8 ms·

A Student Loan Nightmare: The Teacher in the Wrong Payment Plan

• Spooky23 9y ago
  My wife ran into a similar issue relating to a repayment plan where the servicer fubared everything in the process of the 6 transfers between servicers. Fortunately, we had the means and a low enough balance to put it on a high limit balance transfer and pay it off.
  • mjevans 9y ago
    The probably got a bonus out of shafting you in to paying it off (from their PoV).
• clarkevans 9y ago
  I wonder how much of the specific forgiveness problem has to do with private loan servicing. As someone who switched to direct loan servicing in 1995, I found it refreshing to have a government official (who has no financial incentive to deceive you) service your loan. Before 1993, Stafford, PLUS and other student loans were guaranteed by the Federal Government but held and serviced by private entities. In 1993, direct student loan servicing was created and there was a way to convert your loans to be government held and serviced. Starting 2010 only federal direct loans are issued. The history is very political [1]. [1] https://www.newamerica.org/education-policy/policy-explainers/higher-ed-workforce/federal-student-aid/federal-student-loans/federal-student-loan-history/ https://www.newamerica.org/education-policy/policy-explainer...
• jeffdavis 9y ago
  The student loan forgiveness program is a terrible idea no matter what your political leanings. It's basically a very weird way to compensate people for certain kinds of jobs. The accounting is a mess, it's a promise for the future so it doesn't show up as a budget problem tofay, but will later. It's very uneven -- some people take out huge loans and other borrow more modestly. The borrowed money can be used for lots of non-educational things, so it creates an incentive to borrow more than you really need. And then it's a big yes or no at the end, not gradual, so it sticks people to jobs and makes a big dramatic event after ten years.
  • Spooky23 9y ago
    I strongly disagree. It’s one of the few tools available that ensures that qualified, well educated teachers are available everywhere. The program is a great example of the power of the federal government to lift all boats, even when the local governance doesn’t care at all. We see lots of examples of mostly red-state governance where passing costs off to other jurisdictions is essentially government policy. (Example: https://www.thedailybeast.com/nevada-sued-for-greyhound-therapy-for-mentally-ill-patients https://www.thedailybeast.com/nevada-sued-for-greyhound-ther... ) This doesn’t let them do that for several professions.
    • beisner 9y ago
      Or, ya know, you could pay teachers more across the board and do away with the loan tomfuckery.
      • Spooky23 9y ago
        Good luck getting your local school-board to fund $90k starting salaries for teachers!
        • vkou 9y ago
          Well, they certainly find such salaries for administration. (Something about paying market rates.)
          • wavefunction 9y ago
            Fire one administrator and suddenly you have the budget to bring two teachers up to 90k.
            • bittercynic 9y ago
              Not so easy to do when the administrators can influence which positions to keep.
• baxtr 9y ago
  I vividly remember when I was handed my tuition statement at a US college. All the courses added up to a absurd number for a single semester. As an European exchange student an additional line, where this absurd number was waived saved my ass. But still, I remember how shocked I was back then. I thought: How can all my class mates afford that rate for several semesters? I think it is totally absurd that one of the most advanced nations on this planet is putting such a high tax on higher education. Education in general is so crucial for a developed country like the US that I believe it should be free (at least almost free).
  • johnnyb9 9y ago
    People in Europe end up paying for the education, you just don't see it on an itemized statement. What if you add up the 2-3% of your wages across your entire lifetime? Another thing to point out is that many colleges offer grants, scholarships, and work study such that the sticker price often isn't what gets paid.
    • bittercynic 9y ago
      An important part of making education free or nearly free is not the total cost born by society, but the change in incentive. If we all pay for university whether we go or not, it is more likely that we'll decide it is worthwhile to pursue an education.
      • jldugger 9y ago
        This does also change how education works. In Germany, I'm told, you can't expect students to have done assigned readings. And an exchange student from Poland told me that his fellow students would typically show up for the midterms and finals only.
        • mattkrause 9y ago
          Though I have never taught in Germany, I can assure you that plenty of non-German students, even ones paying full freight at expensive US schools, have also not done the reading.
