Author Topic: To payoff student loans or not (b/c Hillary)  (Read 16378 times)

randymarsh

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Re: To payoff student loans or not (b/c Hillary)
« Reply #50 on: July 10, 2016, 06:04:33 PM »
I understand what you're saying, but for me it's not passing the common sense check. If the programs were profitable, private lenders would be entering and offering loans at lower interest rates than what the federal government is to capitalize on that profit and offer better value loans to students.

There are a ton of private lenders. Have you seen all the people refinancing with SoFi and Earnest and other loan providers (and their referral codes) here? People are refinancing their federal loans into these lower cost providers. And remember that the government can borrow at much lower rates than private firms. So the government is profiting even more.

I suspect default rates are higher for gov loans. SoFi and Earnest have the advantage of being picky. Based on the refinancing stories here, it's pretty clear they're geared toward a subset of high income borrowers. The government is also making the loan before you have the degree or any work history. That would seem to be a logical reason for higher rates.

randymarsh

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Re: To payoff student loans or not (b/c Hillary)
« Reply #51 on: July 10, 2016, 06:05:32 PM »
I understand what you're saying, but for me it's not passing the common sense check. If the programs were profitable, private lenders would be entering and offering loans at lower interest rates than what the federal government is to capitalize on that profit and offer better value loans to students.
Except that with federal loans, you don't have the possibility of declaring bankruptcy. Which means private lenders are taking on a lot more risk than the govt and necessarily would need more profit for it to make sense for them. Which is a really stupid part of federal loans, but there it is.

You can't declare private loans in bankruptcy either.

forummm

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Re: To payoff student loans or not (b/c Hillary)
« Reply #52 on: July 10, 2016, 06:13:55 PM »
I understand what you're saying, but for me it's not passing the common sense check. If the programs were profitable, private lenders would be entering and offering loans at lower interest rates than what the federal government is to capitalize on that profit and offer better value loans to students.
Except that with federal loans, you don't have the possibility of declaring bankruptcy. Which means private lenders are taking on a lot more risk than the govt and necessarily would need more profit for it to make sense for them. Which is a really stupid part of federal loans, but there it is.

You can't declare private loans in bankruptcy either.

I think it depends. I think you can with certain refinancing.

ReadySetMillionaire

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Re: To payoff student loans or not (b/c Hillary)
« Reply #53 on: July 11, 2016, 07:35:07 AM »
Refinance at the very least. You are paying an exorbitant rate. If you can knock that down, paying a low amount will be win-win.

If OP's loans are federal loans, for the love of God don't do this. The benefits that come with federal student loans (forbearance, being able to enroll in income-based repayment plans, they go away upon your death, etc.) far outweighs the benefits of refinancing your loans.

I just applied at Earnest...

3.87% variable
5.07% fixed

So she had $90K, I just paid them down $40K last week so $50K.  About $5K is at really low rates so wouldn't refinance those.  So say she has $45K right now at 6.55%.

On Aug 1st I will have $20K more cash I was going to put on them to get them down to $25k and then with work bonuses hopefully knock them out by the end of the year then move on in life socking away 3-5K a month into investments.

Does any of that info change the thought?

Wouldn't there be a cost to refinance?

Your original question intrigued posters like Fields123 and me, who read about student loans way more than we should. And what your father said wasn't exactly true, but it was close: the student loan legislation only blows in one direction, and that direction is always towards better terms for the borrower.

Student loan "forgiveness" started with PSLF: work for 10 years in public job, payments would be based on your income (not your debt), and your loans would be forgiven. Then came Income Based Repayment, which expanded income-based repayment to borrowers who worked in the private sector. IBR is calculated on 15% of AGI and is forgiven after 25 years, but only those who had loans after 2007 (I think) were eligible. Then came "Pay As You Earn."  This lowered the AGI calculation to 10%, but still couldn't be used by people who took out loans prior to 2007ish.

And then came the greatest student loan program to date, Revised Pay As You Earn. This is based on 10% of AGI, half of unpaid interest gets subsidized, those with undergrad debt are forgiven after 20 years, professional debt is 25. Do the math and if you're near 100k in loans, REPAYE is the greatest hedge of all time.

It should be noted that for IBR, PAYE, and REPAYE, you have to pay income tax on the amount forgiven.

But whether that will actually be imposed is another story. The first IBR people will be done paying the terms of their loan in about 17-18 years. Think about how far we've come on student loans in the last decade, and I have a hard time believing that Congress isn't going to make things even more favorable by the time these loans conclude. My guess as to what Congress enacts:

(1) Eliminate income tax on the forgiven debt.
(2) Better interest rates (somewhere between 2.5% and 4%).
(3) Better tax deductions on student loan interest (currently capped at $2,500; I expect this to go up).
(4) Better subsidization of interest.

Of course, all of this would tip the scale even more in favor of stringing out your loans as long as possible, which is exactly what I'm doing.

To OP, though, you've already put $50k cash towards $90k of loans. Let this be a lesson that once you throw money towards debt, there's no bringing it back, ever (which is part of the reason why so many people on here are against aggressive mortgage repayment). At this point, the math to string out the loans does not make sense, so just pay them off as fast as you can.

charis

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Re: To payoff student loans or not (b/c Hillary)
« Reply #54 on: July 11, 2016, 08:07:04 AM »
I agree that given the amount that you have already paid toward these loans, there is no point in reducing your payments now, much less hoping that more forgiveness is coming in the near future.   People are quick to denounce loan forgiveness, but forget there already are, and have been for years, many federal and state loan forgiveness programs for public sector employees in a variety of fields.  Not many borrowers actually take advantage of these, if they qualify, and the government makes billions off student loan interest.

thd7t

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Re: To payoff student loans or not (b/c Hillary)
« Reply #55 on: July 11, 2016, 08:43:28 AM »
Refinance at the very least. You are paying an exorbitant rate. If you can knock that down, paying a low amount will be win-win.

If OP's loans are federal loans, for the love of God don't do this. The benefits that come with federal student loans (forbearance, being able to enroll in income-based repayment plans, they go away upon your death, etc.) far outweighs the benefits of refinancing your loans.

I just applied at Earnest...

3.87% variable
5.07% fixed

So she had $90K, I just paid them down $40K last week so $50K.  About $5K is at really low rates so wouldn't refinance those.  So say she has $45K right now at 6.55%.

On Aug 1st I will have $20K more cash I was going to put on them to get them down to $25k and then with work bonuses hopefully knock them out by the end of the year then move on in life socking away 3-5K a month into investments.

Does any of that info change the thought?

Wouldn't there be a cost to refinance?

Your original question intrigued posters like Fields123 and me, who read about student loans way more than we should. And what your father said wasn't exactly true, but it was close: the student loan legislation only blows in one direction, and that direction is always towards better terms for the borrower.

Student loan "forgiveness" started with PSLF: work for 10 years in public job, payments would be based on your income (not your debt), and your loans would be forgiven. Then came Income Based Repayment, which expanded income-based repayment to borrowers who worked in the private sector. IBR is calculated on 15% of AGI and is forgiven after 25 years, but only those who had loans after 2007 (I think) were eligible. Then came "Pay As You Earn."  This lowered the AGI calculation to 10%, but still couldn't be used by people who took out loans prior to 2007ish.

And then came the greatest student loan program to date, Revised Pay As You Earn. This is based on 10% of AGI, half of unpaid interest gets subsidized, those with undergrad debt are forgiven after 20 years, professional debt is 25. Do the math and if you're near 100k in loans, REPAYE is the greatest hedge of all time.

It should be noted that for IBR, PAYE, and REPAYE, you have to pay income tax on the amount forgiven.

