning more about it (whether they seek eventual forgiveness of debt or simply assistance with cash flow during periods of low income). 

Oddly enough, the government actually spends significant money promoting social programs like the IBR, so I am doing them a free service by promoting their various programs.  Think of what a GS-11 or GS-13 social media marketing exec would cost. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Undecided on October 11, 2013, 11:31:28 AM

I disagree with most "tax expenditures" (the costs of providing tax credits and deductions):
Here is a good illustration of our tax expenditures: http://www.economist.com/node/21553473

(emphasis added)

That's just not how I see the programs you discuss. They're not independent costs, or expenditures---they're considerations that impact on what the gross tax rates are. If the government and its people are happy collecting $X tax revenue, how they decide to get there (flat rate with no exclusions, progressive rates with no exclusions, either variant with exclusions or either variant with even more exclusions) doesn't magically turn the amounts that aren't collected into "tax expenditures" unless you think that the government is entitled to literally every dollar in the first place, and only graciously allows us to keep some of them. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Mr.Macinstache on October 11, 2013, 11:51:19 AM
Need: someone who cannot pay or does not have the ability to pay.

RoG, I think I understand where you are coming from. You have objections to some things that you are forced to pay for in the form of taxes, yes? And IBR is your means of getting that back in some form?

I would disagree that, that is any form of civil disobedience. Civil disobedience is fought on moral or ethical grounds and sometime involves paying a price (Rosa Parks). Saying that just because it's legal ≠ moral or ethical. What you are doing is just exasperating the problem you're trying to protest against solely for your own good.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: NumberJohnny5 on October 11, 2013, 02:54:47 PM
We spend $87 billion per year on the mortgage interest tax deduction.  Do we really need to subsidize the overconsumption of McMansions?  It wastes resources, hurts the environment, and doesn't even help those most in need (renters and lower income homebuyers with smaller mortgages who can't itemize on their 1040).  I would expect that everyone on this forum that disagrees with my usage of the IBR repayment plan would also opt out of the mortgage interest deduction on ethical grounds.  After all, you don't need the deduction.  Sell your house and move to a cheaper house if you can't afford your mortgage.  As a taxpayer, I'm not interested in subsidizing your lifestyle.

Awesome point. If you're like me, you view tax deductions/credits in the same light as any other government program that benefits you financially (food stamps, student loan forgiveness, "free" medical care). But I believe many (most?) don't view them in the same light.

Getting into the question of "need" is a very tricky proposition.  When it comes to paying taxes or receiving benefits from the government, I focus on what the laws and regulations say.  I say that is ethical.  If everyone acted in this manner and it was detrimental, we, the people can change the laws (through our representatives).  I say that satisfies Kant's categorical imperative and the utilitarian notion of greatest good for all.

I treat the laws the way they're written. If they said "This program is for those who cannot pay their bills" then I'd have to decide if I can, or cannot, pay my bills. But if it says "This program is for those with an AGI under X, and assets less than Y" then that's a no-brainer; either my AGI and assets are under the amounts and I qualify, or they're not and I don't.

Our system of laws outlines the social contract between the people and the government we have created.  If there are problems with the laws, don't blame the people for availing themselves of the existing laws.  Seek redress of your grievances with the broken system of laws. 

My sentiments exactly. If you don't like it when people play a game by the rules, change the rules.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 11, 2013, 09:00:45 PM
Awesome point. If you're like me, you view tax deductions/credits in the same light as any other government program that benefits you financially (food stamps, student loan forgiveness, "free" medical care). But I believe many (most?) don't view them in the same light.

It's all one big pot of money.  It seems an arbitrary distinction between taking advantage of tax credits and deductions one doesn't need (as "need" is defined a few posts prior) and taking advantage of a repayment program that one doesn't need (again, per the "need" definition above). 

I guess I could contort the picture of my finances and say "I'm in need".  I don't work because my job ended unexpectedly.  I have 3 kids and I take care of them as their primary caregiver.  My wife's take home pay doesn't quite cover our expenses.  I would have to sell off my retirement assets or a car or get a 2nd mortgage on the house to keep paying my student loans.  Getting a job is tricky because I have all these kids and the job market is tough.  I'm super stressed out, so I think I'm going to take up boating to get my mind off things.  Boats ain't cheap and boat fuel ain't cheap either.  And I need a new truck to tow the boat.  Wow, I'm outta cash!  Oh woe is me, I'm in need now.  :) 

Does that make it ethical for me to participate in the IBR program, since I'm "genuinely" in need now (due to super spendy dumb choices)? 

Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 11, 2013, 09:06:32 PM
Awesome point. If you're like me, you view tax deductions/credits in the same light as any other government program that benefits you financially (food stamps, student loan forgiveness, "free" medical care). But I believe many (most?) don't view them in the same light.

It's all one big pot of money.  It seems an arbitrary distinction between taking advantage of tax credits and deductions one doesn't need (as "need" is defined a few posts prior) and taking advantage of a repayment program that one doesn't need (again, per the "need" definition above). 

I guess I could contort the picture of my finances and say "I'm in need".  I don't work because my job ended unexpectedly.  I have 3 kids and I take care of them as their primary caregiver.  My wife's take home pay doesn't quite cover our expenses.  I would have to sell off my retirement assets or a car or get a 2nd mortgage on the house to keep paying my student loans.  Getting a job is tricky because I have all these kids and the job market is tough.  I'm super stressed out, so I think I'm going to take up boating to get my mind off things.  Boats ain't cheap and boat fuel ain't cheap either.  And I need a new truck to tow the boat.  Wow, I'm outta cash!  Oh woe is me, I'm in need now.  :) 

Does that make it ethical for me to participate in the IBR program, since I'm "genuinely" in need now (due to super spendy dumb choices)?

The difference I see is that the law authorizing IBR authorized it for those specifically experiencing financial hardship (20 USC 1098E).   No such specification exists for the mortgage interest deduction (26 USC 163).
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: liquidbanana on October 12, 2013, 03:34:58 AM
Y'all realize that the Department of Education will make more profits than Exxon Mobile this year, right? I would paste a link, but I'm a luddite on a tablet, so I have no idea how, but you cwn google it. :-)

Just saying.

Anyway, I wouldn't try what the Op is doing as you cannot trust Congress. That debt is just going to get bigger and bigger, and there is no true gaurantee that it will be forgiven.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: dragoncar on October 13, 2013, 07:46:12 PM
Awesome point. If you're like me, you view tax deductions/credits in the same light as any other government program that benefits you financially (food stamps, student loan forgiveness, "free" medical care). But I believe many (most?) don't view them in the same light.

It's all one big pot of money.  It seems an arbitrary distinction between taking advantage of tax credits and deductions one doesn't need (as "need" is defined a few posts prior) and taking advantage of a repayment program that one doesn't need (again, per the "need" definition above). 

I guess I could contort the picture of my finances and say "I'm in need".  I don't work because my job ended unexpectedly.  I have 3 kids and I take care of them as their primary caregiver.  My wife's take home pay doesn't quite cover our expenses.  I would have to sell off my retirement assets or a car or get a 2nd mortgage on the house to keep paying my student loans.  Getting a job is tricky because I have all these kids and the job market is tough.  I'm super stressed out, so I think I'm going to take up boating to get my mind off things.  Boats ain't cheap and boat fuel ain't cheap either.  And I need a new truck to tow the boat.  Wow, I'm outta cash!  Oh woe is me, I'm in need now.  :) 

Does that make it ethical for me to participate in the IBR program, since I'm "genuinely" in need now (due to super spendy dumb choices)?

The difference I see is that the law authorizing IBR authorized it for those specifically experiencing financial hardship (20 USC 1098E).   No such specification exists for the mortgage interest deduction (26 USC 163).

It says "partial financial hardship," which it explicitly defines, not "involuntary financial hardship."

Just because we mustachians have skills to live well on 150% of the poverty line does not mean we are not experiencing a partial financial hardship.  I'm fact, most here would characterize that level of debt on that income as a financial EMERGENCY.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 13, 2013, 07:53:36 PM
Awesome point. If you're like me, you view tax deductions/credits in the same light as any other government program that benefits you financially (food stamps, student loan forgiveness, "free" medical care). But I believe many (most?) don't view them in the same light.

It's all one big pot of money.  It seems an arbitrary distinction between taking advantage of tax credits and deductions one doesn't need (as "need" is defined a few posts prior) and taking advantage of a repayment program that one doesn't need (again, per the "need" definition above). 

I guess I could contort the picture of my finances and say "I'm in need".  I don't work because my job ended unexpectedly.  I have 3 kids and I take care of them as their primary caregiver.  My wife's take home pay doesn't quite cover our expenses.  I would have to sell off my retirement assets or a car or get a 2nd mortgage on the house to keep paying my student loans.  Getting a job is tricky because I have all these kids and the job market is tough.  I'm super stressed out, so I think I'm going to take up boating to get my mind off things.  Boats ain't cheap and boat fuel ain't cheap either.  And I need a new truck to tow the boat.  Wow, I'm outta cash!  Oh woe is me, I'm in need now.  :) 

Does that make it ethical for me to participate in the IBR program, since I'm "genuinely" in need now (due to super spendy dumb choices)?

The difference I see is that the law authorizing IBR authorized it for those specifically experiencing financial hardship (20 USC 1098E).   No such specification exists for the mortgage interest deduction (26 USC 163).

That 20 USC 1098E that you reference, is that the one where Congress specifically developed and codified a formula to define Partial Financial Hardship? 
Like this?

(3) Partial financial hardship
The term “partial financial hardship”, when used with respect to a borrower, means that for such borrower—
(A) the annual amount due on the total amount of loans made, insured, or guaranteed under part B or C (other than an excepted PLUS loan or excepted consolidation loan) to a borrower as calculated under the standard repayment plan under section 1078 (b)(9)(A)(i) or 1087e (d)(1)(A) of this title, based on a 10-year repayment period; exceeds
(B) 15 percent of the result obtained by calculating, on at least an annual basis, the amount by which—
(i) the borrower’s, and the borrower’s spouse’s (if applicable), adjusted gross income; exceeds
(ii) 150 percent of the poverty line applicable to the borrower’s family size as determined under section 9902 (2) of title 42.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 13, 2013, 08:34:38 PM
Awesome point. If you're like me, you view tax deductions/credits in the same light as any other government program that benefits you financially (food stamps, student loan forgiveness, "free" medical care). But I believe many (most?) don't view them in the same light.

It's all one big pot of money.  It seems an arbitrary distinction between taking advantage of tax credits and deductions one doesn't need (as "need" is defined a few posts prior) and taking advantage of a repayment program that one doesn't need (again, per the "need" definition above). 

I guess I could contort the picture of my finances and say "I'm in need".  I don't work because my job ended unexpectedly.  I have 3 kids and I take care of them as their primary caregiver.  My wife's take home pay doesn't quite cover our expenses.  I would have to sell off my retirement assets or a car or get a 2nd mortgage on the house to keep paying my student loans.  Getting a job is tricky because I have all these kids and the job market is tough.  I'm super stressed out, so I think I'm going to take up boating to get my mind off things.  Boats ain't cheap and boat fuel ain't cheap either.  And I need a new truck to tow the boat.  Wow, I'm outta cash!  Oh woe is me, I'm in need now.  :) 

Does that make it ethical for me to participate in the IBR program, since I'm "genuinely" in need now (due to super spendy dumb choices)?

