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Guy is using a government loan forgiveness program. He'll pay "10% of his discretionary income, defined as adjusted gross income minus 150% of the poverty leve

by Hasz 8y ago

Guy is using a government loan forgiveness program. He'll pay "10% of his discretionary income, defined as adjusted gross income minus 150% of the poverty level. Any balance remaining after 25 years is forgiven, effectively covered by taxpayers. The forgiven amount is then taxed as ordinary income." Don't get me wrong, dental school is stupid expensive (forecast from USC was ~450k) but this guy has the financial acumen of a brick. You don't buy a new house, Tesla, and take vacations to Havana with that much debt, while simultaneously pushing the burden for your schooling onto everyone else. https://www.fullwsj.com/articles/mike-meru-has-1-million-in-student-loans-how-did-that-happen-1527252975 https://www.fullwsj.com/articles/mike-meru-has-1-million-in-...

Harvey-Specter 8y ago
> this guy has the financial acumen of a brick Sounds like he's doing the smart thing at this point, doesn't it? He borrowed over $600,000. By the end of the 25 year period he'll likely have paid back less than the original principal.
- Hasz 8y ago
  From the article "Since refinancing his debt with the federal government in 2015, lowering the rate to 7.25%, Mr. Meru’s balance has grown by $148,948. It will keep growing through the 25-year life of the repayment plan until it reaches $2 million. That sum will be forgiven and, at current tax rates, could cost Mr. Meru more than $700,000 in income tax payments. By then, Mr. Meru will have paid $1.6 million. That would be about the same as repaying his $600,000 in student loans at a rate of 4% over 25 years, said Jason Delisle, a student-loan expert with the American Enterprise Institute, a conservative think tank. The biggest factor in Mr. Meru’s runaway debt, he said, was a high principal combined with long periods when Mr. Meru made no payments."
  - Harvey-Specter 8y ago
    I don't have access to the full article, but > lowering the rate to 7.25% > repaying his $600,000 in student loans at a rate of 4% These two things don't jive. Did he have the option of a loan at 4% at some point?
    - nononope 8y ago
      Yeah. The years before the federal student loan interest rates went over 6.49% and private loans went over 7.25% FOR EVERYONE.
    - hellogoodbyeeee 8y ago
      I think the article is saying that had he received a loan at a 4% rate for 25 years he would paid the same amount toward the bill as he is currently doing for loans at a 7.25% rate with loan forgiveness at the end. The 4% is a hypothetical rate, not a real one. Though he did have at least one student loan at a rate of less than 5%. Most student loans are made up of smaller loans. For example, my wife's "student loan" is $100k, but it is made up of 8 loans of 4k to 30k with varying interest rates of 3% to 6.5%. Rates increase every couple of years. To be clear, federal loans are fixed rate loans, but each year you are in school, you may incur new, higher rate loans than the year before.
    - nononope 8y ago
      His first loans were probably 4%. In 2007-8, all loan rates doubled to predatory levels, along side the cost of tuition. He got a doctorate, thats like 8-10 years. Federal loans get cut off at about $27k. So, he likely got private loans with interests rates upward of 8%, loans were purchased by the DOE and he was able to consolidate to a lower rate based on the amount he owed each lender and their respective interest rates. I pay 6.25% because I have autopay and getba discount. Doesn't change the $300/mo interest I accrue monthly
    - nononope 8y ago