But whether that will actually be imposed is another story. The first IBR people will be done paying the terms of their loan in about 17-18 years. Think about how far we've come on student loans in the last decade, and I have a hard time believing that Congress isn't going to make things even more favorable by the time these loans conclude. My guess as to what Congress enacts:

(1) Eliminate income tax on the forgiven debt.
(2) Better interest rates (somewhere between 2.5% and 4%).
(3) Better tax deductions on student loan interest (currently capped at $2,500; I expect this to go up).
(4) Better subsidization of interest.

Of course, all of this would tip the scale even more in favor of stringing out your loans as long as possible, which is exactly what I'm doing.

To OP, though, you've already put $50k cash towards $90k of loans. Let this be a lesson that once you throw money towards debt, there's no bringing it back, ever (which is part of the reason why so many people on here are against aggressive mortgage repayment). At this point, the math to string out the loans does not make sense, so just pay them off as fast as you can.
Your concern about refinancing is partly correct. As long as the spouse's loans aren't consolidated together, they still discharge upon death. Regarding forbearance and IBR, they don't seem to have much value given OP's savings and income. If as you suggest, they pay the loans as quickly as possible, there is no benefit to maintaining the higher rates.

ReadySetMillionaire

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Re: To payoff student loans or not (b/c Hillary)
« Reply #56 on: July 11, 2016, 09:33:01 AM »
Your concern about refinancing is partly correct. As long as the spouse's loans aren't consolidated together, they still discharge upon death. Regarding forbearance and IBR, they don't seem to have much value given OP's savings and income. If as you suggest, they pay the loans as quickly as possible, there is no benefit to maintaining the higher rates.

Federal loans basically act as disability insurance. Assuming OP pays this by the end of next year (eighteen months), keeping the loans as federal will cost maybe an extra $800 in interest paid, and that's assuming he gets a great private rate (around 3.5%). The difference is considerably less if he gets a so-so interest rate, which is possible given his presumably young credit history.

Also, I suspect that if he wanted to get a great rate, he and his wife would have to co-sign the refinance, which isn't good.

So the extra cost associated with higher interest rates is well worth it.
« Last Edit: July 11, 2016, 09:35:14 AM by ReadySetMillionaire »

therethere

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Re: To payoff student loans or not (b/c Hillary)
« Reply #57 on: July 11, 2016, 10:44:19 AM »
This is the disclosure from my Earnest refinance:
 
Loan Discharge Provisions.
 You will discharge (forgive) my Loan if (a) I die and you receive acceptable documentation of my death consisting of a
certied copy of my death certicate or other documentation acceptable to you; or (b) if I become totally and permanently disabled (“TPD”) as
dened below. In order to establish total and permanent disability I must demonstrate to your satisfaction that I am unable to engage in any
substantial gainful activity due to a physical or mental impairment that: (i) can be expected to result in death; (ii) has lasted for a continuous period
of not less than sixty (60) months; or (iii) can be expected to last for a continuous period of not less than sixty (60) months. A doctor of medicine or
osteopathy, authorized to practice in the United States, must describe and certify my TPD status on your TPD discharge application form.

Refinance is also eligible for forbearance in 3 month increments and deferments in case of job loss, military, or university enrollment.

Just curious, what other protections am I missing out on compared to federal loans? (Other than the loan forgiveness since I wasn't eligible anyway)

Telecaster

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Re: To payoff student loans or not (b/c Hillary)
« Reply #58 on: July 11, 2016, 11:22:36 AM »

I understand what you're saying, but for me it's not passing the common sense check. If the programs were profitable, private lenders would be entering and offering loans at lower interest rates than what the federal government is to capitalize on that profit and offer better value loans to students. Never trust a politician, here's an article explaining why what they said is technically correct, but misleading:


 Private lenders are more than happy to give you a student loan--but at higher interest rates.  Banks are all about return on equity.  The government isn't trying to maximize ROE. 

Your point about fair value accounting is why I used the word "profit" in quotes and my comment that people be paying loans back over the coming years and decades, so we don't really know the true cost.   Fair value is GAAP, but it is still an estimate.   But the reality is that right now, student loans bring in more money to the government than they cost. 

golden1

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Re: To payoff student loans or not (b/c Hillary)
« Reply #59 on: July 11, 2016, 11:29:57 AM »
This attitude is why the human race can't have nice things.  "I suffered, so by god, everyone else has to suffer the same as I did."  Where does that end? 

It is in everyone's best interest to have an educated population.  Currently our system puts up a lot of economic barriers to that.  I like the idea of having free online education supplemented by local discussion centers/ lab workshops.  I also like the idea of a more formalized system of mentoring through apprenticeships/ internships.  For type of jobs that are available, people need a better level of training than they are getting. 

Our system of higher education isn't training people particularly well for the amount of money invested.  It is just padding the coffers of university administration and the finance industry.  A loan that you can't ever forgive or discharge through bankruptcy?  Yes, please!


Jack

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Re: To payoff student loans or not (b/c Hillary)
« Reply #60 on: July 11, 2016, 11:44:37 AM »
It is in everyone's best interest to have an educated population.

Is it? Let's question that statement for a moment:

1. How educated is "educated?" Shouldn't a high-school education be enough? If not, then how do we know a bachelor's degree would be enough either -- should we keep pushing so that eventually everyone would be expected to have a PhD?

2. Is the real goal to produce an educated populace, or merely a skilled workforce? There seems to be much disagreement on this point: on one hand, some people disparage the traditional liberal-arts curriculum as failing to prepare students for the workforce, but on the other hand, other people seem to think everyone should go to college (as opposed to apprenticing in the trades). Personally, I think we need more well-read tradespeople with good critical thinking skills and understanding of civics, but I'm not sure how best to accomplish that.

clarkfan1979

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Re: To payoff student loans or not (b/c Hillary)
« Reply #61 on: July 12, 2016, 03:36:07 PM »
Pay off the loans. Assuming Hillary will pass legislation for high income earners to not pay off their loans sound like crazy speculation.

wenchsenior

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Re: To payoff student loans or not (b/c Hillary)
« Reply #62 on: July 14, 2016, 08:25:20 AM »
Pay off the loans. Assuming Hillary will pass legislation for high income earners to not pay off their loans sound like crazy speculation.

Hillary won't pass any such legislation even if she wins because presidents don't have that power to pass legislation and she has never proposed that anyway.

Congress also won't pass legislation to forgive student loans because 1) very few Dems have any interest in doing this; 2) the vast majority of Repubs have no interest in doing this; even if a majority of Dems could be convinced to vote for such legislation....3) the House will remain in GOP control for at least the next 4 years and likely longer than that; and 4) there is no guarantee the Dems will take even the Senate during this cycle (though they have a shot at it), and if they do they could lose it 2 years from now. No Dem-controlled congress is likely in the offing anytime in the next 4 years.

Reasons 2-4 are also why precisely none of Bernie Sander's platform positions (e.g., free college) would EVER pass, even if he were to have won the nom/presidency.

Spitfire

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Re: To payoff student loans or not (b/c Hillary)
« Reply #63 on: July 14, 2016, 08:53:07 AM »
I'd pay them off, especially since you think it is doable by the end of the year. Paying off 90k per year in the loans sounds like you have a great savings rate. Put this behind you and start up your stache on the way to a bright future.

onlykelsey

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Re: To payoff student loans or not (b/c Hillary)
« Reply #64 on: July 14, 2016, 09:25:41 AM »
Pay off the loans. Assuming Hillary will pass legislation for high income earners to not pay off their loans sound like crazy speculation.

Hillary won't pass any such legislation even if she wins because presidents don't have that power to pass legislation and she has never proposed that anyway.