The difference I see is that the law authorizing IBR authorized it for those specifically experiencing financial hardship (20 USC 1098E).   No such specification exists for the mortgage interest deduction (26 USC 163).

That 20 USC 1098E that you reference, is that the one where Congress specifically developed and codified a formula to define Partial Financial Hardship? 
Like this?

(3) Partial financial hardship
The term “partial financial hardship”, when used with respect to a borrower, means that for such borrower—
(A) the annual amount due on the total amount of loans made, insured, or guaranteed under part B or C (other than an excepted PLUS loan or excepted consolidation loan) to a borrower as calculated under the standard repayment plan under section 1078 (b)(9)(A)(i) or 1087e (d)(1)(A) of this title, based on a 10-year repayment period; exceeds
(B) 15 percent of the result obtained by calculating, on at least an annual basis, the amount by which—
(i) the borrower’s, and the borrower’s spouse’s (if applicable), adjusted gross income; exceeds
(ii) 150 percent of the poverty line applicable to the borrower’s family size as determined under section 9902 (2) of title 42.

Yup, that's the one!  That's the one where Congress has codified in law the difference between using IBR and "taking advantage of tax credits and deductions" like mortgage interest deduction, where there is no statement of need.  In other words, it's not arbitrary: Congress has very specifically delineated the difference.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: MrsPete on October 13, 2013, 08:40:54 PM
If you have to ask whether something is ethical, you already know in your heart of hearts that it's wrong.  You're hoping that someone will convince you otherwise. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 13, 2013, 08:42:25 PM
Yup, that's the one!  That's the one where Congress has codified in law the difference between using IBR and "taking advantage of tax credits and deductions" like mortgage interest deduction, where there is no statement of need.  In other words, it's not arbitrary: Congress has very specifically delineated the difference.

They may have screwed up in drafting the legislation, but they made it pretty clear what they meant by Partial Financial Hardship, and I am certain I fall into that category.  It seems like a strange outcome of the law, but they intentionally drafted the language in this manner. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 13, 2013, 08:45:08 PM
If you have to ask whether something is ethical, you already know in your heart of hearts that it's wrong.  You're hoping that someone will convince you otherwise.

I don't think so.  I think this is a legitimately debatable question of ethics.  The fact that there are some saying they don't consider this unethical while others disagree indicates to me this is a grey area open to interpretation.  I more or less suspected that would be the outcome. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: MrsPete on October 13, 2013, 08:48:36 PM
Are you hiding assets?
i believe the discussion is all about hiding assets.  Having a degree, a healthy body and the opportunity to work, the opportunity to earn . . . Those things ARE huge assets.  If you can afford to retire and not work, great.  Good for you.  But if one of your reasons to retire is that it allows you to wriggle your way out of a debt, it's hard to call that ethical -- even if you can get away with it legally. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 13, 2013, 08:55:56 PM
Yup, that's the one!  That's the one where Congress has codified in law the difference between using IBR and "taking advantage of tax credits and deductions" like mortgage interest deduction, where there is no statement of need.  In other words, it's not arbitrary: Congress has very specifically delineated the difference.

They may have screwed up in drafting the legislation, but they made it pretty clear what they meant by Partial Financial Hardship, and I am certain I fall into that category.  It seems like a strange outcome of the law, but they intentionally drafted the language in this manner.

I'm not sure what your response has to do with mine.  You said "it seems an arbitrary distinction between taking advantage of tax credits and deductions one doesn't need (as "need" is defined a few posts prior) and taking advantage of a repayment program that one doesn't need."  I'm saying, no, it's not arbitrary.  It's very clearly spelled out in the law.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 13, 2013, 09:04:04 PM
Are you hiding assets?
i believe the discussion is all about hiding assets.  Having a degree, a healthy body and the opportunity to work, the opportunity to earn . . . Those things ARE huge assets.  If you can afford to retire and not work, great.  Good for you.  But if one of your reasons to retire is that it allows you to wriggle your way out of a debt, it's hard to call that ethical -- even if you can get away with it legally.

We can all work until our backs are broken and fingers worn to nubs.  But must we?  How do you compel one to work? 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 13, 2013, 09:11:05 PM
Yup, that's the one!  That's the one where Congress has codified in law the difference between using IBR and "taking advantage of tax credits and deductions" like mortgage interest deduction, where there is no statement of need.  In other words, it's not arbitrary: Congress has very specifically delineated the difference.

They may have screwed up in drafting the legislation, but they made it pretty clear what they meant by Partial Financial Hardship, and I am certain I fall into that category.  It seems like a strange outcome of the law, but they intentionally drafted the language in this manner.

I'm not sure what your response has to do with mine.  You said "it seems an arbitrary distinction between taking advantage of tax credits and deductions one doesn't need (as "need" is defined a few posts prior) and taking advantage of a repayment program that one doesn't need."  I'm saying, no, it's not arbitrary.  It's very clearly spelled out in the law.

I don't follow.  I'm in need (per the 20 USC 1098E definition) and I qualify for tax credits and deductions, many of which are tied to having "low" income (which means I "need" the credit or deduction.  Low in the latter case being relative, and varying from tens of thousands of dollars in income to over $100,000. 

That's why it is an arbitrary distinction to think me ethical for taking advantage of tax deductions and credits that I don't "need" (MrsPete would put me back in the harnesses after all!) yet simultaneously think me unethical for taking advantage of a student loan repayment program that I don't "need".  The money is all coming out of the same pocket on Uncle Sam's perilously low hanging trousers. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 13, 2013, 09:13:14 PM
Are you hiding assets?
i believe the discussion is all about hiding assets.  Having a degree, a healthy body and the opportunity to work, the opportunity to earn . . . Those things ARE huge assets.  If you can afford to retire and not work, great.  Good for you.  But if one of your reasons to retire is that it allows you to wriggle your way out of a debt, it's hard to call that ethical -- even if you can get away with it legally.

We can all work until our backs are broken and fingers worn to nubs.  But must we?  How do you compel one to work?

Esoteric ethical considerations or vague disapproval, apparently.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: dragoncar on October 13, 2013, 10:37:34 PM
Yup, that's the one!  That's the one where Congress has codified in law the difference between using IBR and "taking advantage of tax credits and deductions" like mortgage interest deduction, where there is no statement of need.  In other words, it's not arbitrary: Congress has very specifically delineated the difference.

They may have screwed up in drafting the legislation, but they made it pretty clear what they meant by Partial Financial Hardship, and I am certain I fall into that category.  It seems like a strange outcome of the law, but they intentionally drafted the language in this manner.

I'm not sure what your response has to do with mine.  You said "it seems an arbitrary distinction between taking advantage of tax credits and deductions one doesn't need (as "need" is defined a few posts prior) and taking advantage of a repayment program that one doesn't need."  I'm saying, no, it's not arbitrary.  It's very clearly spelled out in the law.

I don't follow.  I'm in need (per the 20 USC 1098E definition) and I qualify for tax credits and deductions, many of which are tied to having "low" income (which means I "need" the credit or deduction.  Low in the latter case being relative, and varying from tens of thousands of dollars in income to over $100,000. 

That's why it is an arbitrary distinction to think me ethical for taking advantage of tax deductions and credits that I don't "need" (MrsPete would put me back in the harnesses after all!) yet simultaneously think me unethical for taking advantage of a student loan repayment program that I don't "need".  The money is all coming out of the same pocket on Uncle Sam's perilously low hanging trousers.

I think he's saying that if you truly believe it to be a drafting error, then it's immoral to take advantage.  I might agree, but don't believe it's a drafting error.  I think that having student loans and income (voluntary or involuntarily) below 150% of federal poverty level is indeed a hardship. 

Is it voluntary?  Well I'd say it's voluntary in all cases because nobody made the student take out student loans.  Choosing to major in underwater basketweaving and not paying your loans when you inevitably don't get a high paying job is not any better than keeping earnings low IMO.  But that's the situation the law is designed for.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: NumberJohnny5 on October 13, 2013, 11:33:18 PM
The difference I see is that the law authorizing IBR authorized it for those specifically experiencing financial hardship (20 USC 1098E).   No such specification exists for the mortgage interest deduction (26 USC 163).

Uh-oh, he's got you there. They specifically say financial hardship. Well, as long as they don't go and tell you how they define it, we'll have to use our own definition....

That 20 USC 1098E that you reference, is that the one where Congress specifically developed and codified a formula to define Partial Financial Hardship? 
Like this?

(3) Partial financial hardship
The term “partial financial hardship”, when used with respect to a borrower, means that for such borrower—
(A) the annual amount due on the total amount of loans made, insured, or guaranteed under part B or C (other than an excepted PLUS loan or excepted consolidation loan) to a borrower as calculated under the standard repayment plan under section 1078 (b)(9)(A)(i) or 1087e (d)(1)(A) of this title, based on a 10-year repayment period; exceeds
(B) 15 percent of the result obtained by calculating, on at least an annual basis, the amount by which—
(i) the borrower’s, and the borrower’s spouse’s (if applicable), adjusted gross income; exceeds
(ii) 150 percent of the poverty line applicable to the borrower’s family size as determined under section 9902 (2) of title 42.

Ooooh...they did go and define it. You may not feel that you're experiencing a financial hardship, but according to their definition, you are. Also doesn't seem to say anything about whether this financial hardship must be involuntary or not.

It truly is a shame we must go by their definitions. I mean, the law might say that all vehicles must obey the speed limit...I was hoping to use my personal definition of what a vehicle is (which, btw, is any three-winged machine which is driven by no less by ten licensed pilots, in the water). But, I have to follow "their" definition, which for some reason includes cars and trucks.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 14, 2013, 12:34:43 AM
Yup, that's the one!  That's the one where Congress has codified in law the difference between using IBR and "taking advantage of tax credits and deductions" like mortgage interest deduction, where there is no statement of need.  In other words, it's not arbitrary: Congress has very specifically delineated the difference.

They may have screwed up in drafting the legislation, but they made it pretty clear what they meant by Partial Financial Hardship, and I am certain I fall into that category.  It seems like a strange outcome of the law, but they intentionally drafted the language in this manner.

I'm not sure what your response has to do with mine.  You said "it seems an arbitrary distinction between taking advantage of tax credits and deductions one doesn't need (as "need" is defined a few posts prior) and taking advantage of a repayment program that one doesn't need."  I'm saying, no, it's not arbitrary.  It's very clearly spelled out in the law.

I don't follow.  I'm in need (per the 20 USC 1098E definition) and I qualify for tax credits and deductions, many of which are tied to having "low" income (which means I "need" the credit or deduction.  Low in the latter case being relative, and varying from tens of thousands of dollars in income to over $100,000. 

That's why it is an arbitrary distinction to think me ethical for taking advantage of tax deductions and credits that I don't "need" (MrsPete would put me back in the harnesses after all!) yet simultaneously think me unethical for taking advantage of a student loan repayment program that I don't "need".  The money is all coming out of the same pocket on Uncle Sam's perilously low hanging trousers.

MrsPete was never in the thread where I quoted you saying the difference between "taking advantage of tax credits and deductions one doesn't need (as "need" is defined a few posts prior) and taking advantage of a repayment program that one doesn't need" was arbitrary.  "Arbitrary" means randomly or by personal whim.  The difference is not arbitrary - mortgage interest deduction is not designed to ameliorate financial hardship.  Nor are capital gains tax rates or tax free employer provided health insurance, which you also mentioned.  Instead, the difference is quite clearly delineated in the law. 

