Author Topic: To payoff student loans or not (b/c Hillary)  (Read 16439 times)

tyleriam

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To payoff student loans or not (b/c Hillary)
« on: July 08, 2016, 12:22:04 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.

thd7t

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Re: To payoff student loans or not (b/c Hillary)
« Reply #1 on: July 08, 2016, 12:29:17 PM »
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.

Lagom

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Re: To payoff student loans or not (b/c Hillary)
« Reply #2 on: July 08, 2016, 12:31:38 PM »
With 56k left in loans myself, I've had the same thought but ultimately I'm not sure this is much different than market timing as there is not nearly enough evidence to suggest forgiveness is inevitable. First, the chances of my loan being forgiven completely seem pretty low, since even if some kind of forgiveness happened, it would likely be means-tested. And, even if it was a universal forgiveness, who knows how long it would take to actually go through. Finally, even if it goes through the day after my last loan payment and benefits everyone, I might kick myself a bit, but would still ultimately feel OK not receiving a tax-subsidized benefit that I don't really need, when there are so many people out there in dire economic straights because of their loans.

That said, if you are able to refinance at a low (say <4-5%) rate, it's probably mathematically best to pay the minimum anyway, so as thd7t said, that's a win-win option.

therethere

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Re: To payoff student loans or not (b/c Hillary)
« Reply #3 on: July 08, 2016, 12:32:10 PM »
I highly doubt there is going to be a blanket immediate student loan forgiveness. Will there be more plans concocted with forgiveness based on income and payments and all that jazz, most likely. But to expect them to just disappear anytime in the 5 year timeline seems crazy. I'd continue paying them off.

That being said, I paid off all of ours above 5%. Then instead of paying off the rest I saved what I would pay towards them in a brokerage account with VTSAX. Now I have the freedom to pay them off if I really want to and the flexibility to have money at my disposal for once. As a bonus, if there ever is some blanket student loan forgiveness I will get some benefit. Although the amount remaining will be <10% of what I started with. There's risk that the market could downturn but it doesn't really matter because I could just wait it out since the minimum payments won't make or break me.

**Yes, refinance. If you have professional jobs and some retirement savings Earnest gives a really good rate.

tyleriam

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Re: To payoff student loans or not (b/c Hillary)
« Reply #4 on: July 08, 2016, 12:39:03 PM »
To add to the picture...

My wife works in mental health for a state agency...but she does not work full time and we have no plans for her to work full time for the foreseeable future.

I have not looked into refinancing them.  We have outstanding credit and I have a great full time job, long employment history, etc. 

No other debt besides our modest mortgage of $125K.

Psychstache

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Re: To payoff student loans or not (b/c Hillary)
« Reply #5 on: July 08, 2016, 12:42:12 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.
Loans are already forgiven. It just takes 20 years of payments (10 if you work in a public sector job). This is the kind of compromise that government is capable of these days. There might be small changes around the edges, but think the idea that they will pass a sweeping law that forgives all public loans overnight is super unlikely and wouldn't plan my life with that in mind.

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Bucksandreds

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Re: To payoff student loans or not (b/c Hillary)
« Reply #6 on: July 08, 2016, 12:42:33 PM »
Outstanding student loan debt is $1.2 trillion.  It is completely unaffordable to forgive them all and will never happen.  The key is keeping people out of poverty from having to pay them and lower the costs going forward.  Obama has made changes that help answer the first problem by limiting student loan payment to 10% of income your discretionary income and forgiving the rest after 25 years.  The second part of the equation is not reflating this debt bubble as it slowly deflates.  Hillary wants to do that by giving the poor and middle class free undergrad.  Not sure from where the money comes for that but it would save me $300,000 or more.  I'm not in favor of it either as having some 'skin in the game' is an important motivator for people.  Now lowering the costs by rewarding federal higher education dollars to the universities that give the best value in education would be a good move.

