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If you’re struggling to make ends meet, you’re not alone. While many of us have decent jobs and an income that sounds good on paper, when you put it in context of the amount of debt we owe every month on our student loan payments, well, that’s when things get tricky, resulting in our generation being known for relying on side hustles and additional roommates throughout our 20s in order to have a measure of disposable income. However, for those of us struggling the most, things might actually get better, because the U.S. government has just agreed to forgive approximately $108 billion in student loan debt.
Under the Obama administration, many of us have switched over to an income-based repayment plan, meaning that our payments back to the government are capped to 10% of our earnings; however, for the government, this hasn’t been as effective as previously thought. Under this program, payments are drastically reduced, and often forgiven after a 10-year period if you go into a public service role, or 20-year period if you work private sector.
Unsurprisingly, since we’re all pretty broke, we started taking advantage of this plan, and according to a new report by the Wall Street Journal, enrollment has tripled to 5.3 million borrowers. Because of this program and our enrollment in it, the government is now expecting to forgive a total of $108 billion in income-based repayment plans, and another $29 billion for those that literally die before they can pay off their loans. As more people begin to enroll in income-based repayment plans, the amount that the government will forgive will only increase.
For those of us with bigger balances and those with graduate education, this provides the biggest boost. So essentially, the takeaway from this report is that unless you’re planning on paying off your student loans in the first five years with your giant incomes like all of these assholes you see on Forbes, switching to income-based repayment seems like the best decision you could possibly make for your personal finances. For the government, this big loss in revenue kind of blows, and I’m sure the new President-elect will come up with or elaborate upon a way to fix this issue, but for now, it’s probably in your best interest to take advantage of income-based repayment, because the government’s agreed to have your back once your mandatory ten or twenty years of service are up. .
[via Wall Street Journal]
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Steph W.
Steph W. is a new Master's degree graduate with an intern's salary and six-figure taste. She realizes her expectations far exceed reality, so she spends her days pinning away Loubs she pretends are in her physical closet instead of her virtual one. Her hobbies include attempting to trapping her boyfriend into marriage before he finds out how insane she is and pretending that Black Box wine tastes as good as the kind she could afford when she was gainfully employed. Send her tips for getting out of student debt at recruitchairtsm@gmail.com
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This is an awful idea. Forgiving loans like this is a horrible precedent. Sure it’ll help some people in the short run, but in the long run it’ll lay the foundation of the idea that you can borrow money and not have to pay it back…unless you’re the US taxpayer, who’s really going to be the one paying this off. Nothing is free.
Also, this won’t do anything to address the rising costs of higher education. Universities only charge that much because they know they can and with people being able to borrow money, spend it and not pay it back, the higher education costs will only increase.
I hope this gets repealed under Trump.
The unrestricted rising costs of a college education is easily the biggest issue when it comes to student loans. It’s insane that it’s not being regulated more closely.
I remember reading a statistic (famous last words) that a huge percentage of student loan debt was to For-Profit “universities” like University of Phoenix and DeVry. A good starting point would be to restrict the amount of student loans available to pay tuition to those “fine establishments”.
I think they’ve laid the groundwork for a lot of that with ITT Tech basically shutting down after being told they no long would be eligible to receive federal student loans.
never understood why people went to those when there are perfectly reputable community colleges with similar programs that are fully accredited and you end up with a relatively low education expense.
That’s because the government makes money off the insane interest on the student loans. It’s a never-ending circle jerk: the government gives out loans, leading to kids having more money to pay for college education, which results in universities increasing their tuition, which leads to kids borrowing more money. The universities and the government win, the borrowers and taxpayers lose.
Honestly, for all the flack Trump got for Trump University, it was like a third of the scam as a $200K liberal arts degree.
Who pays 200k for a liberal arts degree?
Anyone who gets one from a private university.
For profit colleges are way more devious with their practices. For all the bullshit that is a private a college most do meet some set of standards and at least your education is worth something, maybe not the 100K that you end up with. For profit colleges are total bullshit and predatory AF. Heald college would sign up homeless people for their courses and get em 25K in student loans. The psych rotation for Citrus College’s nursing program consisted of stint at the Museum of Scientology. So as much as i agree with you on the bullshit that is private colleges For profits are a next level bull shit.