Congress also won't pass legislation to forgive student loans because 1) very few Dems have any interest in doing this; 2) the vast majority of Repubs have no interest in doing this; even if a majority of Dems could be convinced to vote for such legislation....3) the House will remain in GOP control for at least the next 4 years and likely longer than that; and 4) there is no guarantee the Dems will take even the Senate during this cycle (though they have a shot at it), and if they do they could lose it 2 years from now. No Dem-controlled congress is likely in the offing anytime in the next 4 years.

Reasons 2-4 are also why precisely none of Bernie Sander's platform positions (e.g., free college) would EVER pass, even if he were to have won the nom/presidency.

But Sanders is going to give us free college!!!!!!!!!!11!!1!

Agreed on all points.  I'm a bit to Clinton's left on some points and really wished she had a credible opponent from the left in the primary, but Sanders just makes ill-researched promises that have 0% chance of succeeding, and then Clinton is left looking stingy or not left enough.  Frustrating.  We are not electing a dictator. 

Jack

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Re: To payoff student loans or not (b/c Hillary)
« Reply #65 on: July 14, 2016, 09:33:11 AM »
But Sanders is going to give us free college!!!!!!!!!!11!!1!

Agreed on all points.  I'm a bit to Clinton's left on some points and really wished she had a credible opponent from the left in the primary, but Sanders just makes ill-researched promises that have 0% chance of succeeding, and then Clinton is left looking stingy or not left enough.  Frustrating.  We are not electing a dictator.

Anybody who says things like this has no clue whatsoever what half of Sanders' positions actually are, and has instead only paid attention to the sensationalized parts (as proven by the first sentence quoted).

Also, Hillary is the one who has no "credibility."

wenchsenior

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Re: To payoff student loans or not (b/c Hillary)
« Reply #66 on: July 14, 2016, 09:40:07 AM »
But Sanders is going to give us free college!!!!!!!!!!11!!1!

Agreed on all points.  I'm a bit to Clinton's left on some points and really wished she had a credible opponent from the left in the primary, but Sanders just makes ill-researched promises that have 0% chance of succeeding, and then Clinton is left looking stingy or not left enough.  Frustrating.  We are not electing a dictator.

Anybody who says things like this has no clue whatsoever what half of Sanders' positions actually are, and has instead only paid attention to the sensationalized parts (as proven by the first sentence quoted).

Also, Hillary is the one who has no "credibility."

Point taken on my oversimplification of one of Sanders' policies. I still think most of them had a tinker's chance in hell of ever being passed.

Helvegen

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Re: To payoff student loans or not (b/c Hillary)
« Reply #67 on: July 14, 2016, 10:16:42 AM »
I am adamantly opposed to full loan forgiveness.

I busted my ass in college, only applied to in state schools, went to an in state school, lived on very little for 4 years, took on a hard STEM major, worked through college, applied for scholarships and still came out with $10k in debt. Guess what, during my first job, I saved as much as I could and paid back the loan ASAP because that was the agreement I made.

Loan forgiveness crosses the line when so many of us sacrificed (my parents included who helped partially fund my tuition). What precedent does that set in this country? Make terrible decisions, but don't worry about the consequences, big government is here to save you?

I hate Donald Trump but if someone is using loan forgiveness as a centerpiece of their platform I will vote against it out of spite.

TBH, that is exactly the message that came across with Wall Street bailouts. Make a bunch of shitty decisions, destroy an economy, who cares, take all the government cheese you can carry, pls.

In for a penny, in for a pound.

thd7t

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Re: To payoff student loans or not (b/c Hillary)
« Reply #68 on: July 14, 2016, 11:12:22 AM »
I am adamantly opposed to full loan forgiveness.

I busted my ass in college, only applied to in state schools, went to an in state school, lived on very little for 4 years, took on a hard STEM major, worked through college, applied for scholarships and still came out with $10k in debt. Guess what, during my first job, I saved as much as I could and paid back the loan ASAP because that was the agreement I made.

Loan forgiveness crosses the line when so many of us sacrificed (my parents included who helped partially fund my tuition). What precedent does that set in this country? Make terrible decisions, but don't worry about the consequences, big government is here to save you?

I hate Donald Trump but if someone is using loan forgiveness as a centerpiece of their platform I will vote against it out of spite.
So far, no one is campaigning on loan forgiveness, as such, but regarding your own struggles and sacrifices, do you really feel like someone else's loans being forgiven invalidates that? You should just be proud of yourself, not spiteful.

randymarsh

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Re: To payoff student loans or not (b/c Hillary)
« Reply #69 on: July 14, 2016, 11:56:40 AM »
I am adamantly opposed to full loan forgiveness.

I busted my ass in college, only applied to in state schools, went to an in state school, lived on very little for 4 years, took on a hard STEM major, worked through college, applied for scholarships and still came out with $10k in debt. Guess what, during my first job, I saved as much as I could and paid back the loan ASAP because that was the agreement I made.

Loan forgiveness crosses the line when so many of us sacrificed (my parents included who helped partially fund my tuition). What precedent does that set in this country? Make terrible decisions, but don't worry about the consequences, big government is here to save you?

I hate Donald Trump but if someone is using loan forgiveness as a centerpiece of their platform I will vote against it out of spite.
So far, no one is campaigning on loan forgiveness, as such, but regarding your own struggles and sacrifices, do you really feel like someone else's loans being forgiven invalidates that? You should just be proud of yourself, not spiteful.

It doesn't invalidate their efforts, but it does feel like a slap in the face if you work hard for years making the right choices only to have your neighbor get the exact same result without the work you put in.

I have a similar beef with Pell grants. Yes, they have helped many people graduate college. My own parents may have received it when they went back to school as older adults. I think that's great. However, millions (tens?) of dollars are wasted every year on people who do not finish school. They go for a semester, maybe 2, then drop out. I admit I over borrowed and that's my fault, but I also wasn't provided with 5K of grant money. Which could have prevented me from even starting to borrow!

It seems wrong that I worked hard and graduated in 4 years with tons of debt to pay back to the government (along with a higher tax rate...) when other students dick around for a few semesters and have no responsibility to pay back money they basically wasted. The whole thing is a mess. We've been so obsessed with getting poor kids into college we never worried about how to keep them there. The result is money wasted and people like me who feel like they got stiffed.

thd7t

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Re: To payoff student loans or not (b/c Hillary)
« Reply #70 on: July 14, 2016, 12:25:25 PM »
I am adamantly opposed to full loan forgiveness.

I busted my ass in college, only applied to in state schools, went to an in state school, lived on very little for 4 years, took on a hard STEM major, worked through college, applied for scholarships and still came out with $10k in debt. Guess what, during my first job, I saved as much as I could and paid back the loan ASAP because that was the agreement I made.

Loan forgiveness crosses the line when so many of us sacrificed (my parents included who helped partially fund my tuition). What precedent does that set in this country? Make terrible decisions, but don't worry about the consequences, big government is here to save you?

I hate Donald Trump but if someone is using loan forgiveness as a centerpiece of their platform I will vote against it out of spite.
So far, no one is campaigning on loan forgiveness, as such, but regarding your own struggles and sacrifices, do you really feel like someone else's loans being forgiven invalidates that? You should just be proud of yourself, not spiteful.

It doesn't invalidate their efforts, but it does feel like a slap in the face if you work hard for years making the right choices only to have your neighbor get the exact same result without the work you put in.

I have a similar beef with Pell grants. Yes, they have helped many people graduate college. My own parents may have received it when they went back to school as older adults. I think that's great. However, millions (tens?) of dollars are wasted every year on people who do not finish school. They go for a semester, maybe 2, then drop out. I admit I over borrowed and that's my fault, but I also wasn't provided with 5K of grant money. Which could have prevented me from even starting to borrow!