therethere

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Re: To payoff student loans or not (b/c Hillary)
« Reply #7 on: July 08, 2016, 12:44:22 PM »
If I remember correctly all of the income based repayments are based on married income unless you file separately. I think even with part time income you'd be a good candidate for refinance. Both Earnest and Sofi only use soft credit checks for the initial rate. So you don't lose anything by taking a look. Also, since you have the extra income to pay them off in two years a variable rate would be a good option to get the rate even lower. Mine went to 2.38% on variable and it shouldn't change much until the feds start raising rates should be very slow at first (0.25% increments).

tyleriam

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Re: To payoff student loans or not (b/c Hillary)
« Reply #8 on: July 08, 2016, 12:54:16 PM »
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?

therethere

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Re: To payoff student loans or not (b/c Hillary)
« Reply #9 on: July 08, 2016, 01:01:27 PM »
No cost to refinance, in fact with a referral they give you $200. I have the mindset that any interest saved is better than none so I intend to keep it around until the rate raise. And it was pretty painless. But if you're the type of person that likes to keep it simple (I tend to make things horribly complicated) and its motivating to pay them down then I'd say just stick with your plan as the savings would be minimal maybe a few hundred dollars at best.

Yay for not waiting on some magic legislation that may or may not come to save you. Kill the student loans!

tyleriam

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Re: To payoff student loans or not (b/c Hillary)
« Reply #10 on: July 08, 2016, 01:10:49 PM »
I just read with Earnest they require you to hook up all your accounts to them.  I am not very comfortable with that.

Are there any other comparable refinance choices that don't require that sort of thing?

Still not sure I want to keep them past this year.  Every time I think about them, see them in my Mint account my anxiety level rises.

Lagom

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Re: To payoff student loans or not (b/c Hillary)
« Reply #11 on: July 08, 2016, 01:27:03 PM »
I just read with Earnest they require you to hook up all your accounts to them.  I am not very comfortable with that.

Are there any other comparable refinance choices that don't require that sort of thing?

Still not sure I want to keep them past this year.  Every time I think about them, see them in my Mint account my anxiety level rises.

I just posted this in another thread but I think it applies here as well:

Quote
I would argue that whatever provides the largest amount of sustainable happiness with the least negative impact on others will always be the most mustachian choice.

There are quite a few on this forum who are all about mathematical optimization. As a mathematical type myself, I totally get it, but I also have come to realize that delaying long-lasting sources of happiness in the name of math often isn't worth it (unless the wait is short). Paying off a loan that feels like an albatross is one such example. Prioritizing buying a house over maxing a 401k is another. I'm not saying those choices are best for everyone, but they definitely are best for some people.

Interestingly, many routinely justify vacations and other such expenses, but seem to have trouble relating to the idea that removing the immense mental weight of a loan can be just as satisfying, if not more so. After all, I would argue those choices permanently increase a person's happiness in the way an led bulb permanently reduces energy usage. A vacation is much more ephemeral (albeit still often worthwhile!).

futurehermit

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Re: To payoff student loans or not (b/c Hillary)
« Reply #12 on: July 08, 2016, 01:32:15 PM »
Pay them off.

My wife and I started marriage with around $150k in student loan debt.

After 8 years of being out of college for me and 6 years for her, we paid them off.

We only seriously started attacking the debt about three years ago.

Only two years of debt pay down was with a combined income above five figures.

While we were paying it off, we had populist visions/fears of a scenario envisioned by the original poster/father, due to the current administration.

Had we not done what we did, our debt would much greater.

Instead, we live easy because we constrained expenses while having a burgeoning income, continue to do so, and, oh yeah, have only a (small) mortgage debt.

Stacking cheddar,

Futurehermit

banjarian

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Re: To payoff student loans or not (b/c Hillary)
« Reply #13 on: July 08, 2016, 01:37:49 PM »
I just made the final payment on my student loans, after putting $3-4k a month towards them for a while. I briefly considered this, but ultimately decided not to wait.

Forgiveness has been talked about, but it's not certain. It's not even close to being passed. And if it passed, it'll likely take years to happen. By paying off early, you are risking the possibility of eventual forgiveness. By NOT paying off, you are also taking a chance that they never will be forgiven, and that you are tacking extra interest onto your bill. Either way you're taking a chance.