The strawman in his example, obviously.
Yeah, right after he brings back those basic manufacturing jobs, I’m sure.
While I completely agree that this does nothing to deal with the rising cost of education which I also agree is the most important and root cause issue. The large amount of debt carried by these people does need to be addressed as it has secondary and tertiary effects on the housing market, car market, and the big one Retirements. I would therefore say that a reduction in Interest to zero after 10-15 years rather then forgiveness is a better model. At that point the government has brought in enough interest to cover overhead costs and grow the endowment but allows people to pay the loan back relatively quickly once the entire payment is going to principle.
While I hate the idea in general, I can only support this if said profession is in a field that requires a degree, and depending on the state, a master’s degree, that is shit pay and would never be able to fully repay normally (teachers, social services workers, police officer (have to have a degree in my city), etc) but only if they go to a state public school. Go to a private lib art school, you’re on your own.
P.S. I went to state school for my bachelors and masters for social work (MSW pretty much required to do most SW jobs) and am $52,000 in the hole thanks to NJ’s extremely high in-state tuition.
Social worker here. This is why many professions like mine are eligible for public service loan forgiveness, where you do income based repayment for 10 years and then your loan balance is forgiven. Essentially they recognize that you gave up economic reward to provide a service to society that is needed, and make sure you can pay your loans off and aren’t forever indebted for making that sacrifice. Catch is you can only work at an eligible nonprofit for those ten years, which can be tough if there are better paying jobs or are primarily jobs in the for-profit sector.
Median pay is $45,000. I don’t believe you can’t afford to pay off your loans, if you tried.
Starting salary is around $30,000. That’s not a whole lot to work with.
So they get government housing, food stamps, and don’t pay their loans? Awesome!
Where the hell do you get The idea that we get government food and housing? We don’t.
Also, yes, I can pay my loans which is why I’m not doing PSLF. Others have larger loans and may need the help. But don’t think that means you don’t pay. You must make on time payments for 10 years to qualify.
But hey, if you guys think it’s such a cushy lifestyle feel free to join.
You qualify. And no, why would I join? I didn’t goto college to make less on an hourly basis than I did in highschool.
Don’t know where you live that someone making $30000+ a year qualifies for any type of government benefit other than subsidized health insurance, but I’d love to move there. Do you know what the threshold is to qualify for public housing in most states for a single person? I’ll give you a hint, it’s less than 20k
Also YOU said the median salary is $45,000. If you made more than that in high school, I’d be amazed.
Us North Easterns have this pretty rough too. Wish I got to pay souther money for my 4 years of drinking
So then you’re not for forgiveness of loans after 20 years after making payments?
Ultimately what Employed and Depressed said is right; borrowing more to cover the unrestricted rising costs of college is the major issue here. As someone who pays 50% of their monthly income to student loans (100% on-time, may I add) and therefore can’t help the economy by purchasing as much from businesses, I think SOME financial relief to those suffering is fair as it reduces some of the financial burden while allowing those people to spend the money on other things to boost the local economy.
No. Nobody forced you to take the loan, you took the money, now pay it back.
If only you were this forceful with Girl, Todd.
I shudder to think of all the idiotic things I was doing and saying at 18 years old and how narrow minded and unfounded my worldview was. I then proceeded to sign for student loans that would be a primary factor in determining my financial and career trajectory for the next several decades. Not saying you’re wrong, but I think some additional education and resources focused on educating high school seniors on the long term effects of student lending and the proposition of ROI depending on what degree you choose… that could go a long way here.
This. Yea, lets hold 18 year old’s accountable for the crippling debt they signed up for when they could barely walk through a FAFSA application. Most of these “adults” don’t understand how big of a difference 1% interest makes.
And what “adult” graduating high school think they’ll be paying off their undergrad loans and still struggling while gainfully employed, after being told that college is the way to go.
Seriously. That’s why I’m so surprised trade schools aren’t more popular. My dad told me that if college wasn’t my thing, then be a plumber. I went with college, but a plumber makes way more money (depending on the degree), especially with the opportunity cost of skipping out on tuition.