And yes, you meet the definition of partial financial hardship.  That has nothing to do with anything that I've said.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 14, 2013, 12:36:58 AM
It truly is a shame we must go by their definitions. I mean, the law might say that all vehicles must obey the speed limit...I was hoping to use my personal definition of what a vehicle is (which, btw, is any three-winged machine which is driven by no less by ten licensed pilots, in the water). But, I have to follow "their" definition, which for some reason includes cars and trucks.

Maybe it's just because you quoted me, but it sounds like you're mocking me.  When have I suggested using any other definition than the one in the law (the one that I cited)?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: NumberJohnny5 on October 14, 2013, 01:23:51 AM
Maybe it's just because you quoted me, but it sounds like you're mocking me.  When have I suggested using any other definition than the one in the law (the one that I cited)?

Not my intention. Too busy to reread the entire thread, but I think it went like this:

OP says "Hey, look at what I'm doing, think it's ethical?"

Many say "NO! That's not the intent!"

Few say "I guess it's ok."

I say something like "Does the law specifically say...."

Someone points out that the legislation does in fact say something to the effect of "This is designed for people experiencing a financial hardship." Well, now all the naysayers have a point...the legislation says it's for people experiencing a financial hardship, and I think most here would says that the OP is in fact NOT experiencing a financial hardship. The definition of "financial hardship" may vary from person to person, but I'd agree that most people (including me) would not think the OP is experiencing any financial hardship.

But then someone points out that the legislation specifically defined what they meant by "financial hardship". Ah...well, it seems that using that particular black-and-white definition...yes, yes the OP is in fact experiencing a financial hardship. A self-imposed financial hardship that he doesn't really mind, but according to the definition, a financial hardship nonetheless.

I word my post to mimic my reaction to reading the above two points. "Uh-oh, they might have you OP, it says it's for people experiencing a financial hardship." And then "Oh...they define it...I disagree with their definition, but if it's the definition they want to use, so be it...carry on OP, you're in the clear." I'm sure some people will point out that they disagree with the definition, but I'm trying to preempt their arguments with "hey, their law their definition."

To me, it's pretty clear. The legislation does say it's for people experiencing a partial financial hardship. It goes on to define it. It's written in black-and-white language, so I view it in black-and-white. If you meet the criteria, then it's a program you may take advantage of. If you do not meet the criteria, then you cannot take advantage of it (though you're welcome to try to change your circumstances to qualify).

The OP qualifies for the program, so the OP may take advantage of it. If someone thinks the OP should not qualify then they should campaign to get those laws changed (repeal the entire program, change the definition of "financial hardship", put limits on how much can be discharged and/or what degrees can have loans forgiven, etc.). I don't see an ethical dilemma here (side note...anyone else notice that suddenly dilemna should be spelled dilemma?).
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 14, 2013, 01:39:59 AM
Maybe it's just because you quoted me, but it sounds like you're mocking me.  When have I suggested using any other definition than the one in the law (the one that I cited)?

Not my intention. Too busy to reread the entire thread, but I think it went like this:

OP says "Hey, look at what I'm doing, think it's ethical?"

Many say "NO! That's not the intent!"

Few say "I guess it's ok."

I say something like "Does the law specifically say...."

Someone points out that the legislation does in fact say something to the effect of "This is designed for people experiencing a financial hardship." Well, now all the naysayers have a point...the legislation says it's for people experiencing a financial hardship, and I think most here would says that the OP is in fact NOT experiencing a financial hardship. The definition of "financial hardship" may vary from person to person, but I'd agree that most people (including me) would not think the OP is experiencing any financial hardship.

But then someone points out that the legislation specifically defined what they meant by "financial hardship". Ah...well, it seems that using that particular black-and-white definition...yes, yes the OP is in fact experiencing a financial hardship. A self-imposed financial hardship that he doesn't really mind, but according to the definition, a financial hardship nonetheless.

I word my post to mimic my reaction to reading the above two points. "Uh-oh, they might have you OP, it says it's for people experiencing a financial hardship." And then "Oh...they define it...I disagree with their definition, but if it's the definition they want to use, so be it...carry on OP, you're in the clear." I'm sure some people will point out that they disagree with the definition, but I'm trying to preempt their arguments with "hey, their law their definition."

To me, it's pretty clear. The legislation does say it's for people experiencing a partial financial hardship. It goes on to define it. It's written in black-and-white language, so I view it in black-and-white. If you meet the criteria, then it's a program you may take advantage of. If you do not meet the criteria, then you cannot take advantage of it (though you're welcome to try to change your circumstances to qualify).

The OP qualifies for the program, so the OP may take advantage of it. If someone thinks the OP should not qualify then they should campaign to get those laws changed (repeal the entire program, change the definition of "financial hardship", put limits on how much can be discharged and/or what degrees can have loans forgiven, etc.). I don't see an ethical dilemma here (side note...anyone else notice that suddenly dilemna should be spelled dilemma?).

Ah, I see.  It just seemed strange to me since I'm the one who quoted the law (for a different purpose), and seemed like you were piling on by quoting RootofGood's response to me. It's all good now - thanks for the details.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Nords on October 14, 2013, 07:42:55 AM
To me, it's pretty clear. The legislation does say it's for people experiencing a partial financial hardship. It goes on to define it. It's written in black-and-white language, so I view it in black-and-white. If you meet the criteria, then it's a program you may take advantage of. If you do not meet the criteria, then you cannot take advantage of it (though you're welcome to try to change your circumstances to qualify).

The OP qualifies for the program, so the OP may take advantage of it. If someone thinks the OP should not qualify then they should campaign to get those laws changed (repeal the entire program, change the definition of "financial hardship", put limits on how much can be discharged and/or what degrees can have loans forgiven, etc.).
Finally.  Thank goodness.

Now we can get back to work on the precise definition of "retirement" and whether the mortgage is paid off first...

I don't see an ethical dilemma here (side note...anyone else notice that suddenly dilemna should be spelled dilemma?).
It always has been, but it's frequently confused with similar words.  Luckily Grammar Girl is all over it:
http://www.quickanddirtytips.com/education/grammar/it-dilemma-or-dilemna
http://www.dilemna.info/index.php
http://www.worldwidewords.org/qa/qa-dil1.htm
Quote
The reason for it seems to be a mental confusion with other words in English that are spelled with mn but said as mm, including autumn, hymn, condemn, solemn and column.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: MrsPete on October 14, 2013, 10:08:41 AM
Are you hiding assets?
i believe the discussion is all about hiding assets.  Having a degree, a healthy body and the opportunity to work, the opportunity to earn . . . Those things ARE huge assets.  If you can afford to retire and not work, great.  Good for you.  But if one of your reasons to retire is that it allows you to wriggle your way out of a debt, it's hard to call that ethical -- even if you can get away with it legally.

We can all work until our backs are broken and fingers worn to nubs.  But must we?  How do you compel one to work?
Is your back broken?  Are your fingers worn to nubs?  Are you physically able to work without undue physical stress?  If so, then you're extending the argument to a ridiculous point. 

If you owe money and cannot pay it without bringing in a paycheck, you're not at the point you should stop working voluntarily. 


Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: dragoncar on October 14, 2013, 06:24:42 PM
It's always been "dilemma"
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 15, 2013, 01:14:22 PM
Is your back broken?  Are your fingers worn to nubs?  Are you physically able to work without undue physical stress?  If so, then you're extending the argument to a ridiculous point. 

If you owe money and cannot pay it without bringing in a paycheck, you're not at the point you should stop working voluntarily.

My fingers are somewhat nub-like, but they have always been this way.

As for my back, I do stretching exercises and calisthenics, but I have been treated for severe back pain in the past.  Probably caused by sitting in my cubicle for extended periods of time.  The back is fine right now though, thanks for asking!

While working, I suffered from a moderate case of stress related hypertension.  That miraculously went away within a few days of when I quit working.  The htn wasn't to the point of making me at extreme risk of stroke, but there was an "elevated risk".  The job also involved workplace exposures that could lead to serious injury or death, although I was the one usually in charge of ensuring safe working conditions. 

Does it make any difference what my job was?  Some would say my job was unethical.  And at least one Federal Court of Appeals agreed. 

What if I was a lobbyist for the Baby Seal Clubbers of America, Inc. or the Mountaintoppers Coal Stripminers Association?  What if I was a waste disposal engineer in charge of calculating the exact flow rate of toxic sludge our company could discharge into the pristine waters of a river near you? 

Just sayin', with my unfettered powers of destruction, you might be best served having me at home slinging words on the computer screen instead of stacks of bens to hardworking members of Congress or right-sized toxic sludge into the inland waters of America. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Mr.Macinstache on October 15, 2013, 02:06:24 PM
You are still paying your taxes, correct?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Nords on October 15, 2013, 02:08:33 PM
You are still paying your taxes, correct?
The ultimate and perpetual income-based repayment plan...
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Mr.Macinstache on October 15, 2013, 02:19:27 PM
What are the ethical dimensions of GE paying no tax? GE has an extreme case of Mustachian badassity I suppose.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 15, 2013, 02:23:27 PM
Is your back broken?  Are your fingers worn to nubs?  Are you physically able to work without undue physical stress?  If so, then you're extending the argument to a ridiculous point. 

If you owe money and cannot pay it without bringing in a paycheck, you're not at the point you should stop working voluntarily.

My fingers are somewhat nub-like, but they have always been this way.

As for my back, I do stretching exercises and calisthenics, but I have been treated for severe back pain in the past.  Probably caused by sitting in my cubicle for extended periods of time.  The back is fine right now though, thanks for asking!

While working, I suffered from a moderate case of stress related hypertension.  That miraculously went away within a few days of when I quit working.  The htn wasn't to the point of making me at extreme risk of stroke, but there was an "elevated risk".  The job also involved workplace exposures that could lead to serious injury or death, although I was the one usually in charge of ensuring safe working conditions. 

Does it make any difference what my job was?  Some would say my job was unethical.  And at least one Federal Court of Appeals agreed. 

What if I was a lobbyist for the Baby Seal Clubbers of America, Inc. or the Mountaintoppers Coal Stripminers Association?  What if I was a waste disposal engineer in charge of calculating the exact flow rate of toxic sludge our company could discharge into the pristine waters of a river near you? 

Just sayin', with my unfettered powers of destruction, you might be best served having me at home slinging words on the computer screen instead of stacks of bens to hardworking members of Congress or right-sized toxic sludge into the inland waters of America.

I think someone may simply be jealous of you.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: dragoncar on October 15, 2013, 03:04:09 PM
You are still paying your taxes, correct?
The ultimate and perpetual income-based repayment plan...

Quote of the day
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Mr.Macinstache on October 15, 2013, 03:17:43 PM
You are still paying your taxes, correct?
The ultimate and perpetual income-based repayment plan...

Quote of the day

He is still paying the overlords, albeit to a lesser degree.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 15, 2013, 07:58:23 PM
You are still paying your taxes, correct?

If the comment was directed at me, then yes, we pay our federal taxes.  What little we owe.  State taxes are usually much higher for us. 

Yes, Nords, the perpetual income based repayment plan! 

 

Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: MrsPete on October 16, 2013, 05:42:21 AM
Is your back broken?  Are your fingers worn to nubs?  Are you physically able to work without undue physical stress?  If so, then you're extending the argument to a ridiculous point. 

If you owe money and cannot pay it without bringing in a paycheck, you're not at the point you should stop working voluntarily.

My fingers are somewhat nub-like, but they have always been this way.