It seems wrong that I worked hard and graduated in 4 years with tons of debt to pay back to the government (along with a higher tax rate...) when other students dick around for a few semesters and have no responsibility to pay back money they basically wasted. The whole thing is a mess. We've been so obsessed with getting poor kids into college we never worried about how to keep them there. The result is money wasted and people like me who feel like they got stiffed.
Pell grants are an odd case. The graduation rates among students receiving Pell grants are lower, but it appears that a few institutions with really low graduation rates are dragging the numbers down: https://www.google.com/url?sa=t&source=web&rct=j&url=http://hechingerreport.org/an-unprecedented-look-at-pell-grant-graduation-rates-from-1149-schools/&ved=0ahUKEwjf7ZX5yPPNAhWTCD4KHbWnAkIQFggbMAA&usg=AFQjCNHxg3CNh3DiTqe08JSORr3NAedr0Q

Omitting these institutions brings Pell graduation rates pretty close to parity with other students.
« Last Edit: July 14, 2016, 12:28:46 PM by thd7t »

randymarsh

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Re: To payoff student loans or not (b/c Hillary)
« Reply #71 on: July 14, 2016, 12:32:03 PM »
I am adamantly opposed to full loan forgiveness.

I busted my ass in college, only applied to in state schools, went to an in state school, lived on very little for 4 years, took on a hard STEM major, worked through college, applied for scholarships and still came out with $10k in debt. Guess what, during my first job, I saved as much as I could and paid back the loan ASAP because that was the agreement I made.

Loan forgiveness crosses the line when so many of us sacrificed (my parents included who helped partially fund my tuition). What precedent does that set in this country? Make terrible decisions, but don't worry about the consequences, big government is here to save you?

I hate Donald Trump but if someone is using loan forgiveness as a centerpiece of their platform I will vote against it out of spite.
So far, no one is campaigning on loan forgiveness, as such, but regarding your own struggles and sacrifices, do you really feel like someone else's loans being forgiven invalidates that? You should just be proud of yourself, not spiteful.

It doesn't invalidate their efforts, but it does feel like a slap in the face if you work hard for years making the right choices only to have your neighbor get the exact same result without the work you put in.

I have a similar beef with Pell grants. Yes, they have helped many people graduate college. My own parents may have received it when they went back to school as older adults. I think that's great. However, millions (tens?) of dollars are wasted every year on people who do not finish school. They go for a semester, maybe 2, then drop out. I admit I over borrowed and that's my fault, but I also wasn't provided with 5K of grant money. Which could have prevented me from even starting to borrow!

It seems wrong that I worked hard and graduated in 4 years with tons of debt to pay back to the government (along with a higher tax rate...) when other students dick around for a few semesters and have no responsibility to pay back money they basically wasted. The whole thing is a mess. We've been so obsessed with getting poor kids into college we never worried about how to keep them there. The result is money wasted and people like me who feel like they got stiffed.
Pell grants are an odd case. The graduation rates among students receiving Pell grants are lower, but it appears that a few institutions with really low graduation rates are dragging the numbers down: https://www.google.com/url?sa=t&source=web&rct=j&url=http://hechingerreport.org/an-unprecedented-look-at-pell-grant-graduation-rates-from-1149-schools/&ved=0ahUKEwjf7ZX5yPPNAhWTCD4KHbWnAkIQFggbMAA&usg=AFQjCNHxg3CNh3DiTqe08JSORr3NAedr0Q

Omitting these institutions brings Pell graduation rates pretty close to parity with other students.

The rates might be the same but my issue is that the Pell grant students leave and that's it. The borrowers leave and have to pay back loans.

thd7t

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Re: To payoff student loans or not (b/c Hillary)
« Reply #72 on: July 14, 2016, 12:38:42 PM »
I am adamantly opposed to full loan forgiveness.

I busted my ass in college, only applied to in state schools, went to an in state school, lived on very little for 4 years, took on a hard STEM major, worked through college, applied for scholarships and still came out with $10k in debt. Guess what, during my first job, I saved as much as I could and paid back the loan ASAP because that was the agreement I made.

Loan forgiveness crosses the line when so many of us sacrificed (my parents included who helped partially fund my tuition). What precedent does that set in this country? Make terrible decisions, but don't worry about the consequences, big government is here to save you?

I hate Donald Trump but if someone is using loan forgiveness as a centerpiece of their platform I will vote against it out of spite.
So far, no one is campaigning on loan forgiveness, as such, but regarding your own struggles and sacrifices, do you really feel like someone else's loans being forgiven invalidates that? You should just be proud of yourself, not spiteful.

It doesn't invalidate their efforts, but it does feel like a slap in the face if you work hard for years making the right choices only to have your neighbor get the exact same result without the work you put in.

I have a similar beef with Pell grants. Yes, they have helped many people graduate college. My own parents may have received it when they went back to school as older adults. I think that's great. However, millions (tens?) of dollars are wasted every year on people who do not finish school. They go for a semester, maybe 2, then drop out. I admit I over borrowed and that's my fault, but I also wasn't provided with 5K of grant money. Which could have prevented me from even starting to borrow!

It seems wrong that I worked hard and graduated in 4 years with tons of debt to pay back to the government (along with a higher tax rate...) when other students dick around for a few semesters and have no responsibility to pay back money they basically wasted. The whole thing is a mess. We've been so obsessed with getting poor kids into college we never worried about how to keep them there. The result is money wasted and people like me who feel like they got stiffed.
Pell grants are an odd case. The graduation rates among students receiving Pell grants are lower, but it appears that a few institutions with really low graduation rates are dragging the numbers down: https://www.google.com/url?sa=t&source=web&rct=j&url=http://hechingerreport.org/an-unprecedented-look-at-pell-grant-graduation-rates-from-1149-schools/&ved=0ahUKEwjf7ZX5yPPNAhWTCD4KHbWnAkIQFggbMAA&usg=AFQjCNHxg3CNh3DiTqe08JSORr3NAedr0Q

Omitting these institutions brings Pell graduation rates pretty close to parity with other students.

The rates might be the same but my issue is that the Pell grant students leave and that's it. The borrowers leave and have to pay back loans.
That wasn't the issue that you described. You said you felt stiffed, because they didn't finish college and didn't have to pay. You even gave the example of it being okay when your parents took the grants!

randymarsh

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Re: To payoff student loans or not (b/c Hillary)
« Reply #73 on: July 14, 2016, 12:55:21 PM »
I am adamantly opposed to full loan forgiveness.

I busted my ass in college, only applied to in state schools, went to an in state school, lived on very little for 4 years, took on a hard STEM major, worked through college, applied for scholarships and still came out with $10k in debt. Guess what, during my first job, I saved as much as I could and paid back the loan ASAP because that was the agreement I made.

Loan forgiveness crosses the line when so many of us sacrificed (my parents included who helped partially fund my tuition). What precedent does that set in this country? Make terrible decisions, but don't worry about the consequences, big government is here to save you?

I hate Donald Trump but if someone is using loan forgiveness as a centerpiece of their platform I will vote against it out of spite.
So far, no one is campaigning on loan forgiveness, as such, but regarding your own struggles and sacrifices, do you really feel like someone else's loans being forgiven invalidates that? You should just be proud of yourself, not spiteful.

It doesn't invalidate their efforts, but it does feel like a slap in the face if you work hard for years making the right choices only to have your neighbor get the exact same result without the work you put in.

I have a similar beef with Pell grants. Yes, they have helped many people graduate college. My own parents may have received it when they went back to school as older adults. I think that's great. However, millions (tens?) of dollars are wasted every year on people who do not finish school. They go for a semester, maybe 2, then drop out. I admit I over borrowed and that's my fault, but I also wasn't provided with 5K of grant money. Which could have prevented me from even starting to borrow!