Some people, me included, sign their master promissory note at age 17, so they’re not even legally adults.
I don’t disagree, but they are still legally adults. If they aren’t mature enough to make a legal decision like that, then maybe we shouldn’t be federally backing loans to 18 year olds. Because that is the real issue. If they weren’t, then maybe banks scrutinize more who they lend money to. If they knew that there are suddenly risks involved with loaning an 18 year old $100,000 to study to be a historian, then they will become much more responsible with who they give that money too. This means the price of college doesn’t become so inflated as well. At the end of the day, it still comes down to responsible spending, whether you are the kid, the government, or the bank.
In general I agree that it’s pretty stupid to lend that much money to an 18 year old. But without federal backing interest rates on student loans would be crazy high since there’s no collateral involved, essentially pricing out those without means to a higher education. Somewhere there’s a solution that balances access to education against giving out what some mistakenly view as “free money” until the bill comes. We don’t want kids taking out $100k loans for underwater basket weaving and other horrible ROI scenarios, but at the same time we don’t want to price out the kid who’s the first from an impoverished family to attend college and wants to become a doctor, nurse, or engineer and shows the aptitude to achieve it.
If I was smart enough to know what that solution is, I sure as hell wouldn’t be a desk jockey.
I think it depends. Ideally, there’s no such thing as “free” forgiveness of student debt. If your debt is forgiven, someone still has to pay for it. In this case, it’s the US taxpayers.
It’s a shitty situation and props for making all those payments on time. But at the end of the day, I feel like people have to be held accountable for their financial decisions.
In my opinion, I think the ideal solution would be to give out student loans based on an earnings potential of the field on which you’re going to major.
This thought just occurred to me so I might be way off, but are there any other loans out there for intangible collateral? I guess a business idea could technically qualify as that but in what other situation does one walk into a bank and essentially say, “Give me money, and oh by the way, I have absolutely zero proof that I’ll be able to pay any of this back at any point in my life.”
That’s mostly why it’s impossible to discharge student loans via bankruptcy; there’s nothing to repossess, so they’ll just garnish your salary until they get their money.
Main one is credit card debt consolidation. Some people will take out personal loans to pay for vacations. Both of these will come at a high interest rate since they are unsecured loans and all the bank has to go on are the numbers on a sheet of paper saying you can afford it and your word that you will pay it back.
Of course not. But what other things for which you need loans are being portrayed by our society as a right?
What does “earning potential” even mean? I have a psych degree, which according to some definitions means that I should be making peanuts for the rest of my life. Spoiler alert: I’m not. I have a really good job in a related career that allowed me to apply what I learned in college without explicitly turning my college experience into a jobs program.
This is true for millions of college graduates. So while there are definitely some exceptions to the rule (most engineering, for example), the major you picked when you were a teenager isn’t the largest determiner of your future earnings.
Concur. I’m an English major from a small private (read expensive) university who graduated with a fair amount of debt. When I was 18 I couldn’t imagine my life at 22, all I cared about was having four years of fun and getting an education along the way, thinking I’d figure out paying off the loans when I had to. I then taught for a few years and changed careers because I knew $45,000 per year for the rest of my life wouldn’t cut it. Looking back on it, I would have never given myself the money had I been a lender, except for the fact student loans are almost impossible to get rid of since they are immune to bankruptcy, and in some cases, death.
Earning potential as in how much you can, on average, expect to be making in 5, 10, 15 years. Of course there will be outliers one way or another but I’m sure it’s possible for someone who’s much better at math than me to run some numbers and create statistics for this.
Lending terms are always based on risk and there’s no reason that this shouldn’t apply to student loans.
I’m with you on forgiveness of student loans to an extent. If you’re on an income based repayment plan and you still have student loans after 20 years I do believe a portion should be forgiven. However, along with the forgiveness there should also be an increase to the % of your income that must be put towards your remaining student loans after the original 10%. Perhaps, that % gradually increases based on the amount of debt that remains after 20 years and loan forgiveness.
No. What did they spend the other 90% of their income on for TWENTY FUCKING YEARS?!