      His first loans were probably 4%. In 2007-8, all loan rates doubled to predatory levels, along side the cost of tuition. He got a doctorate, thats like 8-10 years. Federal loans get cut off at about $27k. So, he likely got private loans with interests rates upward of 8%, loans were purchased by the DOE and he was able to consolidate to a lower rate based on the amount he owed each lender and their respective interest rates. I pay 6.25% because I have autopay and getba discount. Doesn't change the $300/mo interest I accrue monthly.
- deleted 8y ago
  [deleted]
hkmurakami 8y ago
or he's playing the game just as he is incentivized to play it.
sykh 8y ago
PSLF only takes 10 years so if he could get onto that program he’d save himself a lot of money. PSLF forgiven debt is not taxable.
- nononope 8y ago
  I borrowed $32k was expected to pay near $700/mo on the 10 yr plan. Graduated in 2009 when everyone lost their jobs, nobody was hiring and those who were, got minimum 30% lower salaries. Competition in my field was 400 to one. Not only did a candidate need to be better than 400 applicants, they had to be willing to accept below market wages. Needless to say, the first job I got out of college was not related to my degree but, to 5 years of industry experience and my salary offer was, "this is what we are paying. If you don't want it, we can hire someone else for less. That wage got me on IBR for $129/mo. I paid more than the minimum but, still accrued interest faster. I was lucky to have $15 left at the end of the month, after rent, utilities car payments AND getting my groceeies from a food bank. This system is not sustainable and, if people want to talk about passing the burden on to taxpayers, that would be to the borrower, who has to pay income tax on money they never earned, while the private lender gets a tax credit on the principal. The problem is with the lenders expecting double the interest they used to offer and needlessly skyrocketing tuition and college expenses BECAUSE the U.S. GOVERNMENT stopped providing subsidies to the public Universities and to offset the loss, passed what taxpayers were already paying, onto the students, who are already taxpayers (sheesh)... Then add the price gauging private colleges, who took government loans and made false promises and yes, now the government is paying off those loans to private corporations on behalf of the jipped students.Add in that all colleges have lowered entrance standards, to make the bucks off of people who have no business being in college. I've considered going back to school and found that most colleges accept low C and high D averages. Those kids drop out when the loans run dry. I wanted to find a school that takes education seriously, with a minimum entry requirement of a low B or high C and that doesn't exist. You can basically fail high school and be accepted into college. It's a sad waste of time, money and it detracts from the people who actually go to learn something.
- dentista18 8y ago
  As an orthodontist, he's not eligible for PSLF.
deleted 8y ago
[deleted]
nononope 8y ago
It's 15%. 5% of whatever he's earning doesn't account for the poverty line... I say whatever he's earning because I can't read the damn article. If he can afford to pay the loan, he should.
kamaal 8y ago
>>Any balance remaining after 25 years is forgiven, effectively covered by taxpayers. This looks like a very serious flaw in the repayment clause on the very face of it. To think that people are doing multiple jobs waiting tables, working minimum wage and surviving on tips are paying taxes to subsidize this sort of education is bonkers. The government should first exhaust all recovery chances(going after the home, assets etc) and then think of the next steps.