As for my back, I do stretching exercises and calisthenics, but I have been treated for severe back pain in the past.  Probably caused by sitting in my cubicle for extended periods of time.  The back is fine right now though, thanks for asking!

While working, I suffered from a moderate case of stress related hypertension.  That miraculously went away within a few days of when I quit working.  The htn wasn't to the point of making me at extreme risk of stroke, but there was an "elevated risk".  The job also involved workplace exposures that could lead to serious injury or death, although I was the one usually in charge of ensuring safe working conditions. 

Does it make any difference what my job was?  Some would say my job was unethical.  And at least one Federal Court of Appeals agreed. 

What if I was a lobbyist for the Baby Seal Clubbers of America, Inc. or the Mountaintoppers Coal Stripminers Association?  What if I was a waste disposal engineer in charge of calculating the exact flow rate of toxic sludge our company could discharge into the pristine waters of a river near you? 

Just sayin', with my unfettered powers of destruction, you might be best served having me at home slinging words on the computer screen instead of stacks of bens to hardworking members of Congress or right-sized toxic sludge into the inland waters of America.
An "elevated risk" is enough reason to walk away from your obligations?  Would you take an unethical job?  Why?  Sorry for your nub-like fingers, but I'm not buying that you're unable to work. 
Is your back broken?  Are your fingers worn to nubs?  Are you physically able to work without undue physical stress?  If so, then you're extending the argument to a ridiculous point. 

If you owe money and cannot pay it without bringing in a paycheck, you're not at the point you should stop working voluntarily.

My fingers are somewhat nub-like, but they have always been this way.

As for my back, I do stretching exercises and calisthenics, but I have been treated for severe back pain in the past.  Probably caused by sitting in my cubicle for extended periods of time.  The back is fine right now though, thanks for asking!

While working, I suffered from a moderate case of stress related hypertension.  That miraculously went away within a few days of when I quit working.  The htn wasn't to the point of making me at extreme risk of stroke, but there was an "elevated risk".  The job also involved workplace exposures that could lead to serious injury or death, although I was the one usually in charge of ensuring safe working conditions. 

Does it make any difference what my job was?  Some would say my job was unethical.  And at least one Federal Court of Appeals agreed. 

What if I was a lobbyist for the Baby Seal Clubbers of America, Inc. or the Mountaintoppers Coal Stripminers Association?  What if I was a waste disposal engineer in charge of calculating the exact flow rate of toxic sludge our company could discharge into the pristine waters of a river near you? 

Just sayin', with my unfettered powers of destruction, you might be best served having me at home slinging words on the computer screen instead of stacks of bens to hardworking members of Congress or right-sized toxic sludge into the inland waters of America.

I think someone may simply be jealous of you.
Darling, if you knew me, you'd know that jealousy is not part of my life.  Today I am more than I ever expected I could be, and I'm happy with who I am.

Now, if you want to say that I'm a bit contemptuous of people who take on obligations and walk away from them, yes, I'll plead guilty to that.  If you want to say I'm judgemental of people who don't pay their debts, yeah, that's true.  If you want to say that I'm distainful of people who make promises and don't live up to them, I'll agree. 

But then, this board is more about "get mine" than moral fiber.  I'm not sorry not to fit into that mold.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 16, 2013, 07:06:47 AM
An "elevated risk" is enough reason to walk away from your obligations?  Would you take an unethical job?  Why?  Sorry for your nub-like fingers, but I'm not buying that you're unable to work. 

I'm not saying I am totally unable to work.  There are detriments to working (including health impacts), and the cost of working exceeded the benefits of working under the current constraints. 


Darling, if you knew me, you'd know that jealousy is not part of my life.  Today I am more than I ever expected I could be, and I'm happy with who I am.

Now, if you want to say that I'm a bit contemptuous of people who take on obligations and walk away from them, yes, I'll plead guilty to that.  If you want to say I'm judgemental of people who don't pay their debts, yeah, that's true.  If you want to say that I'm distainful of people who make promises and don't live up to them, I'll agree. 

But then, this board is more about "get mine" than moral fiber.  I'm not sorry not to fit into that mold.

You sound pretty jealous to me too. 

Hey, if you want to get a BS in Engineering, a BA in Spanish Literature, and a Juris Doctor from a top 25 law school (if you can get in), and an incomplete MS in Engineering, and get a chance at partially free money after 25 years of making partial or full payments, I can email you an application to any of my alma maters. 

The offer is on the table.  Why don't you work harder to fund the Federal Treasury, as you so strongly urge others to do.  Surely you could give just a little bit more effort?  I bet dual degrees in engineering and law would help your earnings potential.  Or you can't?  Or don't want to?  Why?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: MrsPete on October 16, 2013, 07:54:23 AM
An "elevated risk" is enough reason to walk away from your obligations?  Would you take an unethical job?  Why?  Sorry for your nub-like fingers, but I'm not buying that you're unable to work. 

I'm not saying I am totally unable to work.  There are detriments to working (including health impacts), and the cost of working exceeded the benefits of working under the current constraints. 


Darling, if you knew me, you'd know that jealousy is not part of my life.  Today I am more than I ever expected I could be, and I'm happy with who I am.

Now, if you want to say that I'm a bit contemptuous of people who take on obligations and walk away from them, yes, I'll plead guilty to that.  If you want to say I'm judgemental of people who don't pay their debts, yeah, that's true.  If you want to say that I'm distainful of people who make promises and don't live up to them, I'll agree. 

But then, this board is more about "get mine" than moral fiber.  I'm not sorry not to fit into that mold.

You sound pretty jealous to me too. 

Hey, if you want to get a BS in Engineering, a BA in Spanish Literature, and a Juris Doctor from a top 25 law school (if you can get in), and an incomplete MS in Engineering, and get a chance at partially free money after 25 years of making partial or full payments, I can email you an application to any of my alma maters. 

The offer is on the table.  Why don't you work harder to fund the Federal Treasury, as you so strongly urge others to do.  Surely you could give just a little bit more effort?  I bet dual degrees in engineering and law would help your earnings potential.  Or you can't?  Or don't want to?  Why?
I understand that you're saying you prefer not to work, but the question is whether it's ethical -- given that you can work -- to purposefully avoid a you entered into voluntarily.  I say no. 

Why don't I go work more to fund the treasury to a larger degree?  You're missing a big point here:  I don't have any debts.  I have not promised to pay back anything.  I have no obligations.  You do, and that's a world of difference.  Having no debts, I have more freedom to choose what I do.

You're free to go right on thinking I'm jealous of you, but it'll be poor reading comprehension on your part.  I have the degrees that I want and need, and I have already reached Financial Independence, I have a great little "side job" that pays well and takes little effort on my part, and I am in the process of building my retirement house on a 40 acre chunk of land.  I'm working a couple more years at a job I like  1) To complete my pension so that I have an extra hedge against inflation -- with my genes, I will likely live to be 100, and I don't want to cut things too close financially.  2) To complete the years required to get my no-cost health insurance for life.  3) So I can put my children through college without dipping into savings.  It's important to me that they begin their professional lives debt-free.  And I have accomplished these things while paying all my bills and without behaving in any way that's morally questionable. 

Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 16, 2013, 08:05:33 AM
An "elevated risk" is enough reason to walk away from your obligations?  Would you take an unethical job?  Why?  Sorry for your nub-like fingers, but I'm not buying that you're unable to work. 

I'm not saying I am totally unable to work.  There are detriments to working (including health impacts), and the cost of working exceeded the benefits of working under the current constraints. 


Darling, if you knew me, you'd know that jealousy is not part of my life.  Today I am more than I ever expected I could be, and I'm happy with who I am.

Now, if you want to say that I'm a bit contemptuous of people who take on obligations and walk away from them, yes, I'll plead guilty to that.  If you want to say I'm judgemental of people who don't pay their debts, yeah, that's true.  If you want to say that I'm distainful of people who make promises and don't live up to them, I'll agree. 

But then, this board is more about "get mine" than moral fiber.  I'm not sorry not to fit into that mold.

You sound pretty jealous to me too. 

Hey, if you want to get a BS in Engineering, a BA in Spanish Literature, and a Juris Doctor from a top 25 law school (if you can get in), and an incomplete MS in Engineering, and get a chance at partially free money after 25 years of making partial or full payments, I can email you an application to any of my alma maters. 

The offer is on the table.  Why don't you work harder to fund the Federal Treasury, as you so strongly urge others to do.  Surely you could give just a little bit more effort?  I bet dual degrees in engineering and law would help your earnings potential.  Or you can't?  Or don't want to?  Why?
I understand that you're saying you prefer not to work, but the question is whether it's ethical -- given that you can work -- to purposefully avoid a you entered into voluntarily.  I say no. 

You're free to go right on thinking I'm jealous of you, but it'll be poor reading comprehension on your part.  I have the degrees that I want and need, and I have already reached Financial Independence, I have a great little "side job" that pays well and takes little effort on my part, and I am in the process of building my retirement house on a 40 acre chunk of land.  I'm working a couple more years at a job I like  1) To complete my pension so that I have an extra hedge against inflation -- with my genes, I will likely live to be 100, and I don't want to cut things too close financially.  2) To complete the years required to get my no-cost health insurance for life.  3) So I can put my children through college without dipping into savings.  It's important to me that they begin their professional lives debt-free.  And I have accomplished these things while paying all my bills and without behaving in any way that's morally questionable.

Just out of curiosity, what is your view of the strategic defaulters in the housing crash and why?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 16, 2013, 09:33:24 AM
You're free to go right on thinking I'm jealous of you, but it'll be poor reading comprehension on your part.  I have the degrees that I want and need, and I have already reached Financial Independence, I have a great little "side job" that pays well and takes little effort on my part, and I am in the process of building my retirement house on a 40 acre chunk of land.  I'm working a couple more years at a job I like  1) To complete my pension so that I have an extra hedge against inflation -- with my genes, I will likely live to be 100, and I don't want to cut things too close financially.  2) To complete the years required to get my no-cost health insurance for life.  3) So I can put my children through college without dipping into savings.  It's important to me that they begin their professional lives debt-free.  And I have accomplished these things while paying all my bills and without behaving in any way that's morally questionable.

Sounds like you are working longer than you need to.  What's your thought on depriving someone else of a job that they could use?  Ethical?  How about milking a pension and retiree healthcare system that you don't really need (you're FI, right?)? 

 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Tyler on October 16, 2013, 09:50:17 AM
Personally, I think all the talk about the ethics of IBR plans is distracting from the bigger issue -- why is college so damn expensive to begin with?  And how is it that colleges can charge so much for an education in a field that they know will never grant a high enough salary to justify the expense?

What if, instead of taxpayers bailing out schools when their graduates can't pay their student loans, the schools were on the hook for the lost money?  I suspect that would solve the problem pretty quickly.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: MrsPete on October 16, 2013, 11:46:40 AM
You're free to go right on thinking I'm jealous of you, but it'll be poor reading comprehension on your part.  I have the degrees that I want and need, and I have already reached Financial Independence, I have a great little "side job" that pays well and takes little effort on my part, and I am in the process of building my retirement house on a 40 acre chunk of land.  I'm working a couple more years at a job I like  1) To complete my pension so that I have an extra hedge against inflation -- with my genes, I will likely live to be 100, and I don't want to cut things too close financially.  2) To complete the years required to get my no-cost health insurance for life.  3) So I can put my children through college without dipping into savings.  It's important to me that they begin their professional lives debt-free.  And I have accomplished these things while paying all my bills and without behaving in any way that's morally questionable.