Housing, food, kids, savings or any number of things. You can’t tell people, no sorry you don’t get to do anything until student loans are paid off. I’m not advocating forgiving the entirety of their debt, just a portion in exchange for a larger portion of their income. Which, makes sense because in theory they are now able to afford to pay more of their income because it is hopefully considerably larger than it was at the age of 22. If you’re advocating people pay off all student loan debt, no matter what or how much of their income it costs them, you’re asking for trouble down the road. If people have to spend 50% their income for the first 25 years of their working life on student debt they won’t have any significant savings to speak of when they reach retirement age. Guess who ends up paying for that down the road anyway.
It’s called priorities. If you can’t pay off your student loans, you’re too poor to have a kid. We’re paying for all of it one way or another, but leave that student debt on them and maybe, just maybe, they won’t let their kid be fucking idiot too.
I don’t know, maybe a private student loan that could have been their only option? Or a mortgage? Or healthcare? There’s a reason that income-based is only 10%, because a good portion of that income HAS to go to housing, transportation and food. You know, living essentials.
A roof over their head, a vehicle to get to work, food, electric bill, maybe even health insurance or a grand or two in savings to fall back on in case of a personal disaster or putting a little something in the 401k on the off hope you may one day retire? Maybe even buy a house, get married, and have a kid before they turn 40 instead of putting their entire life on hold for two decades because of a decision they made at 18?
There’s a lot wrong with the current student loan situation, but continuing to punish post grads that have no additional funds to put toward loans is like trying to get blood from a stone and doesn’t do anyone any good. I’d be willing to be that the vast majority of people want to do right and payback the full balance with interest. For some that’s just not in the cards.
Buy a cheaper car, live in a cheaper place, move to a cheaper city. It’s not the taxpayers’ job to kowtow to your life decisions when you are fully aware of what you owe. Fucking man up, stop being a little bitch and pay it off. I did it, so can you.
Just because you did doesn’t mean everyone can. Personal responsibility certainly plays a major role, but there’s hundreds of thousands of other forces at work here that can make it impossible for many to pay off their entire balance with interest. Job market forces, housing costs, even the goddamn energy market fluctuating the electric bill plays a role in whether some people are going to make this month’s loan payment or slowly fall behind never to catch up. What if you have a medical condition or accident? Just man the fuck up, right?
Move to a cheaper city? And just magically get another job? One that pays more than the current one? I’m sure if that opportunity presented itself the vast majority of people with significant student loan debt would jump on it.
You can’t cut costs that are already cut to the bone.
Too. Fucking. Bad. It’s not the rest of our jobs to pay it off for you. It’s amusing that you switched from “buying a house, getting married, and having kids” to “can’t pay their electric bill.”
It’s obvious that the people lacking responsibility for their decisions have joined the discussion. I could have let mine fester and not paid them, but I cut a check every year to pay them off like millions of others that don’t fancy themselves as special snowflakes. Grow up.
H&H is totally right here. You can’t buy things and not pay them back or expect Bernie to save you from your financial responsibilities. When that happens it sets people up for financial irresponsibilities down the road. Will they then expect their mortgages to be forgiven if they lose a job or get sick? Will they buy a BMW and expect to be bailed out when they can’t pay that off?
If paying off your loans isn’t in the cards, then too bad. Live in debt for the rest of your life. Or make some grown up decisions and budget accordingly.
So the response to hundreds of thousands of people unable to payback their student loans in full plus interest is basically “get fucked”? By and large, I think they are making grown up decisions when the decision is between keeping the lights on/repairing their shit box car so they can make it to work vs paying their student loans that month. Student loans take a back seat every time.
The house will be foreclosed and any remaining debt can be forgiven in bankruptcy. The BMW can be repossessed and any remaining debt due to depreciation can be discharged in bankruptcy. Student debt never goes away, unless you can convince a bankruptcy judge you’re an extreme case (beyond rare). This program isn’t forgiving every penny the students borrowed. It’s forgiving the remainder of whatever is left after 20 years (or 10 if you’re in public service, which are typically high need, lower paying jobs) of income based repayment. They’ve paid for 20 years. I think it’s time to allow them to move on from this instead of haunting them with their decision until they’re dead.