It seems wrong that I worked hard and graduated in 4 years with tons of debt to pay back to the government (along with a higher tax rate...) when other students dick around for a few semesters and have no responsibility to pay back money they basically wasted. The whole thing is a mess. We've been so obsessed with getting poor kids into college we never worried about how to keep them there. The result is money wasted and people like me who feel like they got stiffed.
Pell grants are an odd case. The graduation rates among students receiving Pell grants are lower, but it appears that a few institutions with really low graduation rates are dragging the numbers down: https://www.google.com/url?sa=t&source=web&rct=j&url=http://hechingerreport.org/an-unprecedented-look-at-pell-grant-graduation-rates-from-1149-schools/&ved=0ahUKEwjf7ZX5yPPNAhWTCD4KHbWnAkIQFggbMAA&usg=AFQjCNHxg3CNh3DiTqe08JSORr3NAedr0Q

Omitting these institutions brings Pell graduation rates pretty close to parity with other students.

The rates might be the same but my issue is that the Pell grant students leave and that's it. The borrowers leave and have to pay back loans.
That wasn't the issue that you described. You said you felt stiffed, because they didn't finish college and didn't have to pay. You even gave the example of it being okay when your parents took the grants!

Huh? I do feel stiffed, because they didn't finish and don't have to pay anything back. My parents finished, so not the same thing.

therethere

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Re: To payoff student loans or not (b/c Hillary)
« Reply #74 on: July 14, 2016, 01:02:19 PM »
Um as someone who paid off 100k+ of my own loans and 100k+ of husband's. I DO feel invalidated that others get off the hook on their loans in any sort of loan forgiveness at all. I'm even against the new REPAYE and all that crap. Want lower payments? Sure extend out your loan a ton and take the lower payments.   I don't know the full requirements of the 10 year public service forgiveness but I am okay with a program along those lines. Otherwise, I think everyone should have to pay off their loans unless they are permanently disabled or die. Is that how its going to work in reality... doubtful.

We've pretty much forfeited one of our salary's every year since we graduated (10 years!) to pay off our student loans. So to have others shirk their own responsibility on much smaller amounts does piss me off! I think the 15% of discretionary or whatever figure they are using is much too low too. As one forum member has shown you can easily use REPAYE to get out of most of the responsibility for your loan by maxing out anything that reduces AGI. Thus allowing the borrowers not paying off their student loan in full to save for retirement, buy a house, start a family, etc. All things I have had to forgo in order to pay off my loans that are my responsibility.

bb11

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Re: To payoff student loans or not (b/c Hillary)
« Reply #75 on: July 14, 2016, 01:15:43 PM »
There is not going to be any sweeping loan forgiveness. Pay the loans off.

charis

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Re: To payoff student loans or not (b/c Hillary)
« Reply #76 on: July 14, 2016, 02:13:18 PM »
I think the 15% of discretionary or whatever figure they are using is much too low too. As one forum member has shown you can easily use REPAYE to get out of most of the responsibility for your loan by maxing out anything that reduces AGI. Thus allowing the borrowers not paying off their student loan in full to save for retirement, buy a house, start a family, etc. All things I have had to forgo in order to pay off my loans that are my responsibility.

This really just comes across as bitter (which you are certainly entitled to feel) because someone didn't choose to stall all of these things as you did.  Is it your position that it is morally superior to pay back what you borrowed instead of taking advantage of loan forgiveness programs that the federal government extends for its federal loans?  If so, unfortunately the government doesn't care about your personal moral compass, the government wants to get paid.  And that is way more likely to happen if the millions of students in or on the verge of default are paying a percentage of their income.   

It's the same argument people use against food stamps and other welfare.  "I did it on my own, why should anyone else get help."  Yes, some people will try to game the system(s), but that doesn't mean that most don't really need it.   Don't be bitter, be confident in your moral and financial superiority.

randymarsh

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Re: To payoff student loans or not (b/c Hillary)
« Reply #77 on: July 14, 2016, 03:17:32 PM »
I think the 15% of discretionary or whatever figure they are using is much too low too. As one forum member has shown you can easily use REPAYE to get out of most of the responsibility for your loan by maxing out anything that reduces AGI. Thus allowing the borrowers not paying off their student loan in full to save for retirement, buy a house, start a family, etc. All things I have had to forgo in order to pay off my loans that are my responsibility.

This really just comes across as bitter (which you are certainly entitled to feel) because someone didn't choose to stall all of these things as you did.  Is it your position that it is morally superior to pay back what you borrowed instead of taking advantage of loan forgiveness programs that the federal government extends for its federal loans?  If so, unfortunately the government doesn't care about your personal moral compass, the government wants to get paid.  And that is way more likely to happen if the millions of students in or on the verge of default are paying a percentage of their income.   

It's the same argument people use against food stamps and other welfare.  "I did it on my own, why should anyone else get help."  Yes, some people will try to game the system(s), but that doesn't mean that most don't really need it.   Don't be bitter, be confident in your moral and financial superiority.

Agree with your overall point (I don't really have a problem with income based plans. In all likelihood many people are going to end up paying their loans for 20+ years and will pay more overall), but welfare isn't a good analogy. People choose to take on debt & the amount of that debt. I suspect most people on welfare are either chronically poor or hit a rough patch from unemployment.

therethere

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Re: To payoff student loans or not (b/c Hillary)
« Reply #78 on: July 14, 2016, 03:18:10 PM »
Yes, I am bitter and jealous! I delayed and given up a lot to pay off my loans. Its called being responsible. Surprisingly, I don't feel morally superior. I would probably use the programs to my advantage too if available. But they didn't then and they do now.

I don't really care how you choose to live your life. Pay down your loans quick or slow. Don't pay them at all and face the consequences! But in conversations around student loan forgiveness there are a lot of people playing the victim and that they deserve to get their loans forgiven for blah blah blah. The entitlement is and the complete absence of responsibility is what bothers me. I believe the majority of people could pay them back if they actually tried. Instead they prioritize other things above paying off their debt and then complain that they can't afford the payments. I realize there is no perfect solution because some people truly do need help. But when these programs get to the point where they are subsidizing people who have the ability to pay but just have other priorities that's when its overreaching too far. I am upset that the push is for the net of student loan forgiveness to keep getting larger and larger and "help" more people.


Frugalman19

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Re: To payoff student loans or not (b/c Hillary)
« Reply #79 on: July 15, 2016, 07:39:08 AM »
Refinance and pay off debt, don't wait for a government handout. You/your wife chose to take on this debt, be an adult and pay it off. It is simply immoral to wait for someone else to pay your debt for you. This is what's wrong with the US. Your wife signed for that loan!!

charis

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Re: To payoff student loans or not (b/c Hillary)
« Reply #80 on: July 15, 2016, 08:21:20 AM »
I think the 15% of discretionary or whatever figure they are using is much too low too. As one forum member has shown you can easily use REPAYE to get out of most of the responsibility for your loan by maxing out anything that reduces AGI. Thus allowing the borrowers not paying off their student loan in full to save for retirement, buy a house, start a family, etc. All things I have had to forgo in order to pay off my loans that are my responsibility.

This really just comes across as bitter (which you are certainly entitled to feel) because someone didn't choose to stall all of these things as you did.  Is it your position that it is morally superior to pay back what you borrowed instead of taking advantage of loan forgiveness programs that the federal government extends for its federal loans?  If so, unfortunately the government doesn't care about your personal moral compass, the government wants to get paid.  And that is way more likely to happen if the millions of students in or on the verge of default are paying a percentage of their income.   

It's the same argument people use against food stamps and other welfare.  "I did it on my own, why should anyone else get help."  Yes, some people will try to game the system(s), but that doesn't mean that most don't really need it.   Don't be bitter, be confident in your moral and financial superiority.