Sounds like you are working longer than you need to.  What's your thought on depriving someone else of a job that they could use?  Ethical?  How about milking a pension and retiree healthcare system that you don't really need (you're FI, right?)? 

 
Some people choose to stop working the very minute they have enough to cover their anticipated expenses.  I've chosen to work a little longer so that I'll know my kids are through college and so I'll have a good cushion via the pension.  I'm not "milking" any system -- these are benefits for which I've worked, benefits I've earned.  I've had a payroll deduction every month that pays for my pension.  Will I need the health care?  Absolutely!  "Milking a system" means you're taking advantage of a loophole.  I have no intention of doing that. 

No one's standing in line for my job, and I'm mentoring younger teachers as they enter the profession.  MOD EDIT: Personal attack removed.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Hamster on October 18, 2013, 02:48:24 AM
Quote
One thing I am very confident about is my ability to spend and manage money more efficiently than 535 individuals in Washington D.C.
But it's not those 535 individuals who will be paying back your loan. It's me. And all those others who paid for what they got.

I pay taxes into the general fund just like you.  I'm sure I "pay" for things for you that I don't want to.
That's a pretty difficult argument to make when you yourself state that you pay only $150 in income tax on $150k in earnings.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Nords on October 18, 2013, 04:49:27 AM
Personally, I think all the talk about the ethics of IBR plans is distracting from the bigger issue -- why is college so damn expensive to begin with?  And how is it that colleges can charge so much for an education in a field that they know will never grant a high enough salary to justify the expense?

What if, instead of taxpayers bailing out schools when their graduates can't pay their student loans, the schools were on the hook for the lost money?  I suspect that would solve the problem pretty quickly.
College is "so damn expensive" because people keep paying for it with money that they get from the federal government, and then these highly educated individuals are able to read their loan agreements and do exactly what the government requires them to do.

You're right:  college would be a lot cheaper if the schools were on the hook.  However there would be fewer graduates, too.  These smaller numbers would generate less taxable revenue, and the govt would collect fewer taxes. 

The govt is subsidizing college for its taxpayers.  The govt can change the rules and close the repayment loopholes whenever it musters the political will to do so.  Until then, it's perfectly right to repay only those parts of the loan that the govt insists on being repaid. 

It's ethical to use IBR.  It's also ethical to take tax credits for photovoltaic and solar water heating systems.  It's ethical to take any loopholes that the govt leaves you in its policies, and the govt seems to feel pretty comfortable with its citizens doing so.

However anyone who can't sleep at night after using the IBR program would be perfectly within their rights to pay off the full loan amount.  In my opinion, that would be volunteering to pay more taxes than you're required to.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Mr.Macinstache on October 18, 2013, 07:10:50 AM
Students loans are cheap and easy from the federal govt. Knowing that, of course colleges are going to charge the most they can get away with. That is what drives the cost up in any market. Cheap and easy credit.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 18, 2013, 07:24:11 AM
That's a pretty difficult argument to make when you yourself state that you pay only $150 in income tax on $150k in earnings.

I have paid much more in the past, and will likely pay much more in the future. 

That $150 is my fair share of taxes, per the tax code.  Some people "pay" negative thousands of dollars in taxes (refundable tax credits like EIC and Additional Child Tax Credits).   
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 18, 2013, 07:27:56 AM
College is "so damn expensive" because people keep paying for it with money that they get from the federal government, and then these highly educated individuals are able to read their loan agreements and do exactly what the government requires them to do.

Yeah, I don't get it.  The government gives me these loans to pay for my law school.  I take a class on personal income tax, like it, learn a lot, get an A+ in the class, then apply what I learn to my personal finances and incorporate that learning into my advice and recommendations to others.  Who coulda thunk it? 

Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: randymarsh on October 18, 2013, 07:38:34 AM
College is "so damn expensive" because people keep paying for it with money that they get from the federal government, and then these highly educated individuals are able to read their loan agreements and do exactly what the government requires them to do.

Agreed. While designed with good intentions, the student loan program has surely caused the cost of education to rise much more than it otherwise would have. Plus states have no problem cutting education while spending on prisons. https://www.aclu.org/blog/racial-justice/states-brilliant-budget-solution-sacrifice-public-education-spend-more

IBR may not have been designed for early retirees (and personally I'd rather just get my loans paid off ASAP), but they're clearly allowed to use it. I don't really see an ethical issue. Many countries subsidize higher education. This is one way the US does it, just on the backend instead of up-front.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: NinetyFour on October 18, 2013, 07:41:46 AM
If I read it correctly, from your journal, RootofGood, you socked away $11,000 this year to an IRA.  Wow.  That you can do that, while ignoring your student loan debt, just amazes me.  I think it's wrong.  I wouldn't be able to rationalize it.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: dragoncar on October 18, 2013, 08:10:13 AM
That's a pretty difficult argument to make when you yourself state that you pay only $150 in income tax on $150k in earnings.

I have paid much more in the past, and will likely pay much more in the future. 

That $150 is my fair share of taxes, per the tax code.  Some people "pay" negative thousands of dollars in taxes (refundable tax credits like EIC and Additional Child Tax Credits).

This brings up a relevant question.  Do the haters plan to FIRE?  If so, do they plan to take advantage of low tax rates for mustachian level incomes, or will they be making extra payments to the IRS?

If I read it correctly, from your journal, RootofGood, you socked away $11,000 this year to an IRA.  Wow.  That you can do that, while ignoring your student loan debt, just amazes me.  I think it's wrong.  I wouldn't be able to rationalize it.
If I read it correctly, from your journal, RootofGood, you socked away $11,000 this year to an IRA.  Wow.  That you can do that, while ignoring your student loan debt, just amazes me.  I think it's wrong.  I wouldn't be able to rationalize it.
If I read it correctly, from your journal, RootofGood, you socked away $11,000 this year to an IRA.  Wow.  That you can do that, while ignoring your student loan debt, just amazes me.  I think it's wrong.  I wouldn't be able to rationalize it.

Do you think its wrong for early retires on this forum to sit on $500k or more of assets (in taxable and non taxable accounts) and not pay any income tax?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: ZiziPB on October 18, 2013, 08:48:30 AM
Quote
This brings up a relevant question.  Do the haters plan to FIRE?  If so, do they plan to take advantage of low tax rates for mustachian level incomes, or will they be making extra payments to the IRS?

I think there is a significant difference between incurring an obligation (student loans) and walking away from it and paying a low tax rate on low income...  I will be paying whatever taxes are due on the income I have in retirement, just like the OP is doing.  But I will not have borrowed money in order to achieve FIRE and avoided repaying my loans by utilizing a loophole in the IBR program.  I appreciate that what he is doing technically fits within the IBR guidelines and therefore is legal, but that doesn't mean it's ethical.

Think about it this way: I borrow a million dollars and put it in my savings account.  That allows me to retire early and live off the interest.  Because I live on the interest only (and, BTW, I am still saving a portion of that interest because I really don't have high expenses so I don't spend it all), I am "poor" and based on the fact that I am "poor" which I prove by showing that I bearly make enough in interest to cover my living expenses, I refuse to repay the money I borrowed, until my creditors finally write it off.  Does it strike you as ethical?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Hamster on October 18, 2013, 09:44:26 AM
Aaargh... my reply got 404'd... trying again (remember to Ctrl-C before trying to post, everyone...).
This brings up a relevant question.  Do the haters plan to FIRE?  If so, do they plan to take advantage of low tax rates for mustachian level incomes, or will they be making extra payments to the IRS?

First of all, "haters" is an ad hominem. Let's leave the name calling out of it.

Second, my comment was in response to the OP's statement - which was omitted in the above quotes:
Quote from: RootOfGood
I pay taxes into the general fund just like you.  I'm sure I "pay" for things for you that I don't want to.

I am calling bullshit on the claim that OP "pays" anything for anyone in taxes when he only paid $150 on $150k in income. I don't have a problem with taking full legal advantage of the tax code. BUT after paying essentially nothing in income tax, you can't defend the claim that you are paying taxes to support anything on my behalf.

Back to the general scenario: I think the reason this discussion is getting so much traction is that many of us believe that the word "Independent" in FIRE is not satisfied when you depend on the government to cover your debt obligations under a program that is based on financial hardship. Do we need a new term FDRE?.

If you drop out of high school, have 3 babies, and get by on gov't assistance with no intention of working although you are capable, are you FIRE?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: prof61820 on October 18, 2013, 09:55:49 AM
Moral/ethical issues aside, I commend you for finding an interesting legal loophole that I'm sure any investment banker/hedge fund manager/corporate exec (or tuition jacking University President) would lose zero sleep over utilizing.  Have you thought about these two issues?

1.  Can you earn "income" if it's paid solely as a benefit or you apply the dollars to an individual 401(k)?  In other words, can you do contract legal work and instead of your client paying you wages that you pocket, can they pay you by making a direct retirement account contribution or a health savings account contribution or pay you and you deposit the cash in a benefit account? 

2.  And I know it won't happen to you, but what happens to someone else if they follow your plan and their wife departs either via divorce or death?  What's the game plan at that point?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Tetsuya Hondo on October 18, 2013, 11:17:50 AM
If deep down you knew that this was ok, you wouldn't have felt the need to bring it up to seek validation.

The way I see it, you took out student loans and have simply decided not to even though you easily could. You've found a legal loophole to crawl through but you're violating the spirit of the program.

So, you're choosing to retire early and let the rest of us pick up the tab. In the MMM spirit, a face punch is in order.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: dragoncar on October 18, 2013, 11:35:11 AM
Quote
This brings up a relevant question.  Do the haters plan to FIRE?  If so, do they plan to take advantage of low tax rates for mustachian level incomes, or will they be making extra payments to the IRS?

I think there is a significant difference between incurring an obligation (student loans) and walking away from it and paying a low tax rate on low income...  I will be paying whatever taxes are due on the income I have in retirement, just like the OP is doing.  But I will not have borrowed money in order to achieve FIRE and avoided repaying my loans by utilizing a loophole in the IBR program.  I appreciate that what he is doing technically fits within the IBR guidelines and therefore is legal, but that doesn't mean it's ethical.

Think about it this way: I borrow a million dollars and put it in my savings account.  That allows me to retire early and live off the interest.  Because I live on the interest only (and, BTW, I am still saving a portion of that interest because I really don't have high expenses so I don't spend it all), I am "poor" and based on the fact that I am "poor" which I prove by showing that I bearly make enough in interest to cover my living expenses, I refuse to repay the money I borrowed, until my creditors finally write it off.  Does it strike you as ethical?

Well low income tax rates are meant to help the poor make ends meet.  The 47% who don't pay income tax are definitely being subsidized by those who do (I personally am ok with this, but it is analogous).  Don't try to tell me that you won't be getting  anything from those tax dollars paid by other people, despite the fact that you may very well have more money than they do.  Taxes are an obligation as much as debt is.

Aaargh... my reply got 404'd... trying again (remember to Ctrl-C before trying to post, everyone...).
This brings up a relevant question.  Do the haters plan to FIRE?  If so, do they plan to take advantage of low tax rates for mustachian level incomes, or will they be making extra payments to the IRS?

First of all, "haters" is an ad hominem. Let's leave the name calling out of it.

Second, my comment was in response to the OP's statement - which was omitted in the above quotes:
Quote from: RootOfGood
I pay taxes into the general fund just like you.  I'm sure I "pay" for things for you that I don't want to.