Even beyond a personal level, you don’t think that long term this debt won’t have a significant drag effect on the economy? These payments go to financial institutions that employ a handful of number crunchers instead of it going toward new goods that employ many more manufacturing jobs.
Exactly, those are the real world consequences of buying things you can’t afford. Student loans should be no different. So making a bare minimum payment of $x.xx amount 240 times is ok if you have six figures of debt? Then tax payers just cover it?
It will definitely affect the long term, big picture economy; it already is. But that should encourage our high schools, counselors, colleges, admissions offices, FAFSA, 17 year olds, gov’t officials, everyone to learn about the costs of higher education and what they will be on the hook for. This is a systemic failure from top to bottom, but forgiving the current debts is an even bigger failure.
First of all, “manufacturing jobs” where thousands of people stand there and put piece A into piece B aren’t coming back, we have robots for that shit. Second, they fucked themselves. They decided that having a hundred thousand in student loans for a shitty piece of paper they couldn’t afford was better than joining the military, going to a state school, or apprenticing for a trade — not me — it’s wholly their problem. At 42 years old, they should own it then more than at 22.
Even with the onset of automation, money spent on goods is much better for the economy as a whole instead of loan payments to financial institutions. The money flows back through the supply chain touching many more employees than going back into a loan institution’s coffer after one transfer.
And in the end, it will be your problem, it will be all of our problem. These people just don’t disappear from America. Instead of trying to help them now and set them up for success later down the road, they’ll spend decades in and out of poverty, straining government safety nets eventually ending up old and without savings or retirement to help them through their final years. And many will still be making loan payments. The cost to try and fix the problem now is much cheaper than letting it fester.
As much as I’m sure you’d like to hole up somewhere and scream “I got mine, screw you!” or tell people they just need to pull on their bootstraps harder, those are not a viable solutions to chronic macroeconomic problems.
If enough people make poor financial decisions the rest of us should just fix it for them? Did you not have the internet when choosing a degree and college like the rest of us who decided not to fuck themselves? Yeah, Engineering was so fun while others were out every night dicking around, and now I should pay their loans with my taxes? Nope, sorry.
After a certain point it becomes systemic and it’s no longer about personal choices, no matter how ill informed they may have been. I got an engineering degree too. There were many times where I was cranking calcs at night while others were out at the bars. Yes it sucked. I’m not saying we reward those that thought it was a good idea to take out $100k in loans for a 4 year party and get a dick-off degree in basket weaving. But the student loan problem is getting to the point where it’s going to torpedo the entire economy a-la 2007 unless some mitigating steps are taken soon. So it’s going to effect you in a negative way one way or another. The choice at this point is do you want a graze or a shot in the chest? The damage is already done. The best we can hope to do is mitigate the fallout and learn from the mistakes. Put systems in place so that kids think long and hard about signing those papers, know that trades and community colleges are viable alternatives in many cases, get businesses to understand that a 4 year degree is not required for many (if not the majority) of their positions, and try to get college costs in check by tackling the cost increase-loan increase cycle.
Honestly, I agree. The only people I know who truly cannot make their minimum payments are people who are super lazy and do nothing to find a better job or make their situation better. They’re leeches in other areas too. If you’re determined, you can make it work, but you have to be willing to work hard as shit. I paid off $40k in loans in two and a half years on a modest income and I didn’t want for anything.
Booooooooooooo
I think the ability to jack up prices depends on the researcher you ask. It can also be argued that sticker price can continue to rise based on a college’s richest students. If they can meet/exceed the price, why wouldn’t they raise it?
And I’ll say this ignorantly but if there are loopholes for the wealthy to take advantage of, how is this different?
What loopholes do the wealthy take advantage of when it comes to paying for college?
None for college that I know of, but I answered that already.
As someone who suffered and paid off all their loans this really pisses me off
42 grand in 2 years and these clowns with history degrees are going to get forgiven. Unbelievably frustrating.
So glad I busted my ass to pay off my education, and now I get to forgive some Oberlin grad with a Sociology degree.