Let's say I made minimal payments and bided my time, but forgiveness didn't happen. I could end up paying $102,000 on what was initially a $45k loan by stretching it out as long as possible. Even if I only waited it out for 3 years or so, and then paid it off after realizing forgiveness wouldn't happen, I would add about $8600 to my total amount paid, just by waiting.

Even if student loans end up being forgiven at some point, I've still only paid the amount I initially agreed to pay -- in fact, much less, considering all the interest I skipped out on. Perhaps I'll miss the opportunity to unload $40k of personal debt on to the government, but ultimately, I'm okay financially, still working aggressively on my early retirement goals, and benefiting from that education I've paid so much for. The benefit in waiting is uncertain, and the risk in paying off early is only that you'll pay the amount you signed up to pay in the first place. I say pay 'em.

Jack

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Re: To payoff student loans or not (b/c Hillary)
« Reply #14 on: July 08, 2016, 01:40:18 PM »
Hillary ain't Bernie. I wouldn't expect the Federal student loan terms to change in the next eight years.

Yaeger

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Re: To payoff student loans or not (b/c Hillary)
« Reply #15 on: July 08, 2016, 01:40:28 PM »
In a private setting, the people making the decisions are responsible for results. If someone can't pay off a student loan, the loaner (a private business) loses money, no one else loses out. In a public setting, people not involved in the decision-making process and risk analysis shoulder the burden for the defaulted or forgiven loan. Why is this acceptable?

This is an example of why the government should never have been involved in the student loan business. Not only has it caused a student loan bubble by offering lower cost loans to more people, but it has the potential of putting the taxpayers on the hook for someone's poor decision, i.e. vote for Hillary. Similar to the mortgage crisis, for student loans. We never learn.

2buttons

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Re: To payoff student loans or not (b/c Hillary)
« Reply #16 on: July 08, 2016, 01:43:06 PM »
HRC is courting the Bernie vote, and once you actually dig into the details of her plan its not really forgiveness. Her plan just cuts interest rates in half and a few other things like forgiveness with americorps service. 

That said, even if she is actually serious about her plan, gets elected President, and follows through on it, she would still need to get Congress to approve it. 

I would pay them off.

v8rx7guy

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Re: To payoff student loans or not (b/c Hillary)
« Reply #17 on: July 08, 2016, 01:46:27 PM »
I'd be so pissed if all student loan debt was suddenly forgiven.

Yaeger

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Re: To payoff student loans or not (b/c Hillary)
« Reply #18 on: July 08, 2016, 01:53:33 PM »
I'd be so pissed if all student loan debt was suddenly forgiven.

All of us would be. That's a lot of loss to the taxpayers.

2buttons

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Re: To payoff student loans or not (b/c Hillary)
« Reply #19 on: July 08, 2016, 02:03:27 PM »
I'd be so pissed if all student loan debt was suddenly forgiven.

All of us would be. That's a lot of loss to the taxpayers.

Not to mention, all of us that actually paid back what we owed by working extra and drastically cutting back, neigh, scratch that, not having a life to pay off what we agreed to for our education.

v8rx7guy

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Re: To payoff student loans or not (b/c Hillary)
« Reply #20 on: July 08, 2016, 02:09:46 PM »
I'd be so pissed if all student loan debt was suddenly forgiven.

All of us would be. That's a lot of loss to the taxpayers.

Not to mention, all of us that actually paid back what we owed by working extra and drastically cutting back, neigh, scratch that, not having a life to pay off what we agreed to for our education.

Exactly.  I busted my ass over the last 2 years to pay mine off.

Axecleaver

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Re: To payoff student loans or not (b/c Hillary)
« Reply #21 on: July 08, 2016, 02:22:41 PM »
Hillary added free college to her platform to energize the younger Dem base who supported Bernie. Once she's elected, she'll name a few people to a commission to look into it, a year later they'll say it's unaffordable, and it'll die there until we get a new president. If, by some miracle, she works with the Dems to propose legislation, the Republicans will kill it in the Assembly.