I am calling bullshit on the claim that OP "pays" anything for anyone in taxes when he only paid $150 on $150k in income. I don't have a problem with taking full legal advantage of the tax code. BUT after paying essentially nothing in income tax, you can't defend the claim that you are paying taxes to support anything on my behalf.

Back to the general scenario: I think the reason this discussion is getting so much traction is that many of us believe that the word "Independent" in FIRE is not satisfied when you depend on the government to cover your debt obligations under a program that is based on financial hardship. Do we need a new term FDRE?.

If you drop out of high school, have 3 babies, and get by on gov't assistance with no intention of working although you are capable, are you FIRE?

It's only ad hominem if you consider yourself the man.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Mr.Macinstache on October 18, 2013, 11:38:15 AM
You can't compare avoiding taxes to avoiding repayment of a student loan. The govt takes taxes by force, a student loan is a voluntary contract someone entered into.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Nords on October 18, 2013, 11:44:33 AM
If deep down you knew that this was ok, you wouldn't have felt the need to bring it up to seek validation.

The way I see it, you took out student loans and have simply decided not to even though you easily could. You've found a legal loophole to crawl through but you're violating the spirit of the program.

So, you're choosing to retire early and let the rest of us pick up the tab. In the MMM spirit, a face punch is in order.
Just to clarify, I asked RoG to comment on this situation because it came up on another forum where he was asking for advice on just this loophole.

I believe that those of you accusing him of behaving unethically are judging him as if there's a universal standard of ethics to cover these situations.  I do not agree with "universal standard".  I think that you may have a higher ethical standard than him, and that you're unfairly applying it to him.  That's your own self-imposed problem, and for your sakes I hope you're willing to live up to that standard. 

His decision to use IBR takes care of him and his family while following the rules.  If there's any "harm", it's all in your perception of being required to pay back a govt subsidy.  That requirement does not exist-- it's a subsidy.  The only standard here is the legislative code, and we've shown that it's fairly straightforward in its definition.  He qualifies under that definition, and he is satisfying its terms. 

If you did not want people following the rules as they're written, then you need to make new rules.  Of course it's much easier to shame someone for not elevating their behavior to a more stratospheric level, at least from your perspective.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Tetsuya Hondo on October 18, 2013, 12:42:48 PM
I believe that those of you accusing him of behaving unethically are judging him as if there's a universal standard of ethics to cover these situations.  I do not agree with "universal standard".  I think that you may have a higher ethical standard than him, and that you're unfairly applying it to him.  That's your own self-imposed problem, and for your sakes I hope you're willing to live up to that standard. 

His decision to use IBR takes care of him and his family while following the rules.  If there's any "harm", it's all in your perception of being required to pay back a govt subsidy.  That requirement does not exist-- it's a subsidy.  The only standard here is the legislative code, and we've shown that it's fairly straightforward in its definition.  He qualifies under that definition, and he is satisfying its terms. 

If you did not want people following the rules as they're written, then you need to make new rules.  Of course it's much easier to shame someone for not elevating their behavior to a more stratospheric level, at least from your perspective.

Paying back your loans is an exceedingly low bar for moral behavior.

As for making new rules, people complain about the bureaucratic nature of government and the litigiousness of society, yet this is a perfect example of how this comes about. You cannot legislate away every possible shady behavior that people do and might engage in. We wouldn't need so much bureaucracy and so much fricking legislation if people could uphold at least the lower bars of ethical behavior and societal norms. That approach is great for lawyers, bad for the rest of us.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: dragoncar on October 18, 2013, 01:07:05 PM
You can't compare avoiding taxes to avoiding repayment of a student loan. The govt takes taxes by force, a student loan is a voluntary contract someone entered into.

Sure I can!  Both are maximizing your wealth within the confines of the "contract."  If I have enter a contract with bob to paint his house for $100, then I tell him hey I only need $50 now, is bob acting unethically to take me up on my offer? 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 18, 2013, 01:08:00 PM

Paying back your loans is an exceedingly low bar for moral behavior.


Do you have much experience with the world of corporate finance, most especiallly in the junk world?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Tetsuya Hondo on October 18, 2013, 01:28:35 PM

Paying back your loans is an exceedingly low bar for moral behavior.


Do you have much experience with the world of corporate finance, most especiallly in the junk world?

So, what you're saying is: two wrongs make a right?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: dragoncar on October 18, 2013, 01:35:27 PM
I believe that those of you accusing him of behaving unethically are judging him as if there's a universal standard of ethics to cover these situations.  I do not agree with "universal standard".  I think that you may have a higher ethical standard than him, and that you're unfairly applying it to him.  That's your own self-imposed problem, and for your sakes I hope you're willing to live up to that standard. 

His decision to use IBR takes care of him and his family while following the rules.  If there's any "harm", it's all in your perception of being required to pay back a govt subsidy.  That requirement does not exist-- it's a subsidy.  The only standard here is the legislative code, and we've shown that it's fairly straightforward in its definition.  He qualifies under that definition, and he is satisfying its terms. 

If you did not want people following the rules as they're written, then you need to make new rules.  Of course it's much easier to shame someone for not elevating their behavior to a more stratospheric level, at least from your perspective.

Paying back your loans is an exceedingly low bar for moral behavior.

As for making new rules, people complain about the bureaucratic nature of government and the litigiousness of society, yet this is a perfect example of how this comes about. You cannot legislate away every possible shady behavior that people do and might engage in. We wouldn't need so much bureaucracy and so much fricking legislation if people could uphold at least the lower bars of ethical behavior and societal norms. That approach is great for lawyers, bad for the rest of us.

They put means testing in legislation ALL THE TIME.  In fact many states supplement federal means tested programs in order to remove or limit the means testing.  It's very hard to believe this was unintentional.

Paying back loans you are not required to repay is charity pure and simple.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 18, 2013, 01:37:39 PM

Paying back your loans is an exceedingly low bar for moral behavior.


Do you have much experience with the world of corporate finance, most especiallly in the junk world?

So, what you're saying is: two wrongs make a right?

No, I am asking:

Do you have much experience with the world of corporate finance, most especiallly in the junk world?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Tetsuya Hondo on October 18, 2013, 01:53:04 PM
No, I am asking:

Do you have much experience with the world of corporate finance, most especiallly in the junk world?

So, what you're saying is: everyone else is doing it?

I really can't believe so many of you will go through the ethical acrobatics to try and explain this away as anything other than it is.

So, rather than going around in circles through increasing planes of moral relevancy, I need to get back to my work. These flesh-eating drugs aren't going to sell themselves.

[By the way, what's up with all the 404 errors? Did MMM miss a bill?]
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 18, 2013, 02:08:29 PM
No, I am asking:

Do you have much experience with the world of corporate finance, most especiallly in the junk world?

So, what you're saying is: everyone else is doing it?

I really can't believe so many of you will go through the ethical acrobatics to try and explain this away as anything other than it is.

So, rather than going around in circles through increasing planes of moral relevancy, I need to get back to my work. These flesh-eating drugs aren't going to sell themselves.

[By the way, what's up with all the 404 errors? Did MMM miss a bill?]

Nope.  I am asking:

Do you have much experience with the world of corporate finance, most especiallly in the junk world?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 18, 2013, 02:41:27 PM
Instead of asking questions, why don't you just make your point?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 18, 2013, 02:50:06 PM
Instead of asking questions, why don't you just make your point?

I don't have a point.  Its clear by now after 100+ posts that nobody posting will change their opinion on this subject.  I was merely curious as to whether Hondo had any experience in corporate finance/junk where default/not paying back loans is a business decision.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 18, 2013, 02:51:47 PM
Instead of asking questions, why don't you just make your point?

I don't have a point.  Its clear by now after 100+ posts that nobody posting will change their opinion on this subject.  I was merely curious as to whether Hondo had any experience in corporate finance/junk where default/not paying back loans is a business decision.

Are you talking about companies that stay in business?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 18, 2013, 03:03:23 PM
Instead of asking questions, why don't you just make your point?

I don't have a point.  Its clear by now after 100+ posts that nobody posting will change their opinion on this subject.  I was merely curious as to whether Hondo had any experience in corporate finance/junk where default/not paying back loans is a business decision.

Are you talking about companies that stay in business?

Usually in one fashion or another.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 18, 2013, 03:09:44 PM

Are you talking about companies that stay in business?

Usually in one fashion or another.

Can you give some examples?  The companies that I know of that default on their loans end of going through bankruptcy.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: amicableskeptic on October 18, 2013, 03:11:01 PM
This thread has gotten so long and so crazy I just couldn't take reading everything through so sorry if I'm repeating something.  It does seem like Root and others on this thread have a version of ethics that says "if enough people agree something is okay then it is okay".  I don't agree with that system and I don't agree with his choice in this instance.

Ceding the decision of what is ethically right or wrong to any government is not morally sound.  Let's try and make decisions based on some system of ethics outside of "if it is legal it is ethical".  Some people can choose Kant, some people can choose Jesus, some can choose Felix Adler, but all are better choices than letting politicians define your morality for you.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 18, 2013, 03:18:14 PM

Are you talking about companies that stay in business?

Usually in one fashion or another.

Can you give some examples?  The companies that I know of that default on their loans end of going through bankruptcy.

When a corporation defaults on its borrowings (loans or bonds) there are a variety of possible outcomes:

- bankruptcy (which can result in liquidation of the business or they can come out anew a la GM, American Airlines, etc.)
- prepack, a form of bankruptcy in which a reorganization is agreed to before the default and then blessed by a bankruptcy court after which the company resules operations
- recapitalization, whereby new investors inject fresh capital into the business
- debt for equity swap, where the lenders become the owners without the benefit of bankruptcy court
- sale of the business

In all of these cases, choosing to default/not pay back the debt is a business decision, with no moral implications.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 18, 2013, 03:25:05 PM

Are you talking about companies that stay in business?

Usually in one fashion or another.

Can you give some examples?  The companies that I know of that default on their loans end of going through bankruptcy.

When a corporation defaults on its borrowings (loans or bonds) there are a variety of possible outcomes:

- bankruptcy (which can result in liquidation of the business or they can come out anew a la GM, American Airlines, etc.)
- prepack, a form of bankruptcy in which a reorganization is agreed to before the default and then blessed by a bankruptcy court after which the company resules operations
- recapitalization, whereby new investors inject fresh capital into the business
- debt for equity swap, where the lenders become the owners without the benefit of bankruptcy court
- sale of the business

In all of these cases, choosing to default/not pay back the debt is a business decision, with no moral implications.

Yes, I'm aware of what can happen in default.  I intended to ask for examples of specific companies, but I can see how one could misread my question.  Anyway, we'd be having a very different discussion if RootofGood were going in bankruptcy instead of early retirement.

Also, you can't simply assert that choosing to default has no moral implications.  Most people, including me, strongly disagree with that assumption. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 18, 2013, 03:29:04 PM

Are you talking about companies that stay in business?

Usually in one fashion or another.

Can you give some examples?  The companies that I know of that default on their loans end of going through bankruptcy.

When a corporation defaults on its borrowings (loans or bonds) there are a variety of possible outcomes:

- bankruptcy (which can result in liquidation of the business or they can come out anew a la GM, American Airlines, etc.)
- prepack, a form of bankruptcy in which a reorganization is agreed to before the default and then blessed by a bankruptcy court after which the company resules operations
- recapitalization, whereby new investors inject fresh capital into the business
- debt for equity swap, where the lenders become the owners without the benefit of bankruptcy court
- sale of the business

In all of these cases, choosing to default/not pay back the debt is a business decision, with no moral implications.

