4 ms·

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 forgiven

by 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
    > 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 Bear in mind that the standard repayment plan is 10 years, and PSLF forgives debt remaining after 10 years. Without a change in repayment plan, there is no benefit to PSLF. Where the law protects the common good is disallowing graduated payment plans access to PSLF, as it's the only non-standard plan that doesn't factor in income. I donno what Shafer's income is, but his district currently starts licensed teachers with a master's off at 40k[1]. If we assume he accrued 4 years exp while pursuing his Master's, then he's at 45k. But running the numbers, paying back 70k at 8.25 percent interest means a monthly payment of $850, so unless his wife is a doctor, it seems like he'd qualify for some sort of income plan. Personally, given my modest loan amounts, favorable interest rates, and decent wage I found it difficult to qualify for PSLF without some extreme retirement savings planning -- maxing out both a 403b and a 457b is allowed, but it's rare for folks to have access to both. Deferred income plans like those reduce your AGI, which is what repayment plans are keyed in on. Things that don't reduce AGI include: union dues, mortgage payments, rent, car payments, medical expenses, or dependents. [1]: http://www.4j.lane.edu/wp-content/uploads/2013/04/2016-17-Licensed-Salary-Schedule.pdf http://www.4j.lane.edu/wp-content/uploads/2013/04/2016-17-Li...

by Cacti 9y ago

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
  > 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 Bear in mind that the standard repayment plan is 10 years, and PSLF forgives debt remaining after 10 years. Without a change in repayment plan, there is no benefit to PSLF. Where the law protects the common good is disallowing graduated payment plans access to PSLF, as it's the only non-standard plan that doesn't factor in income. I donno what Shafer's income is, but his district currently starts licensed teachers with a master's off at 40k[1]. If we assume he accrued 4 years exp while pursuing his Master's, then he's at 45k. But running the numbers, paying back 70k at 8.25 percent interest means a monthly payment of $850, so unless his wife is a doctor, it seems like he'd qualify for some sort of income plan. Personally, given my modest loan amounts, favorable interest rates, and decent wage I found it difficult to qualify for PSLF without some extreme retirement savings planning -- maxing out both a 403b and a 457b is allowed, but it's rare for folks to have access to both. Deferred income plans like those reduce your AGI, which is what repayment plans are keyed in on. Things that don't reduce AGI include: union dues, mortgage payments, rent, car payments, medical expenses, or dependents. [1]: http://www.4j.lane.edu/wp-content/uploads/2013/04/2016-17-Licensed-Salary-Schedule.pdf http://www.4j.lane.edu/wp-content/uploads/2013/04/2016-17-Li...