Pay your loans off ASAP. I wouldn't even worry about refinancing given your short timeline. It will feel great and then you can start ramping up the tax-advantaged savings.

Eric

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Re: To payoff student loans or not (b/c Hillary)
« Reply #22 on: July 08, 2016, 02:27:29 PM »
Hillary added free college to her platform to energize the younger Dem base who supported Bernie. Once she's elected, she'll name a few people to a commission to look into it, a year later they'll say it's unaffordable, and it'll die there until we get a new president. If, by some miracle, she works with the Dems to propose legislation, the Republicans will kill it in the Assembly.

Pay your loans off ASAP. I wouldn't even worry about refinancing given your short timeline. It will feel great and then you can start ramping up the tax-advantaged savings.

Agreed.  Everyone realizes how the government works, right?  It's not like the president just gets to pass their own laws.  They still have to "work with" the Party of No.  Therefore, it's not happening anytime soon.  Pay them.

aFrugalFather

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Re: To payoff student loans or not (b/c Hillary)
« Reply #23 on: July 08, 2016, 02:36:19 PM »
Pay them off, or at least refinance and invest the money you would have used. 

tonysemail

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Re: To payoff student loans or not (b/c Hillary)
« Reply #24 on: July 08, 2016, 02:49:42 PM »
I think HARP is a good example of what student loan relief may look like.
It didn't affect that many households.

p.s.
a valuable lesson here about doubting yourself because of dad.
recognize when to listen to him and when to stick to your guns
« Last Edit: July 08, 2016, 03:35:32 PM by tonysemail »

onlykelsey

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Re: To payoff student loans or not (b/c Hillary)
« Reply #25 on: July 08, 2016, 02:53:52 PM »
Hillary added free college to her platform to energize the younger Dem base who supported Bernie. Once she's elected, she'll name a few people to a commission to look into it, a year later they'll say it's unaffordable, and it'll die there until we get a new president. If, by some miracle, she works with the Dems to propose legislation, the Republicans will kill it in the Assembly.

Pay your loans off ASAP. I wouldn't even worry about refinancing given your short timeline. It will feel great and then you can start ramping up the tax-advantaged savings.

Agreed. I would look in to refinancing, though.  It can't hurt if you're not going to do lots of hard credit pulls in the near future.

If there is reform it will be around the edges and means-tested.  I think people get confused about how (not) powerful presidents are in domestic matters.

Helvegen

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Re: To payoff student loans or not (b/c Hillary)
« Reply #26 on: July 08, 2016, 03:31:08 PM »
If Hillary becomes president I see a 0% chance of student loan forgiveness. The whole idea that a center-right corporatist would do such a thing is so hilarious and naive, I don't even know what to say.

Just pay the loans.

onlykelsey

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Re: To payoff student loans or not (b/c Hillary)
« Reply #27 on: July 08, 2016, 03:37:25 PM »
If Hillary becomes president I see a 0% chance of student loan forgiveness. The whole idea that a center-right corporatist would do such a thing is so hilarious and naive, I don't even know what to say.

Just pay the loans.

Honestly, I think the chance is 0% no matter who wins.  The President doesn't get to choose their own congress, and it's a trillion dollar industry.  Maybe we'll see some reform for new students and around the edges (maybe in the deductability of interest?), but I don't think you could get even 10% of Congress behind forgiveness.

MidWestLove

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Re: To payoff student loans or not (b/c Hillary)
« Reply #28 on: July 08, 2016, 03:58:03 PM »
pay them off - if you are into math/money optimization business , you are taking certain loss (in accumulated interested) vs very unlikely potential 'gain'  where timing, nature, the fact itself, or any laws regarding this is completely uncertain.

congress makes laws. congressalso  dishes out money (authorizes it), president has to convince congresscritters that it is in their interest to do so. given how horrible financial record Obama had (8.9 trillion in public debt when starting his presidency, what 19 trillion now), and given how fast the left lost the Congress (2014?) , it is very unlikely that any 'forgiveness' would happen.