Yes, I'm aware of what can happen in default.  I intended to ask for examples of specific companies, but I can see how one could misread my question.  Anyway, we'd be having a very different discussion if RootofGood were going in bankruptcy instead of early retirement.

Also, you can't simply assert that choosing to default has no moral implications.  Most people, including me, strongly disagree with that assumption.

You are entitled to your opinions, certainly.

Ask any lender or bond investor (especially those who traffic in junk) if they assume that noone they lend to would ever default.  They all know that there is risk of default, plan for it going into the deal (if they have an ounce of sense) and price the loan accordingly.  The borrowers never make any promises that things will always go well, and there is explicit discussion of what happens if the obligor default spelled out in the loan docs.  You really think they see any of this in moral terms?  If they do, they are in the wrong business.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Lans Holman on October 18, 2013, 03:40:11 PM
I don't think bankruptcy makes a good analogy for all those reasons Brewer just mentioned.  This would be more like running up a big credit card bill for a bunch of fancy dinners when you know you're about to file for bankruptcy.  (Not sure if that even works, but hopefully you'll get my point.)  Yes it's legal, yes it might be the rational decision for that individual.  If I ever found myself in that situation I can't say that I wouldn't be tempted, and if a friend of mine did it I wouldn't hold it against them.  This isn't about me trying to hold myself up as some kind of paragon of moral virtue, as Nords was suggesting.  There's just no way it's not a total jerk move to borrow a bunch of money, promise to pay it back, have the ability to pay it back, and not pay it back.  Doesn't matter who you borrowed it from.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 18, 2013, 03:44:49 PM

Yes, I'm aware of what can happen in default.  I intended to ask for examples of specific companies, but I can see how one could misread my question.  Anyway, we'd be having a very different discussion if RootofGood were going in bankruptcy instead of early retirement.

Also, you can't simply assert that choosing to default has no moral implications.  Most people, including me, strongly disagree with that assumption.

You are entitled to your opinions, certainly.

Ask any lender or bond investor (especially those who traffic in junk) if they assume that noone they lend to would ever default.  They all know that there is risk of default, plan for it going into the deal (if they have an ounce of sense) and price the loan accordingly.  The borrowers never make any promises that things will always go well, and there is explicit discussion of what happens if the obligor default spelled out in the loan docs.  You really think they see any of this in moral terms?  If they do, they are in the wrong business.

"Assuming that no one would ever default" is a strawman in no way equivalent to whether it is moral to default on a loan when one has the ability to pay it back.

Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 18, 2013, 03:45:58 PM
I don't think bankruptcy makes a good analogy for all those reasons Brewer just mentioned.  This would be more like running up a big credit card bill for a bunch of fancy dinners when you know you're about to file for bankruptcy.  (Not sure if that even works, but hopefully you'll get my point.)  Yes it's legal, yes it might be the rational decision for that individual.  If I ever found myself in that situation I can't say that I wouldn't be tempted, and if a friend of mine did it I wouldn't hold it against them.  This isn't about me trying to hold myself up as some kind of paragon of moral virtue, as Nords was suggesting.  There's just no way it's not a total jerk move to borrow a bunch of money, promise to pay it back, have the ability to pay it back, and not pay it back.  Doesn't matter who you borrowed it from.

I don't think anyone said bankruptcy would be a good analogy.  Indeed, I specifically said we'd be having a very different conversation in that case.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 18, 2013, 03:54:37 PM

Yes, I'm aware of what can happen in default.  I intended to ask for examples of specific companies, but I can see how one could misread my question.  Anyway, we'd be having a very different discussion if RootofGood were going in bankruptcy instead of early retirement.

Also, you can't simply assert that choosing to default has no moral implications.  Most people, including me, strongly disagree with that assumption.

You are entitled to your opinions, certainly.

Ask any lender or bond investor (especially those who traffic in junk) if they assume that noone they lend to would ever default.  They all know that there is risk of default, plan for it going into the deal (if they have an ounce of sense) and price the loan accordingly.  The borrowers never make any promises that things will always go well, and there is explicit discussion of what happens if the obligor default spelled out in the loan docs.  You really think they see any of this in moral terms?  If they do, they are in the wrong business.

"Assuming that no one would ever default" is a strawman in no way equivalent to whether it is moral to default on a loan when one has the ability to pay it back.

Corporate borrowers do so all the time.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 18, 2013, 03:57:17 PM
"Assuming that no one would ever default" is a strawman in no way equivalent to whether it is moral to default on a loan when one has the ability to pay it back.

Corporate borrowers do so all the time.

Indeed, and people murder other people all the time as well.  That doesn't make it moral.

And my example is only slightly more of a strawman than yours.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 18, 2013, 04:05:24 PM
"Assuming that no one would ever default" is a strawman in no way equivalent to whether it is moral to default on a loan when one has the ability to pay it back.

Corporate borrowers do so all the time.

Indeed, and people murder other people all the time as well.  That doesn't make it moral.

And my example is only slightly more of a strawman than yours.

Why should corporate borrowers be held to a different standard than individual borrowers (and vice versa)?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Hamster on October 18, 2013, 04:15:47 PM

Yes, I'm aware of what can happen in default.  I intended to ask for examples of specific companies, but I can see how one could misread my question.  Anyway, we'd be having a very different discussion if RootofGood were going in bankruptcy instead of early retirement.

Also, you can't simply assert that choosing to default has no moral implications.  Most people, including me, strongly disagree with that assumption.

You are entitled to your opinions, certainly.

Ask any lender or bond investor (especially those who traffic in junk) if they assume that noone they lend to would ever default.  They all know that there is risk of default, plan for it going into the deal (if they have an ounce of sense) and price the loan accordingly.  The borrowers never make any promises that things will always go well, and there is explicit discussion of what happens if the obligor default spelled out in the loan docs.  You really think they see any of this in moral terms?  If they do, they are in the wrong business.

"Assuming that no one would ever default" is a strawman in no way equivalent to whether it is moral to default on a loan when one has the ability to pay it back.

Corporate borrowers do so all the time.

You are making a false comparison. You should be comparing to collecting government welfare checks or food stamps, not to corporate borrowing.

In the borrowing you are talking about, the purpose of lending is for the lender to make a profit off of the interest (which is based on the lender assuming some level of risk and tying up their capital). In the case of the government guaranteeing and paying off the student loan for someone with financial hardship, it is a totally different scenario. The government is not in this to make a profit. The government is assuming the risk and spreading it among the rest of the taxpayers. Those who are hurt aren't the entities that stand to profit from the loan if it is paid off.

It is government charity, legally exploited. I am requesting that my congress people close this loophole by adding wealth to the means test in addition to looking at AGI. Maybe something both parties could agree on.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Hamster on October 18, 2013, 04:18:03 PM
Why should corporate borrowers be held to a different standard than individual borrowers (and vice versa)?

When the government starts guaranteeing and giving hardship deferrals and loan repayment to corporations, then your argument will make sense.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 18, 2013, 04:23:51 PM
"Assuming that no one would ever default" is a strawman in no way equivalent to whether it is moral to default on a loan when one has the ability to pay it back.

Corporate borrowers do so all the time.

Indeed, and people murder other people all the time as well.  That doesn't make it moral.

And my example is only slightly more of a strawman than yours.

Why should corporate borrowers be held to a different standard than individual borrowers (and vice versa)?

You continue to ask questions rather than make a point.  I'm happy to actually discuss this with you, but at some point you need to make claims rather than ask questions.  You've yet to make any moral claims.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 18, 2013, 04:27:52 PM
The government is not in this to make a profit.

Bullshit.  The gubmint gets greatly increased income and payroll taxes from this as well as a greater GDP from which to draw taxes and borrowing capacity.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 18, 2013, 04:29:04 PM
Why should corporate borrowers be held to a different standard than individual borrowers (and vice versa)?

When the government starts guaranteeing and giving hardship deferrals and loan repayment to corporations, then your argument will make sense.

Hellloooo?!  Anyone recall Government General Motors and Chrysler?  As a GM bondholder that got cornholed, I sure do.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: dragoncar on October 18, 2013, 04:38:07 PM
Why should corporate borrowers be held to a different standard than individual borrowers (and vice versa)?

When the government starts guaranteeing and giving hardship deferrals and loan repayment to corporations, then your argument will make sense.

Hellloooo?!  Anyone recall Government General Motors and Chrysler?  As a GM bondholder that got cornholed, I sure do.

I LOLed
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Hamster on October 18, 2013, 04:45:59 PM
Why should corporate borrowers be held to a different standard than individual borrowers (and vice versa)?

When the government starts guaranteeing and giving hardship deferrals and loan repayment to corporations, then your argument will make sense.

Hellloooo?!  Anyone recall Government General Motors and Chrysler?  As a GM bondholder that got cornholed, I sure do.
Wrong comparison. First, the auto bailout money has been paid back, with interest. second, it was a bailout after the fact, to avoid the collapse of the US auto industry, not to allow people to retire early while forcing the public to assume loan payments which they could have made out of savings.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: beltim on October 18, 2013, 04:49:02 PM
Why should corporate borrowers be held to a different standard than individual borrowers (and vice versa)?

When the government starts guaranteeing and giving hardship deferrals and loan repayment to corporations, then your argument will make sense.

Hellloooo?!  Anyone recall Government General Motors and Chrysler?  As a GM bondholder that got cornholed, I sure do.

Was this moral?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 18, 2013, 04:50:46 PM
Why should corporate borrowers be held to a different standard than individual borrowers (and vice versa)?

When the government starts guaranteeing and giving hardship deferrals and loan repayment to corporations, then your argument will make sense.

Hellloooo?!  Anyone recall Government General Motors and Chrysler?  As a GM bondholder that got cornholed, I sure do.
Wrong comparison. First, the auto bailout money has been paid back, with interest. second, it was a bailout after the fact, to avoid the collapse of the US auto industry, not to allow people to retire early while forcing the public to assume loan payments which they could have made out of savings.

OK, I am done trying to teach pigs to sing.  As I observed, it is unlikely anyone postring on this thread will change their opinion.  Clearly that includes you and I.  Have fun.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: dragoncar on October 18, 2013, 05:04:21 PM
Why should corporate borrowers be held to a different standard than individual borrowers (and vice versa)?

When the government starts guaranteeing and giving hardship deferrals and loan repayment to corporations, then your argument will make sense.

Hellloooo?!  Anyone recall Government General Motors and Chrysler?  As a GM bondholder that got cornholed, I sure do.
Wrong comparison. First, the auto bailout money has been paid back, with interest. second, it was a bailout after the fact, to avoid the collapse of the US auto industry, not to allow people to retire early while forcing the public to assume loan payments which they could have made out of savings.

OK, I am done trying to teach pigs to sing.  As I observed, it is unlikely anyone postring on this thread will change their opinion.  Clearly that includes you and I.  Have fun.

Well at least the thread helped me rationalize my gut feeling, thereby entrenching my beliefs :-)
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: bluecollarmusician on October 18, 2013, 07:15:30 PM
This thread is a soap opera!  Kudos to everyone for their contributions- I had to read every post!


I don't know why I feel compelled to add my $.02- people seem to be emotionally charged and tied to their respective posts.