• seibelj 9y ago
  The student loan forgiveness program encourages people to take out loans they can't afford, discourages them from finding higher-paying employment opportunities in the private sector, and discourages switching jobs whatsoever because of worries about whether the new job will qualify. Once locked into a job, the employer can use this to their advantage by underpaying the employee, knowing they are less likely to hop during the income forgiveness years. As with all market-warping programs, the inevitable result is a total mess that hurts more than it helps while creating a bureaucracy to manage the situation, which costs taxpayers while providing no useful output for society. Although I disagree philosophically with rewarding some types of jobs over others with free money, if society were to do this, a much better way would be providing some sort of general income tax cut (like raising the standard deduction for people employed in certain industries) rather than saying "Hey, work for this job and in 10 years we will forgive all your student loans (maybe)," which is a very weird solution when you think about it.
  • empath75 9y ago
    Yeah my wife was planning on doing this with her student loan for her social work degree and I just refinanced it all to a five year loan so we could get rid of it. I don’t know how people manage to spend $50k getting a degree in social work. Something is wrong with the system that that is allowed to happen.
    • scaryspooky 9y ago
      Why blame 'the system' instead of your wife, though? It was her choice to pursue a degree at such costs.
      • AdmiralAsshat 9y ago
        This is alot like blaming the patient for getting addicted to opioids. This nation indoctrinates the youth into believing that they are worthless bums if they don't go to college. So when they walk into the door, barely an "adult" by any stretch of the word, we put a piece of paper in front of them and say, "Sign this, or you will never get the degree you need, never get the job you need, and die cold and lonely." So they sign that paper, unaware that the loan they incurred at the beginning of their adult life will follow them for the rest of their lives. And if the degree fails to bring in the job they were promised, tough luck. And if the Department of Education decides not to forgive their student loans after years of service to a government job or non profit, them's the brakes.
• j-c-m 9y ago
  TL;DR Guy chose a payment plan not eligible for loan forgiveness.
  • bittercynic 9y ago
    While true in a simple sense, the meat of the story for me was that he expected a financial services company to act in his interest. Personally, I don't think it is a great situation when you have to be a cynical bastard to get a fair shake at consumer-level finance.
• Cacti 9y ago
  There is a line in here that the $70,000 he's already paid amounts to nothing, but what does that mean? That the $70,000 doesn't count towards his loan forgiveness, of which some amount has to be reached? The article, or at least one of the quotes, made it sound like it didn't count in general, which I find hard to believe. Was he really just paying the interest all this time?
  • arkem 9y ago
    He wasn't paying down any of the principal, presumably because the loan forgiveness program would take care of it. > Because of his 8.25 percent interest rate, which he could not refinance due to loan rules, even those higher payments weren’t putting a dent in his principal. So the $70,000 or so that he did pay over the period amounted to nothing, and he’ll most likely pay at least that much going forward.
  • jldugger 9y ago
    Graduated repayment plans are basically start off interest only and ramp up every two years. If you're mistakenly pursuing PSLF with one, you'd likely want to take the longest horizon payment plan, so the ramp up is slower. https://studentaid.ed.gov/sa/repay-loans/understand/plans/graduated https://studentaid.ed.gov/sa/repay-loans/understand/plans/gr...
    • Cacti 9y ago
      Thanks. Sounds like the law was structured this way to avoid exactly this scenario, that people would purposefully avoid paying off what they could, pay only the interest (or the minimum amount acceptable to the loan company) and then stick the government with the remainder. I'll be honest, this is a shitty situation for this guy, and maybe he was misled, but this does seem to fall under the "if it's too good to be true" category. The idea of trying to game this situation by paying the minimum possible should have set off alarms bells with everyone involved, like, every month. I'm surprised it took so long for the issue to surface.