MidWestLove

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Re: To payoff student loans or not (b/c Hillary)
« Reply #29 on: July 08, 2016, 03:58:44 PM »
also, a stupid question -isn't it a moral/right thing to do? if I borrowed something I will pay it off..

TheOldestYoungMan

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Re: To payoff student loans or not (b/c Hillary)
« Reply #30 on: July 08, 2016, 04:02:42 PM »
I'd be OK with forgiving the loans...as long as it was tied to destroying their credit.

I arrive at that determination based on the guidelines I use for lending/borrowing from friends or families.

1.  Never borrow what you can't pay back.
2.  Never loan money you can't afford to lose.
3.  Neither party should enter the arrangement if it will ruin the relationship.
4.  Never ask for more while the old amount is still outstanding.
5.  Never lend more while the old amount is still outstanding.

If a family member borrows any amount from me, I will never bring it up again, but the answer for all future borrowing is "no".

Not paying back this money that was borrowed, even if the government passed a law right now forgiving the debt, would make you a bad person.  Not like hitler or anything, but it would be a black mark on your contribution to society.  You'd be a taker not a contributor.

I also think publicly funding higher education is already happening, we just need to get serious as a civilization about higher education.  Culturally we could save a lot of money by not being OK with high schoolers screwing around for the last two years basically taking their first two years of college already.  Call it what it is, figure out how to adjust the accreditation, and make high school and college blend a little better.

Introduce a national public university, with online lectures from all the best professors, free, with online testing accepted by every college that takes public money.  You could knock out a 4 year degree in 6months-1year of labwork and in person verification of the online material.  This is possible right now, today, with resources that already exist, it lacks only an official recognition and a cultural acceptance.

You could even have local discussion groups for every topic.  I'd personally volunteer at the local weekly meeting to help out with engineering classes.  Lots of people would.  We just need a space (like an empty high school classroom) and someone to organize it.

We as a society have decided we want college to be expensive.  We tolerate it.

And so when one of us borrows money to pay for it, we should require them to pay back that money.

MidWestLove

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Re: To payoff student loans or not (b/c Hillary)
« Reply #31 on: July 08, 2016, 04:13:51 PM »
"

Introduce a national public university, with online lectures from all the best professors, free, with online testing accepted by every college that takes public money.  You could knock out a 4 year degree in 6months-1year of labwork and in person verification of the online material.  This is possible right now, today, with resources that already exist, it lacks only an official recognition and a cultural acceptance.
"

I think we are steering into general education discussion separate from OP question. I do agree with you on lending rules and also believe strongly in right and wrong, and not paying back what I owe when I have the means to do so is wrong to me.

on the general education, my perspectives were that of the foreigner
- I found US high school to be ridiculously easy , even for 16 year old foreign boy with very limited English to graduate with honors as senior. it was just 2-4 years behind Russian education in almost everything, and exact science in particular. We studied geometry in multiple dimensions  in 6 grade when math split into geometry and calculus, botany and chemistry started in 6 grades as well. for bio science you had 2 years of botany, 1 year of zoology, 1 year of anatomy, and 1 general bio science (genetics, etc) by the time you graduated. for physics , you had  mechanics , dynamic forces, electrodynamics (Omhs law, etc), general physics (nuclear, elemental particles,etc). for chemistry - 2 years of non organic chemistry, 1 year of organics, and 1 of general. and this for each and every person, no exceptions, no 'I will pick my classes'.  in US all of this was condenced like crazy and augmented by large amount of either performing arts (chorus, band) and other non exact sciences..

- for national universities, it is complex . US universities are among the most expensive in the world, they are also among the best of the world by far.  Russia had free university system and is now operating in hybrid mode before likely switching to full US model as that shown itself to be very efficient.