Agree with your overall point (I don't really have a problem with income based plans. In all likelihood many people are going to end up paying their loans for 20+ years and will pay more overall), but welfare isn't a good analogy. People choose to take on debt & the amount of that debt. I suspect most people on welfare are either chronically poor or hit a rough patch from unemployment.

True, it's not a great analogy, but for many people, not going to college is not really a viable option.   Also, there is a critical need for certain people to enter certain low paying fields (teaching is the biggie that comes to mind), for which advanced degrees are required.   There are also still many intelligent people who are the first generation in their (poor) family to attend college.  Even with grants, scholarships, and public colleges, tuition is out of reach for a lot of students.    I agree that the current entitlement mentality concerning loan forgiveness is a big problem. 

tyleriam

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Re: To payoff student loans or not (b/c Hillary)
« Reply #81 on: July 17, 2016, 09:36:45 AM »
OP here...

I didn't realize this question was going to spark so much debate.

I am going to keep paying them down.  On Aug 1st I am going to payoff the next biggest one which is $16k and hang onto $5K as an emergency fund.  Depending on work bonuses I may be able to knock the last of them out by year end, if not within the first few months of 2017.  After that I plan to build our emergency fund back up to $12K and then go from there.

As far as the morality of it...I agree, we took the loans, she got the degree, we owe the money and morally we should pay it back.  With that said, let's just for a moment imagine that Hillary gets elected and the first thing she does is passes a massive forgiveness bill that would have wiped out our loans.  I understand that is uber unlikely but I guess it is just the thought of that happening that leaves a little kernel of doubt.  I appreciate all the kicks in the ass to charge forward and get done with them in this thread.  That is what I needed to push forward and help with the nagging doubts.

MrsPete

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Re: To payoff student loans or not (b/c Hillary)
« Reply #82 on: July 17, 2016, 09:47:45 AM »
My father, who is a smart guy, former CEO of multiple companies, is telling me not to do it.  He thinks the politicians are going to eventually forgive them so we should just pay the absolute minimum and wait for that.  Our household earns low 6 figures.
You asked for our thoughts:

First, I think that if this guy were really all that smart, he'd have guided his daughter down a path that didn't lead to so much debt.  Really, college debt isn't that hard to avoid; perhaps she couldn't see it when she was 18 years old, but Dad should've.  He may be a great guy and solid business leader, but this makes me question his personal financial ability (incidentally, my own father was similar:  He was brilliant, worked in finance and was highly regarded ... but had no sense of restraint in his personal spending).   

Second, if you're earning 6 figures, you are "the rich" whom Hillary considers just short of the enemy.  Even if she enacts any type of student debt forgiveness act (which, like others here, I think is unlikely), it will be for people earning lower wages.

I think you've already received the best advice:  Refinance for a lower interest rate and pay them off. 

[quote author=ReadySetMillionaire link=topic=58427.msg1148451#msg1148451
If OP's loans are federal loans, for the love of God don't do this. The benefits that come with federal student loans (forbearance, being able to enroll in income-based repayment plans, they go away upon your death, etc.) far outweighs the benefits of refinancing your loans.
[/quote]
I'd hope that anyone who's paying off loans that affect other people is smart enough to take out life insurance to pay off those loans in case he or she dies. 

Point taken on my oversimplification of one of Sanders' policies. I still think most of them had a tinker's chance in hell of ever being passed.
He really resonated with my high school students.  Of my 17-18 year old students who are really interested /strongly support a candidate, a few were Trump-supporters, quite a few supported Sanders, and none were interested in Hillary.  When I tried to talk to them about Sanders' inability to follow through with what he was saying (source:  The Constitution), they didn't believe me ... nor were they interested enough to read and fact-check my statements.

« Last Edit: July 17, 2016, 10:02:58 AM by MrsPete »

wenchsenior

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Re: To payoff student loans or not (b/c Hillary)
« Reply #83 on: July 17, 2016, 10:56:27 AM »
OP here...

I didn't realize this question was going to spark so much debate.

I am going to keep paying them down.  On Aug 1st I am going to payoff the next biggest one which is $16k and hang onto $5K as an emergency fund.  Depending on work bonuses I may be able to knock the last of them out by year end, if not within the first few months of 2017.  After that I plan to build our emergency fund back up to $12K and then go from there.

As far as the morality of it...I agree, we took the loans, she got the degree, we owe the money and morally we should pay it back.  With that said, let's just for a moment imagine that Hillary gets elected and the first thing she does is passes a massive forgiveness bill that would have wiped out our loans.  I understand that is uber unlikely but I guess it is just the thought of that happening that leaves a little kernel of doubt.  I appreciate all the kicks in the ass to charge forward and get done with them in this thread.  That is what I needed to push forward and help with the nagging doubts.

Yeah, but this was my point. You sound as though you might be young enough to have not been through many election cycles and don't really understand the likelihood of things becoming law.

Hillary is not running on this promise and never has. But let's assume she were to support such a policy (which is possible), SHE still can't do anything. She has no power to make it law. She can only propose the concept to sympathetic members of Congress, who then have to draft legislation on it, and THEN get a majority of both chambers to agree to pass it and make it law.

Problems is, I'm not sure even a solid Dem-controlled Congress could be convinced to pass such legislation. And for sure no GOP-controlled body will pass it.

BUT, let us go way out on the limb and assume you COULD get a Dem majority to sponsor, draft, and agree to pass such legislation.

Then you run into the brick wall of statistical improbability that the Dems will control both branches of Congress anytime during Hillary's first term (there is almost zero chance of them taking back the House, even if they manage to retake the Senate).

This is why precisely NONE of Bernie Sanders' left-wing proposals would be enacted, even if he were to win the presidency AND the Senate. The House is likely to remain in GOP hands for at least the next 8 years, and possibly much longer than that.  Unless a bunch of extremely unlikely events occur, the absolute best the activist far Left can hope for in terms of national legislation, is a deadlocked stalemate for the next 4-8 years.

So my question is, why would you, tylerium, or your father,assume that this type of forgiveness is likely? It makes NO logical sense. I am sincerely asking, does your father have insider info of some sort? Because I'm willing to be convinced if I'm overlooking something.
« Last Edit: July 17, 2016, 10:58:59 AM by wenchsenior »

tyleriam

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Re: To payoff student loans or not (b/c Hillary)
« Reply #84 on: July 17, 2016, 12:51:15 PM »
My father, who is a smart guy, former CEO of multiple companies, is telling me not to do it.  He thinks the politicians are going to eventually forgive them so we should just pay the absolute minimum and wait for that.  Our household earns low 6 figures.
You asked for our thoughts:

First, I think that if this guy were really all that smart, he'd have guided his daughter down a path that didn't lead to so much debt.  Really, college debt isn't that hard to avoid; perhaps she couldn't see it when she was 18 years old, but Dad should've.  He may be a great guy and solid business leader, but this makes me question his personal financial ability (incidentally, my own father was similar:  He was brilliant, worked in finance and was highly regarded ... but had no sense of restraint in his personal spending).   

Second, if you're earning 6 figures, you are "the rich" whom Hillary considers just short of the enemy.  Even if she enacts any type of student debt forgiveness act (which, like others here, I think is unlikely), it will be for people earning lower wages.


It is my father saying not to pay them off not her's.  The debt is her Master's student loans that she did after moving out of the house.  In other words my father had nothing to do with them.

tyleriam

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Re: To payoff student loans or not (b/c Hillary)
« Reply #85 on: July 17, 2016, 01:09:19 PM »
Yeah, but this was my point. You sound as though you might be young enough to have not been through many election cycles and don't really understand the likelihood of things becoming law.