Yep, fuck fiscal responsibility amirite?
Should an 18 year old get a loan if they’re not going to realistically pay off their lib arts degree from randomly expensive private university?
Nope. Deny them the loan. Despite what Bernie Sanders says, higher education isn’t a right for everyone, especially when I can get 90% of the knowledge for a liberal arts degree from Wikipedia.
If you can’t tell me what the “interest rate” or what “unsubsidized” means on your loan. I’m not letting you borrow 30k sorry not sorry
I know people who have well over $100k in student loans for history and English degrees.
Me too, and they work as admin. assistants making $12/hour.
100%, don’t give em an inch Bill, if you do they’ll take a mile.
As someone who suffered and paid off all their loans, I’m happy that others will not have to go through all of the bullshit I had to and maybe they can have a decent shot at not being as cynical and jaded as I am because of it. Maybe they’ll even have a savings account with a decent balance and a start on their retirement.
Other people getting a break or a little bit easier road in no way takes away from your accomplishment.
Sure it does. Because to make that road easier, you are now asking the person who already paid off their loans responsibly to also payoff people’s loans because they were irresponsible.
Bragging about masochism? Really?
Ride your high horse right on out of here.
show some financial responsibility you jerk
You’re like 36, time to pay that shit off Will.
No shame in the debt-free game. Sorry not sorry I made fiscally intelligent decisions in my early 20s.
Like, do you want a cookie or something?
As someone who’s going to be paying off the remainder of his student loans and not benefiting from this program, I’m still a major advocate of this program.
Maybe the solution here would be to start teaching 17 and 18 year old kids what $100,000 in debt really means? I sure as hell wouldn’t have gone to the schools I did if I knew what it would have meant in the long term. Instead, I was told by my school administrators and my parents that “you should go wherever you’ll get the best education, money will work itself out” which is an incredibly foolish notion.
THIS. I got into my dream school, but they wanted $50k a year that my parents and I just didn’t have. Fortunately my parents instilled financial literacy into me at a young age, and after a long sit down talk about my career goals and what graduating with $200k in debt as social worker would mean for the rest of my life, I opted for state school with a scholarship.
Too many kids are told to tour schools and pick based on which one they “feel most at home” at. Whatever the fuck that means. It’s a whole lot of money to mortgage your future on for four years of living in a cool place where the campus culture “gets you”. At the end of the day, you’re making an investment in your future, not going to summer camp for fun.
Not even mentioning the lack of financial responsibility this creates, as other commentators have done better than I. Mutual funds and banks are now investing in CDO’s based upon student loans. That alone is a scary thought, but now the loans those have been based on can just disappear? Tuition and the loans propping it up is a bubble and this just seems like a needle going towards it.
Not to mention that you actually end up paying significantly more than the initial loan if you do this 10 or 20 year plan. Yes, the payments are low, but you could pay it off in half the time with a proper budget.
Also the forgiven amount is taxable income. But yes, this. You end up paying more in interest than if you had just done traditional payments.
On the other end of the spectrum, I found out there’s a gross income cutoff to qualify for deducting student loan interest from your taxable income. GODDAMIT.
Mind sharing that number?
Not exactly sure. Last year we were only allowed to deduct $2,500 in interest for student loans.
If you work private sector though, the forgiven loan amount once the 10 year or 25 year mark is reached is considered taxable income. And the 10% of your discretionary income isn’t set in stone if your income increases past a certain level. Just so happened to be working on mine when I saw this article so I had this up: https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven
I honestly think the biggest issue is all of our parents telling us that the money will work itself out, combined with the fact that when they went through and took out loans, a multitude of things (college prices, hours of work needed to pay for a semester, etc) were much different. 95% of 17/18 year olds have no concept of these things and basically rely on their elder peers to help with these decisions.
But really, it’s all a shitshow and there are a lot of root causes that need to be addressed for this to get better anytime soon.
I’m not subscribing or signing in to read the WSJ article.
Fun fact about this program, if you get married both incomes now count toward the 10%, so be ready for the sticker shock when that monthly loan payment balloons by $500/month or be prepared to file taxes separately. Or get a divorce. Whatever.