Field123

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Re: To payoff student loans or not (b/c Hillary)
« Reply #32 on: July 08, 2016, 04:33:17 PM »
A lot of good discussion on the merits and arguments for/against Income Based Repayment Programs in this thread:

http://forum.mrmoneymustache.com/ask-a-mustachian/in-$150-000-of-student-loan-debt-and-need-some-adviceencouragement/msg570744/#msg570744

I've spent a lot of time analyzing this issue and I agree with others who do not expect any type of sweeping forgiveness. I do, however, expect future democratic administrations to sweeten the existing forgiveness programs through some combination of reducing pay back period, reducing % of income paid, and most of all, eliminating income tax on the forgiven amount.

If you would have asked this question before you began repaying your wife's student loans I would have argued that it is absolutely a 100% no-brainer (in terms of financial optimization, I don't want to rehatch the moral debate) to enroll in the Pay As you Earn (PAYE) or IBR, but not REPAYE. Assuming your wife makes a low income over the next 20 years you will have $0 or very minimal payments until the balance is forgiven. The only drawback to this plan is that you would have to file income taxes as married filing separately (to avoid having your income considered in the payments) thereby losing access to IRA's. I've done the math and that is an easy tradeoff for the student loan savings.

The other risk, of course, is that my analysis depends on the forgiven balance not being treated as taxable income. This is discussed in the other thread, but I'm making a huge bet on it and I think this is something that Hilary will do. Although even in the event that the forgiven balance is taxable, the net present value of the current balance still exceeds the future taxable amount.

In your present situation, you'd have to do the math to calculate the tradeoff of losing IRA's and other costs associated with married filing seperately and balance that against the risk of potentially having income tax due on the forgiven amount. It's probably still in favor of PAYE, but not the landslide obvious choice it was originally.
« Last Edit: July 08, 2016, 04:58:07 PM by Field123 »

Field123

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Re: To payoff student loans or not (b/c Hillary)
« Reply #33 on: July 08, 2016, 04:55:23 PM »
I think it is also important to note that refinancing, while it may save you some money on interest if you do repay the loans in full, renders your wife ineligible for any type of government student loan benefits such as income based payment and forgiveness. For this reason, I would not refinance if I were you.

chasesfish

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Re: To payoff student loans or not (b/c Hillary)
« Reply #34 on: July 09, 2016, 11:55:15 AM »
I think you have to be in the business of you....pay off that deb.   My wife and I had to payoff $110,000 of student loan debt and it wasn't easy.   

Indexer

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Re: To payoff student loans or not (b/c Hillary)
« Reply #35 on: July 09, 2016, 12:09:17 PM »
The only way I see them being forgiven are the rules that are already in place or maybe more generous versions of those same rules. I'm of course referring to the income based repayment. After making that minimum payment for X years they are forgiven. That forgiveness then shows up as taxable income...  So you just owe the IRS a smaller amount instead. Unless you weren't even paying the interest and the balance kept growing, in which case you might end up owing the IRS an amount similar to or greater than what you borrowed. With certain government jobs the forgiveness doesn't show up as income. The only forgiveness I could see coming in the future is making those rules even more lenient, but I don't see a mass forgiveness happening.

Even considering the income based plan with your income you are probably going to be making the full payment so you might as well pay them down.

SimplyMarvie

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Re: To payoff student loans or not (b/c Hillary)
« Reply #36 on: July 09, 2016, 12:15:25 PM »
I am nearly 5 years into payments on IBR and am expecting my loans to be forgiven through Public Interest Loan Forgiveness sometime in mid 2022, after ten years of scrupulous on-time payments. I am also white-knuckling it through the next five years, hoping that there are no major changes in the program before I'm through with it. It's kind of a form of golden handcuffs, because the outstanding interest is amortizing back into the loan, and the balance is already high (law school, during which I had two babies and tuition increased 24%), so at this point even though I could command a higher salary in the private sector, I really can't afford to leave public sector or non-profit employment.

I am very grateful for this program, but I would NOT want to put yourself into a position where you're tying your financial decisions to people making (or not making) changes in the law in your favor at some point in the future. Been there, doing that, it kind of sucks.