Hillary is not running on this promise and never has. But let's assume she were to support such a policy (which is possible), SHE still can't do anything. She has no power to make it law. She can only propose the concept to sympathetic members of Congress, who then have to draft legislation on it, and THEN get a majority of both chambers to agree to pass it and make it law.

...

So my question is, why would you, tylerium, or your father,assume that this type of forgiveness is likely? It makes NO logical sense. I am sincerely asking, does your father have insider info of some sort? Because I'm willing to be convinced if I'm overlooking something.

I understand how bills become law.  For ease of typing/conversation I am overstating the simplicity.

At the same time...I would have never thought ObamaCare would have gotten passed and yet it did. 

Hillary's current platform as I understand it involves working to make college free for anyone earning under $125K by 2021.  She also plans to use an executive order (?) to put a 3 month moratorium on interest and in addition somehow allow many/all borrowers to refinance during those 3 months.  I am not sure how accurate that description is, that is just what I have gathered reading the news.  I can see that she has her sights set on buying the young/Bernie voters with some sort of college/student loan program.  Problem is the free college by 2021 thing only affects people who currently cannot vote.  If she wants to buy those votes she has to do something for the current college students and graduates who are already saddled with student loans.  I think she is going to push for something.  Maybe she just pushes a tax bill to make the forgiveness non taxable.  Who knows.  Regardless if it is a 10+ year solution I cannot stand waiting that long.  We have been fiddling around with these damn loans so long I am fed up.

My father is not sure what will happen he just thinks there will be an expansion of the forgiveness programs.  He also is not as debt averse as I am so he thinks if I can refinance them to 3 something I should put money in the market instead.

wenchsenior

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Re: To payoff student loans or not (b/c Hillary)
« Reply #86 on: July 17, 2016, 01:42:13 PM »
Yeah, but this was my point. You sound as though you might be young enough to have not been through many election cycles and don't really understand the likelihood of things becoming law.

Hillary is not running on this promise and never has. But let's assume she were to support such a policy (which is possible), SHE still can't do anything. She has no power to make it law. She can only propose the concept to sympathetic members of Congress, who then have to draft legislation on it, and THEN get a majority of both chambers to agree to pass it and make it law.

...

So my question is, why would you, tylerium, or your father,assume that this type of forgiveness is likely? It makes NO logical sense. I am sincerely asking, does your father have insider info of some sort? Because I'm willing to be convinced if I'm overlooking something.

I understand how bills become law.  For ease of typing/conversation I am overstating the simplicity.

At the same time...I would have never thought ObamaCare would have gotten passed and yet it did. 

Hillary's current platform as I understand it involves working to make college free for anyone earning under $125K by 2021.  She also plans to use an executive order (?) to put a 3 month moratorium on interest and in addition somehow allow many/all borrowers to refinance during those 3 months.  I am not sure how accurate that description is, that is just what I have gathered reading the news.  I can see that she has her sights set on buying the young/Bernie voters with some sort of college/student loan program.  Problem is the free college by 2021 thing only affects people who currently cannot vote.  If she wants to buy those votes she has to do something for the current college students and graduates who are already saddled with student loans.  I think she is going to push for something.  Maybe she just pushes a tax bill to make the forgiveness non taxable.  Who knows.  Regardless if it is a 10+ year solution I cannot stand waiting that long.  We have been fiddling around with these damn loans so long I am fed up.

My father is not sure what will happen he just thinks there will be an expansion of the forgiveness programs.  He also is not as debt averse as I am so he thinks if I can refinance them to 3 something I should put money in the market instead.

Ok,  I can kind of see your reasoning about the student loan thing if I squint.

Re: Obamacare, you are correct that it was extremely unlikely for such legislation to pass. That happened because of a very rare convergence of events: Dem president, broad Dem party support (longstanding for decades) to revise health care law, and Dem control of both branches of Congress (an unlikely result of 8 yrs of Bush presidency with unpopular war, plus a nearly unprecedented economic collapse, PLUS a favorable electoral map for Dems that happened to fall in that particular year). And remember, Dems held that majority for a very short time. But you are correct, they passed a bunch of legislation while they did hold it. It's just unlikely to happen again any time soon.


Jack

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Re: To payoff student loans or not (b/c Hillary)
« Reply #87 on: July 18, 2016, 09:32:34 AM »
With that said, let's just for a moment imagine that Hillary gets elected and the first thing she does is passes a massive forgiveness bill that would have wiped out our loans.  I understand that is uber unlikely but I guess it is just the thought of that happening that leaves a little kernel of doubt.

What you need to do is do the math.

To find the expected value of Hillary loan forgiveness, multiply the probability of it happening by the forgiven loan amount. Then, to find the expected cost of that not happening, multiply one minus that probability by the amount of extra interest you would pay by choosing not to pay down the loans ahead of time.

Eforgiveness = Pforgiveness * $90k

C(no forgiveness) = (1 - Pforgiveness) * $90K((1 + 6.55%)t - 1)

Pforgiveness = P(Hillary elected) * P(Hillary pushes for loan reform) * P(Congress actually passes loan reform)

I estimate the value of Pforgiveness at about 50% * 1% * 1% = 0.005% (and even that might still be a couple of orders of magnitude too high). Therefore, Eforgiveness = $4.50. Under those assumptions, if you'll pay more than $4.50 in extra interest while waiting for loan forgiveness, it's not worth it -- but of course, your assumptions may vary.

My father is not sure what will happen he just thinks there will be an expansion of the forgiveness programs.  He also is not as debt averse as I am so he thinks if I can refinance them to 3 something I should put money in the market instead.

Well now, that changes the math entirely! Your dad is entirely correct about that. Assuming either that (a) the loans refinanced at 3% would still have the same terms regarding things like deferment, forbearance and forgiveness (either in the Hillary situation or in other circumstances, such as disability or death) or (b) you didn't care about terms that were less favorable in that regard, you would be much better off taking the 7% (market returns) - 3% (loan interest) = 4% arbitrage than paying the opportunity cost of not doing so.

Hillary loan forgiveness in that situation would be mostly irrelevant to the decision-making; it would just be a nice bonus if it ended up occurring.

RangerOne

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Re: To payoff student loans or not (b/c Hillary)
« Reply #88 on: July 18, 2016, 12:03:54 PM »
Pay the loans off. Hillary is going to lose anyway.

For Hillary to lose Trump will have to win in a land slide. The GOP will support Trump to whatever degree they have to in public to not completely piss off their base. But most establishment GOP, baring some of the quacks, will 100% be vying for Hillary. Every major US corporation wants Hillary and in a close election every trick in the book will be played to make sure she comes out ahead. Trump is too much of a liability unless they come to an understanding where they believe they can completely control him.

tyleriam

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Re: To payoff student loans or not (b/c Hillary)
« Reply #89 on: July 18, 2016, 12:13:09 PM »
With that said, let's just for a moment imagine that Hillary gets elected and the first thing she does is passes a massive forgiveness bill that would have wiped out our loans.  I understand that is uber unlikely but I guess it is just the thought of that happening that leaves a little kernel of doubt.

What you need to do is do the math.

To find the expected value of Hillary loan forgiveness, multiply the probability of it happening by the forgiven loan amount. Then, to find the expected cost of that not happening, multiply one minus that probability by the amount of extra interest you would pay by choosing not to pay down the loans ahead of time.

Eforgiveness = Pforgiveness * $90k

C(no forgiveness) = (1 - Pforgiveness) * $90K((1 + 6.55%)t - 1)

Pforgiveness = P(Hillary elected) * P(Hillary pushes for loan reform) * P(Congress actually passes loan reform)

I estimate the value of Pforgiveness at about 50% * 1% * 1% = 0.005% (and even that might still be a couple of orders of magnitude too high). Therefore, Eforgiveness = $4.50. Under those assumptions, if you'll pay more than $4.50 in extra interest while waiting for loan forgiveness, it's not worth it -- but of course, your assumptions may vary.