      • jldugger 9y ago
• rayiner 9y ago
  As part of PSLF, you’re required to file an annual certification: https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf https://studentaid.ed.gov/sa/sites/default/files/public-serv.... The certification clearly says that a payment only counts if it is under one of the income driven repayment plans or one of the non-income driven repayment plans with a payment higher than what it would be on the standard 10-year plan (page 3). Moreover, the certification states PHEAA is require to tell you whether your payments are qualifying and how many qualifying payments you have left. I suspect the form correspondence sent by PHEAA met those requirements and this guy simply did not notice.
  • exhilaration 9y ago
    Yeah, the article mentions that the reporter went through the the guy's paperwork and found exactly that on the back of one of the statements, that none of the payments qualified for the loan forgiveness. The reporter argues that it should have been more visible.
    • rayiner 9y ago
      I mean I think the government should exercise its discretion to prevent injustice in situations like this. But it’s not some crazy Kafkaesque situation. The government forgives tens of thousands of dollars of loans to you, and all you have to do is meet a handful of requirements.
• indubitable 9y ago
  All of this insanity could be solved if student loans were treated like any other loan. If student loans could be dismissed in bankruptcy then it would align the interests of lenders and students. As is in the current system, since loans cannot be dismissed, it turns into practically guaranteed profit for the lenders. In the worst case they can garnish wages so the equation changes from repayment to lifetime earnings of at least $x --- loans as 'lifetime rent' packages. This has completely bastardized education in purpose, cost, and quality. The US now literally pays more per capita [1] for higher education than Germany. Germany has subsidized 'free' education for everybody, including foreigners. Like all things, I'm certain the current system started out with good intentions -- probably with some good feeling and wholesome name like 'equal access to education act.' But instead of positively changing things, it seems to mostly have just distorted what was already there. For instance giving a loan, which now regularly surpass 6 figures as tuition raises in response to the availability of 'free' money, for somebody to go study a field that's going to have no meaningful impact on their future earnings is simply exploitative. It's take advantage of naivete and the inability to dismiss that loan. Nobody in a million years would do that if loans could be dismissed. This would leave the less productive degrees to be primarily the domain of the 'bourgeois' and I don't really see that as a problem. Their family and connections can subsidize the value of such education if they see fit -- people from less privileged backgrounds do not have that luxury. And those from less privileged backgrounds are arguably even more susceptible to the belief that if they just get a degree, any degree, they'll be able to get, nay - be entitled to, a great job. Less privileged tends to imply that one's parent(s)s did not manage to obtain 'great jobs' themselves, and so may be less aware of the conditions to find such a job. In any case, the intersection of this myth and reality is something that never ends well. [1] - https://nces.ed.gov/programs/coe/indicator_cmd.asp https://nces.ed.gov/programs/coe/indicator_cmd.asp
  • thedufer 9y ago
    If student loans could be dismissed in bankruptcy, there would be approximately no student loans. Why would a bank ever issue one when the student's financially optimal move is to take the loan, finish school, and then immediately file for bankruptcy? Student loans are difficult for this reason precisely - the people who need the money have no assets, and they're borrowing to buy something intangible that thus can't have a lien against it.
• zaroth 9y ago
  Loan servicing really seems like a bounded enough problem that it should be solvable by a rules based expert system. Why is this shit so hard? Where's the unbounded complexity over making payments and understanding what programs you are enrolled in or qualify for? I'm not saying it's trivial but it's not like there 15,000 different programs that need to be individually coded using data that isn't available using rules that change daily. The problem seems hard but absolutely doable to automate 98% of the work.
  • awakeasleep 9y ago
    A large part of it is that a student loan servicing company can be more profitable if they drive students into certain programs for doing deferrals and switching plans. These programs are clearly in the benefit of the servicer, to the detriment of the borrower, and CS reps have targets around it. If the system was fully automated, how could you ensure it yielded the maximum profit? People could just figure out the best way to repay their loan without your 'sales funnel' pushing them in the direction you want to go.
    • zaroth 9y ago
      An automated company has no need to try to maximize short-term profits from individual users, it should optimize for long-term value to the most number of users, right? Driving adoption of the platform to the most users and ultimately maximizing aggregate long-term profit and value simultaneously?