MisterTwoForty

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Re: To payoff student loans or not (b/c Hillary)
« Reply #37 on: July 09, 2016, 08:03:35 PM »
Pay them off, if you are expecting a politican to save your finances you'll be waiting forever.

If you took out the loan, you pay it back. 

LouLou

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Re: To payoff student loans or not (b/c Hillary)
« Reply #38 on: July 10, 2016, 04:21:20 AM »
Highly unlikely that Hillary Clinton would propose and Congress would pass a law instantly forgiving 100% of student loans.

Field123

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Re: To payoff student loans or not (b/c Hillary)
« Reply #39 on: July 10, 2016, 09:27:53 AM »
also, a stupid question -isn't it a moral/right thing to do? if I borrowed something I will pay it off..

One would think...

I see not paying back your student loans the same as not paying back your credit card. You willfully borrowed money to acquire something, why shouldn't you be responsible to pay it back?

I said I didn't want to start an ethical debate on this, but I think there is a big misunderstanding between the people familiar with these loan forgiveness programs and those who are not.

On the face of the actual loan documents that you sign when taking out student loans through the Department of Education (in the fine print) there is a sectional called "Repayment Options". Included in those options are the various income based repayment programs.

So although an outstanding balance may be "forgiven", as long as you comply with the repayment terms spelled out in the actual loan document (pay a % of income for a certain amount of time), I would argue that you have fulfilled your obligations as specified in the loan and you have, in fact, "Paid it Back". To do anything less than financially optimize your repayment in the name of morality is the antithesis of mustachianism. How many of MMMs articles basically conclude that people should "just do the math"?

Loan forgiveness upon completion of IBR or PAYE is not some type of charity or welfare from the government. Rather, it is the government fulfilling its end of the bargain after you have fulfilled yours.

Yaeger

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Re: To payoff student loans or not (b/c Hillary)
« Reply #40 on: July 10, 2016, 12:13:22 PM »
Loan forgiveness upon completion of IBR or PAYE is not some type of charity or welfare from the government. Rather, it is the government fulfilling its end of the bargain after you have fulfilled yours.

That's why we need to eliminate, or reform, federally-backed student loans. Most taxpayers aren't aware of the fact that they're being taxed to provide this bargain for you, and even more insidious is that upon loan default that the taxpayers are the losers of someone else's poor decision.

I'd like to see this program become a Working Capital Fund, where it has greater flexibility over defaults, interest rates, and loan approval. Basically future student's availability for federal loans becomes contingent upon current students paying back loans.

forummm

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Re: To payoff student loans or not (b/c Hillary)
« Reply #41 on: July 10, 2016, 12:40:23 PM »
There is no chance that all student loans will be forgiven. What do you think student loan holders are--rich bankers who make lots of campaign contributions?

It's possible that attending college could get a lot cheaper in the future. But other than the long term income based repayment plans with long term forgiveness (after 25 years w/o public service employment), you'll have to pay.

MissNancyPryor

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Re: To payoff student loans or not (b/c Hillary)
« Reply #42 on: July 10, 2016, 12:56:07 PM »
I am in the camp of "you borrowed it, pay it back" and the idea of waiting for Hillary or any other politician is folly.  I do like forgiveness for occupations within communities or services that lack participation.  The  incentive approach of trading 10 or 20 years serving the underserved to pay back the debt seems fair. 

Shouldn't there be strings attached in the free college utopia though?  If school is paid for by society, shouldn't those paid-for degrees be among those that benefit society most?  That is the same reason that the incentives works--society needs help in some geographies and communities so we are willing to make a trade of time spent for debt forgiveness.  STEM degrees as well as much-needed vocational skills would rise to the top of the 'needs' list.  The old trope of underwater basket weaving and its equivalents should not be funded by the masses.  Personal enrichment should be on the individual's dime. 

Yes, that requires that we pass judgement and forces communities to determine what they value most.  That idea is a mismatch with lots of snowflakes out there who haven't figured out how to make their talents marketable and don't feel they should have to.       