by Hasz 8y ago

Harvey-Specter 8y ago

> this guy has the financial acumen of a brick Sounds like he's doing the smart thing at this point, doesn't it? He borrowed over $600,000. By the end of the 25 year period he'll likely have paid back less than the original principal.

Hasz 8y ago
From the article "Since refinancing his debt with the federal government in 2015, lowering the rate to 7.25%, Mr. Meru’s balance has grown by $148,948. It will keep growing through the 25-year life of the repayment plan until it reaches $2 million. That sum will be forgiven and, at current tax rates, could cost Mr. Meru more than $700,000 in income tax payments. By then, Mr. Meru will have paid $1.6 million. That would be about the same as repaying his $600,000 in student loans at a rate of 4% over 25 years, said Jason Delisle, a student-loan expert with the American Enterprise Institute, a conservative think tank. The biggest factor in Mr. Meru’s runaway debt, he said, was a high principal combined with long periods when Mr. Meru made no payments."
- Harvey-Specter 8y ago
  I don't have access to the full article, but > lowering the rate to 7.25% > repaying his $600,000 in student loans at a rate of 4% These two things don't jive. Did he have the option of a loan at 4% at some point?
  - nononope 8y ago
    Yeah. The years before the federal student loan interest rates went over 6.49% and private loans went over 7.25% FOR EVERYONE.
  - hellogoodbyeeee 8y ago
    I think the article is saying that had he received a loan at a 4% rate for 25 years he would paid the same amount toward the bill as he is currently doing for loans at a 7.25% rate with loan forgiveness at the end. The 4% is a hypothetical rate, not a real one. Though he did have at least one student loan at a rate of less than 5%. Most student loans are made up of smaller loans. For example, my wife's "student loan" is $100k, but it is made up of 8 loans of 4k to 30k with varying interest rates of 3% to 6.5%. Rates increase every couple of years. To be clear, federal loans are fixed rate loans, but each year you are in school, you may incur new, higher rate loans than the year before.
  - nononope 8y ago
    His first loans were probably 4%. In 2007-8, all loan rates doubled to predatory levels, along side the cost of tuition. He got a doctorate, thats like 8-10 years. Federal loans get cut off at about $27k. So, he likely got private loans with interests rates upward of 8%, loans were purchased by the DOE and he was able to consolidate to a lower rate based on the amount he owed each lender and their respective interest rates. I pay 6.25% because I have autopay and getba discount. Doesn't change the $300/mo interest I accrue monthly
  - nononope 8y ago
    His first loans were probably 4%. In 2007-8, all loan rates doubled to predatory levels, along side the cost of tuition. He got a doctorate, thats like 8-10 years. Federal loans get cut off at about $27k. So, he likely got private loans with interests rates upward of 8%, loans were purchased by the DOE and he was able to consolidate to a lower rate based on the amount he owed each lender and their respective interest rates. I pay 6.25% because I have autopay and getba discount. Doesn't change the $300/mo interest I accrue monthly.
deleted 8y ago
[deleted]

hkmurakami 8y ago

or he's playing the game just as he is incentivized to play it.

sykh 8y ago

PSLF only takes 10 years so if he could get onto that program he’d save himself a lot of money. PSLF forgiven debt is not taxable.

nononope 8y ago
I borrowed $32k was expected to pay near $700/mo on the 10 yr plan. Graduated in 2009 when everyone lost their jobs, nobody was hiring and those who were, got minimum 30% lower salaries. Competition in my field was 400 to one. Not only did a candidate need to be better than 400 applicants, they had to be willing to accept below market wages. Needless to say, the first job I got out of college was not related to my degree but, to 5 years of industry experience and my salary offer was, "this is what we are paying. If you don't want it, we can hire someone else for less. That wage got me on IBR for $129/mo. I paid more than the minimum but, still accrued interest faster. I was lucky to have $15 left at the end of the month, after rent, utilities car payments AND getting my groceeies from a food bank. This system is not sustainable and, if people want to talk about passing the burden on to taxpayers, that would be to the borrower, who has to pay income tax on money they never earned, while the private lender gets a tax credit on the principal. The problem is with the lenders expecting double the interest they used to offer and needlessly skyrocketing tuition and college expenses BECAUSE the U.S. GOVERNMENT stopped providing subsidies to the public Universities and to offset the loss, passed what taxpayers were already paying, onto the students, who are already taxpayers (sheesh)... Then add the price gauging private colleges, who took government loans and made false promises and yes, now the government is paying off those loans to private corporations on behalf of the jipped students.Add in that all colleges have lowered entrance standards, to make the bucks off of people who have no business being in college. I've considered going back to school and found that most colleges accept low C and high D averages. Those kids drop out when the loans run dry. I wanted to find a school that takes education seriously, with a minimum entry requirement of a low B or high C and that doesn't exist. You can basically fail high school and be accepted into college. It's a sad waste of time, money and it detracts from the people who actually go to learn something.
dentista18 8y ago
As an orthodontist, he's not eligible for PSLF.

deleted 8y ago

[deleted]

nononope 8y ago

It's 15%. 5% of whatever he's earning doesn't account for the poverty line... I say whatever he's earning because I can't read the damn article. If he can afford to pay the loan, he should.

kamaal 8y ago

>>Any balance remaining after 25 years is forgiven, effectively covered by taxpayers. This looks like a very serious flaw in the repayment clause on the very face of it. To think that people are doing multiple jobs waiting tables, working minimum wage and surviving on tips are paying taxes to subsidize this sort of education is bonkers. The government should first exhaust all recovery chances(going after the home, assets etc) and then think of the next steps.