How is the OP acting unethically because he is "more capable" than all those folks with a $100K of debt, and two degrees in jazz clarinet performance to make money???? WTF, seriously people.  This is a website about FIRE- if it is unethical, it is unethical for ALL- if you are experiencing financial hardship- get the heck out of dodge and do something about it.

OK- so maybe the problem is that we are somehow giving a free pass to people who are "struggling to get by"---again, wtf- my wife and I live like kings on 30K a year and my best bud is constantly stressed about money with 100+k a year in income.   
The gvt set a non-arbitrary definition of partial financial hardship- your defs do not count! Fortunately for the OP their definition of hardship is his definition of retirement income.  Yes, their should be asset test for the loan forgiveness... but that still doesn't address all the jokers out there with degrees they will never pay for- so is it ok for them because they didn't "know" any better??? So that is ok???  The whole thing is wrong- but there are many wrong angles in the whole deal...

It is crazy talk- you can't have a social safety net AND the completely "fiercely independent" American ethic that people are preaching- there has to be a specific definition, because as can be witnessed by the situation with my best friend and myself people define financial hardship differently.

To the op- congrats on your Atlas Shrugged style retirement- you can make a ton of money, but choose not to, and don't need to by playing the game as it is set up in front of you.  Well done.  It might not be how I would have done it- but I am happy, your are happy... good to go.


Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: MrsPete on October 18, 2013, 07:15:41 PM
Just out of curiosity, what is your view of the strategic defaulters in the housing crash and why?
It's wrong to enter into a contract and fail to fulfill your part of the bargain; however, it's not quite as bad as failing to pay back a student loan because the bank can "take back" the house and recover its losses, whereas the education cannot be repossessed.


Personally, I think all the talk about the ethics of IBR plans is distracting from the bigger issue -- why is college so damn expensive to begin with?  And how is it that colleges can charge so much for an education in a field that they know will never grant a high enough salary to justify the expense?
Student loans are a big part of why college is so expensive.  Money's available, people are willing to borrow . . . so the schools charge a bit more, and then a bit more, and then a bit more?  And, in their defense, they feel forced to start adding this and that amenity to attract students, who now expect more than students in previous generations (for example, the dorms I used to live in with a roommate are now considered "too small" for two and have become singles).  But now we've reached the "tipping point", and the amounts so many people are borrowing are no longer sustainable . . . so this vicious cycle can't continue.   


That $150 is my fair share of taxes, per the tax code.  Some people "pay" negative thousands of dollars in taxes (refundable tax credits like EIC and Additional Child Tax Credits).
As long as you're doing your taxes honestly, that's fine.  That's kind of like finding the best bargain you can. 
But it's not in any way the same thing as borrowing money and voluntarily deciding you don't want to pay it back. 


Do you think its wrong for early retires on this forum to sit on $500k or more of assets (in taxable and non taxable accounts) and not pay any income tax?
I'd assume that the early retirees paid income taxes on that $500K when it was originally earned, or if it was tax-sheltered when it was earned, they're paying income taxes on it when it's withdrawn.  Money sitting in an account isn't "income", so why would they owe income tax on it? 

Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 19, 2013, 07:47:10 PM
OK, I am done trying to teach pigs to sing.  As I observed, it is unlikely anyone posting on this thread will change their opinion.  Clearly that includes you and I.  Have fun.

I disagree, Brewer!  I decided to repay my student loans in full.  The good posters here persuaded me it is the ethical thing to do. 

Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: NinetyFour on October 19, 2013, 08:31:11 PM
Really?  Wow, that's very cool, Root!  Thanks for sharing that.  Makes me feel better about the world.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 19, 2013, 09:02:59 PM
OK, I am done trying to teach pigs to sing.  As I observed, it is unlikely anyone posting on this thread will change their opinion.  Clearly that includes you and I.  Have fun.

I disagree, Brewer!  I decided to repay my student loans in full.  The good posters here persuaded me it is the ethical thing to do.

Well I am going squirrel hunting tomorrow (with rabbits and doves as targets of convenience).  The bag limit per day is 5 squirrels.  I bet they will allbe as large as this one:

Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 19, 2013, 09:15:33 PM
Well I am going squirrel hunting tomorrow (with rabbits and doves as targets of convenience).  The bag limit per day is 5 squirrels.  I bet they will allbe as large as this one:

Best of luck!  I'll be out there with you in spirit tomorrow (although physically out in the woods on the east coast). 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: brewer12345 on October 19, 2013, 09:36:17 PM
Well I am going squirrel hunting tomorrow (with rabbits and doves as targets of convenience).  The bag limit per day is 5 squirrels.  I bet they will allbe as large as this one:

Best of luck!  I'll be out there with you in spirit tomorrow (although physically out in the woods on the east coast).

Thanks.  Hoping to get in the better part of a day before the rain arrives in the afternoon.  Works marvels for stress management when I can get out into the woods and river bottoms.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 19, 2013, 09:43:27 PM
Well I am going squirrel hunting tomorrow (with rabbits and doves as targets of convenience).  The bag limit per day is 5 squirrels.  I bet they will allbe as large as this one:

Best of luck!  I'll be out there with you in spirit tomorrow (although physically out in the woods on the east coast).

Thanks.  Hoping to get in the better part of a day before the rain arrives in the afternoon.  Works marvels for stress management when I can get out into the woods and river bottoms.

Shooting things probably helps relieve stress too. 

Ok, back to our regularly scheduled program - IBR usage if you are "filthy rich" - ethical or not?  Go!
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Hamster on October 19, 2013, 10:35:30 PM
OK, I am done trying to teach pigs to sing.  As I observed, it is unlikely anyone posting on this thread will change their opinion.  Clearly that includes you and I.  Have fun.

I disagree, Brewer!  I decided to repay my student loans in full.  The good posters here persuaded me it is the ethical thing to do.
Wow, seriously? That is very admirable to put principles above principal, so to speak. I am impressed.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Mazzinator on October 20, 2013, 11:11:13 AM
OK, I am done trying to teach pigs to sing.  As I observed, it is unlikely anyone posting on this thread will change their opinion.  Clearly that includes you and I.  Have fun.

I disagree, Brewer!  I decided to repay my student loans in full.  The good posters here persuaded me it is the ethical thing to do.

You serious, Clark?
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 21, 2013, 10:26:30 AM
OK, I am done trying to teach pigs to sing.  As I observed, it is unlikely anyone posting on this thread will change their opinion.  Clearly that includes you and I.  Have fun.

I disagree, Brewer!  I decided to repay my student loans in full.  The good posters here persuaded me it is the ethical thing to do.

You serious, Clark?

Well, I'll keep paying whatever my lender tells me I owe. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 22, 2013, 04:57:51 PM
Moral/ethical issues aside, I commend you for finding an interesting legal loophole that I'm sure any investment banker/hedge fund manager/corporate exec (or tuition jacking University President) would lose zero sleep over utilizing.  Have you thought about these two issues?

1.  Can you earn "income" if it's paid solely as a benefit or you apply the dollars to an individual 401(k)?  In other words, can you do contract legal work and instead of your client paying you wages that you pocket, can they pay you by making a direct retirement account contribution or a health savings account contribution or pay you and you deposit the cash in a benefit account? 

2.  And I know it won't happen to you, but what happens to someone else if they follow your plan and their wife departs either via divorce or death?  What's the game plan at that point?

I don't think you can avoid the income.  You could contribute some of the income to an SEP IRA or solo 401k depending on how you are set up. 

What happens if the wife departs?  If it's a final departure, her loan indebtedness is forgiven completely (student loans act as a form of life insurance).  If it is by divorce, I guess she gets half and I get half.  Then I have to figure out if I can live on $20k/yr or so.  Probably not, so I'd get a job or some other source of income.   

Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: yanmp on November 09, 2013, 03:00:20 PM
I have no moral/ethical problem with it, but I'm unable to see a fundamental difference between this practice and say, able-bodied people who live on welfare such as Social Security Disability  + Food Stamps + Section 8 housing, as they, as in this case, meet the requirements as written.

So, more power to you, and to them.  Not that you or anyone else in this thread necessarily does - but I don't see a way that you could attack people who 'take advantage' of welfare without being hypocritical about it. 
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: chasesfish on November 09, 2013, 05:04:53 PM
I think this is an issue created by the government taking over the student loan business.  Now repayment will be based on political favoritism and "need", instead of objective business decisions.  There's also not much difference between what an art major can borrow verses and engineer, which is absurd.   Borrowing capacity should be based off earning potential with the expectation 100% of the loan would be repaid.

As for the original question, I'm on the fence about the moral/ethical delimma.

If the loan was consolidated with the federal government, I'm sure Rootofgood is still a net payor into the system. 

I think the moral hazard is like another poster said, I wish I had run up $250k in student loan debt living the six year dream in college, then I could just go work for the FDIC for 10 years and all is forgiven.   It would have been much more fun than working my ass off and finishing in 3 years while holding a job.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Captain and Mrs Slow on October 30, 2015, 03:36:19 AM
This reminds me of a massive flame war Derreck Foster got into after he published his book about early retirement. People got massively upset that he had the gall to collect the child tax credit (or what it was back then), just cause he was smart and frugal!

We're having the same argument in Canada right now with the TFSA, how dare you be frugal and save and invest, and horror of horrows, collect GIS (welfare for seniors) while having investments. Tax the Rich!

To quote Garth (Turner greater fool) anytime the goverment gives you free money take it!

Pardon any typos done on my iPad on holidays

Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: Captain and Mrs Slow on October 30, 2015, 03:37:21 AM
Oops this was meant to be in response to gaming REPAYE
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RocketSurgeon on October 30, 2015, 10:29:51 AM
Not sure if I'm adding to the discussion, but I will be taking advantage of IBR and PSLF. The lender has offered me a deal; Work for us, meet these conditions, and make X payments and I'll forgive your loan. Don't see the ethical problem, as 'abilty to pay' isn't even relevant.

Some more food for thought; my loans are, I believe, well below market rates. If I agreed that it was unethical to accept the forgiveness, would you then push me to pay back the interest at market rates? (which I can quite easily afford.)

e: And just to cover all my bases, I  do not have experience with the world of corporate finance, especially in the junk world. :p





Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on October 30, 2015, 02:02:56 PM
Wow, it's hard to believe this thread is over 2 years old.  Since I started the thread, I've been retired the whole time but pulling in a decent income from my side hustles (my blog, a few hours per month of freelance writing, plus now a couple hours of consulting each week). My wife is still getting paid full time (for working an 80% of full time schedule). 

Our current IBR based repayments are $34 per month in spite of our six figure income.  A continued example that the IBR is not a program for the poor or lower income people, but one aimed squarely at the solid middle class (who tend to go to college in larger numbers). 

Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: arebelspy on November 09, 2015, 05:08:29 AM
Wow, it's hard to believe this thread is over 2 years old.

I had that same thought when I read this, then clicked on your welcome thread from the first post and read through it.  You've been FIRE'd over two years!  It was fun reading your 4 month updates and such.  :D

Your first two years of FIRE seem pretty ideal, to me.
Title: Re: Ethical Dimensions of Student Loan Income Based Repayment Plans
Post by: RootofGood on November 09, 2015, 06:54:23 PM
Your first two years of FIRE seem pretty ideal, to me.

I can't complain!  :)

My biggest surprises were the 6 months of decompressing (I figured I would be immune!) and the fact that keeping up with a 1 year old is more work than I thought it was. 

Now that I've decompressed and the kid is 3, life keeps getting better.