Telecaster

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Re: To payoff student loans or not (b/c Hillary)
« Reply #43 on: July 10, 2016, 02:56:15 PM »

That's why we need to eliminate, or reform, federally-backed student loans. Most taxpayers aren't aware of the fact that they're being taxed to provide this bargain for you, and even more insidious is that upon loan default that the taxpayers are the losers of someone else's poor decision.

Federal student loans were reformed in 2010, which significantly reduced costs.  Both Trump and Elizabeth Warren have made the point that the student loan program actually takes in tens of billions more in "profits"  than it spends. 

Now, because people who took out loans in 2010 will presumably be paying them back over the coming years and decades, you can't actually say if the program will continue to be in the black.   Maybe a recession hits and the default goes up or whatever.  And of course there is opportunity cost too (from the point of view of the government), which makes the accounting even more complicated.  On the flip side, you could make the argument because college educated workers make more money, they pay more in taxes too.  So there is an increase in tax revenue. 

It is complicated, but right now no one is being taxed to provide student loans because the program is a net positive to the government.   

Yaeger

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Re: To payoff student loans or not (b/c Hillary)
« Reply #44 on: July 10, 2016, 04:28:41 PM »

That's why we need to eliminate, or reform, federally-backed student loans. Most taxpayers aren't aware of the fact that they're being taxed to provide this bargain for you, and even more insidious is that upon loan default that the taxpayers are the losers of someone else's poor decision.

Federal student loans were reformed in 2010, which significantly reduced costs.  Both Trump and Elizabeth Warren have made the point that the student loan program actually takes in tens of billions more in "profits"  than it spends. 

Now, because people who took out loans in 2010 will presumably be paying them back over the coming years and decades, you can't actually say if the program will continue to be in the black.   Maybe a recession hits and the default goes up or whatever.  And of course there is opportunity cost too (from the point of view of the government), which makes the accounting even more complicated.  On the flip side, you could make the argument because college educated workers make more money, they pay more in taxes too.  So there is an increase in tax revenue. 

It is complicated, but right now no one is being taxed to provide student loans because the program is a net positive to the government.   

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:

http://www.forbes.com/sites/prestoncooper2/2016/04/10/federal-student-loans-will-cost-taxpayers-170-billion/#38bf9f255e04

The CBO report, table 5 shows the net deficit when using fair-value accounting vs. standard accounting (what Warren and Trump were talking about):
https://www.cbo.gov/sites/default/files/51310-2016-03-StudentLoan.pdf

randymarsh

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Re: To payoff student loans or not (b/c Hillary)
« Reply #45 on: July 10, 2016, 04:56:48 PM »
It's pure fantasy to think there's going any sort of mass forgiveness program. Income based plans appear to be the "solution" the gov is providing, probably with the hope that people's incomes go up and they end up paying what they would have anyway.

90K in federal loans implies grad school. Undergraduates can't borrow that much themselves. I think a grad student should know better than to borrow tens of thousands of dollars and then expect a bailout.


Bartleby_the_Scrivener

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Re: To payoff student loans or not (b/c Hillary)
« Reply #46 on: July 10, 2016, 05:22:13 PM »
Hillary added free college to her platform to energize the younger Dem base who supported Bernie. Once she's elected, she'll name a few people to a commission to look into it, a year later they'll say it's unaffordable, and it'll die there until we get a new president. If, by some miracle, she works with the Dems to propose legislation, the Republicans will kill it in the Assembly.

Exactly. Clinton's just pandering. Just pay 'em.

forummm

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Re: To payoff student loans or not (b/c Hillary)
« Reply #47 on: July 10, 2016, 05:48:30 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.

woopwoop

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Re: To payoff student loans or not (b/c Hillary)
« Reply #48 on: July 10, 2016, 05:59:22 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.

clarkevii

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Re: To payoff student loans or not (b/c Hillary)
« Reply #49 on: July 10, 2016, 06:03:30 PM »
Pay the loans off. Hillary is going to lose anyway.