My father is not sure what will happen he just thinks there will be an expansion of the forgiveness programs.  He also is not as debt averse as I am so he thinks if I can refinance them to 3 something I should put money in the market instead.

Well now, that changes the math entirely! Your dad is entirely correct about that. Assuming either that (a) the loans refinanced at 3% would still have the same terms regarding things like deferment, forbearance and forgiveness (either in the Hillary situation or in other circumstances, such as disability or death) or (b) you didn't care about terms that were less favorable in that regard, you would be much better off taking the 7% (market returns) - 3% (loan interest) = 4% arbitrage than paying the opportunity cost of not doing so.

Hillary loan forgiveness in that situation would be mostly irrelevant to the decision-making; it would just be a nice bonus if it ended up occurring.

I like your style!

Another factor I haven't mentioned is wanting freedom and the ability to make some career changes.  I don't feel comfortable doing that until I have eliminated the debt and have the full use of my wife's income during that time.

RangerOne

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Re: To payoff student loans or not (b/c Hillary)
« Reply #90 on: July 18, 2016, 12:15:29 PM »
I have heard similar advice from a father in law I respect for his practicality with money and high corporate standing. But I think you have to dig deeper with him or at least put his advice in context.

I find that many people 50 years or older lived through a period where home loans had far higher interest rates than 6-7% student loans. However at the same time their bank savings were returning 4 and 5%. I think experience with numbers like these has skewed some of their perspective on how unforgiving student loan debt is at what today is a very high interest rate. Considering their is very little beneficial tax treatment to owing tones of money on student loans, unlike owning a home.

I wouldn't count on forgiveness for your student loans at the amount of money you are making. They tend to like to throw the cutoff for such programs somewhere in the range of where student loan interest tax breaks phase out. Sounds like you are already on that cusp. If anything I think the most likely fix we will see is the ability to refinance to more reasonable interest rates more easily, which I think is a fair compromise to lessen the burden of loans.



signhere

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Re: To payoff student loans or not (b/c Hillary)
« Reply #91 on: July 18, 2016, 03:25:14 PM »
I made a (predictably unpopular) post on this topic in the Investor Alley forum a few weeks ago.

Basically, my view is that there WILL, in the near future, be some sort of loan bailout and I've 'put my money where my mouth is' by making only the monthly minimum payments, dragging out repayment as long as possible. I owe roughly 120k @ 7%.

Full disclosure - don't want to sound like a jerk but I was lucky enough to be able to "retire" shortly after graduating so whether I'm right or wrong won't make a significant difference in my lifestyle. If this wasn't the case, I would be more tempted to take the risk averse route and refinance with SoFi or a similar organization, though losing out on the federal loan repayment options/benefits (such as forgiveness for public service jobs) may not make sense for your particular situation.




AccidentalMiser

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Re: To payoff student loans or not (b/c Hillary)
« Reply #92 on: July 18, 2016, 04:12:28 PM »
My wife has $90K student loans.  We are hitting them hard this year and have paid off half, expect to pay off the other half by the end of this year.  All but a few thousand are at 6.55%.  My father, who is a smart guy, former CEO of multiple companies, is telling me not to do it.  He thinks the politicians are going to eventually forgive them so we should just pay the absolute minimum and wait for that.  Our household earns low 6 figures.  I just think even if something is done it's going to be for lower income people not us.  Also, just to give you the whole picture...the loans are all in my wife's name not mine.  She stays at home, works part time and only makes about $20K per year.

In the back of my head a part of me thinks...maybe my Dad is right.  How stupid am I going to feel if I pay these things off, next year Hillary is elected and they pass some massive student loan forgiveness package.

Curious what ya'll think.

With all due respect, you're not going to get your loans retroactively forgiven.  The money was borrowed from someone.  Someone wants their money back.

charis

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Re: To payoff student loans or not (b/c Hillary)
« Reply #93 on: July 19, 2016, 07:58:04 AM »
My wife has $90K student loans.  We are hitting them hard this year and have paid off half, expect to pay off the other half by the end of this year.  All but a few thousand are at 6.55%.  My father, who is a smart guy, former CEO of multiple companies, is telling me not to do it.  He thinks the politicians are going to eventually forgive them so we should just pay the absolute minimum and wait for that.  Our household earns low 6 figures.  I just think even if something is done it's going to be for lower income people not us.  Also, just to give you the whole picture...the loans are all in my wife's name not mine.  She stays at home, works part time and only makes about $20K per year.

In the back of my head a part of me thinks...maybe my Dad is right.  How stupid am I going to feel if I pay these things off, next year Hillary is elected and they pass some massive student loan forgiveness package.

Curious what ya'll think.

With all due respect, you're not going to get your loans retroactively forgiven.  The money was borrowed from someone.  Someone wants their money back.

This is a good point.  Does anyone have an example of a forgiveness program that was enacted to include past borrowers?  But they could, as they have recently, sweeten current forgiveness programs and repayment plans, which is tantamount to retroactive forgiveness if past borrowers suddenly become eligible.

Field123

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Re: To payoff student loans or not (b/c Hillary)
« Reply #94 on: July 19, 2016, 08:05:38 AM »
My wife has $90K student loans.  We are hitting them hard this year and have paid off half, expect to pay off the other half by the end of this year.  All but a few thousand are at 6.55%.  My father, who is a smart guy, former CEO of multiple companies, is telling me not to do it.  He thinks the politicians are going to eventually forgive them so we should just pay the absolute minimum and wait for that.  Our household earns low 6 figures.  I just think even if something is done it's going to be for lower income people not us.  Also, just to give you the whole picture...the loans are all in my wife's name not mine.  She stays at home, works part time and only makes about $20K per year.

In the back of my head a part of me thinks...maybe my Dad is right.  How stupid am I going to feel if I pay these things off, next year Hillary is elected and they pass some massive student loan forgiveness package.

Curious what ya'll think.

With all due respect, you're not going to get your loans retroactively forgiven.  The money was borrowed from someone.  Someone wants their money back.

This is a good point.  Does anyone have an example of a forgiveness program that was enacted to include past borrowers?  But they could, as they have recently, sweeten current forgiveness programs and repayment plans, which is tantamount to retroactive forgiveness if past borrowers suddenly become eligible.

The Revised Pay as You Earn Program (REPAYE) was enacted to retroactively allow for forgiveness for past borrowers, not all of whom would have been eligible for an income based forgiveness program.

https://studentaid.ed.gov/sa/about/announcements/repaye

GetItRight

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Re: To payoff student loans or not (b/c Hillary)
« Reply #95 on: July 19, 2016, 05:16:47 PM »
Don't bank on the promises of criminals to give you money stolen from someone else. Continue with your current plan to be paid off around the end of the year, if it takes a little longer so be it. Refi with Earnest or another bank (I used Earnest this last time around) or look at doing 0% CC transfers since you have the cash flow. I did several of those, but of course smaller chunks at a time ($12k-$15k at a time).

Jack

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Re: To payoff student loans or not (b/c Hillary)
« Reply #96 on: July 20, 2016, 09:02:22 AM »
Don't bank on the promises of criminals to give you money stolen from someone else.

If loan forgiveness happened, it would not be in the form of the government cancelling the debt outright and leaving the lenders booking the losses. Instead, it would be in the form of the Fed paying off the lenders with newly-created money -- which is not the same thing as "criminals" "stealing" it, by definition, regardless of what you think about the Federal Reserve system.