sk8rmom

Finally Grad Plus loans are included! Good news for those borrowers who are required to have graduate degrees but don't have high starting salaries. Finaid.org has had good info on the repayment plans posted for awhile, along with advice for students who are having trouble consolidating:
FinAid | Loans | Repayment Plans | Income Contingent Repayment

Atana

It is a victory of sorts. The dilemma is the fed subs like that of Sallie Mae and Nelnet are not considered part of the program. And until Congress and the USDOE retract the provision that one can only consolidate once, its unlikely that these corporations will turn loose of these loans to be rolled into federal directs which would be eligible for such remedies as the article mentioned.

But Duncan is to be given credit for some progress, however something will need to be done for those who (by federal programs or school complicity) were bound to the corporate loans.

And as far as cost, well there has been some convincing evidence that having fewer of our professional class as being lifetime wage slaves to these corporations might actually revive a moribund consumer economy. And other costs would be much less if the corporate loan model were to be superseded such as the 2 billion a year on the SLP subsidies, various over billings and etc probably have cost the government much more than loan mediation programs or even forgiveness would cost our economy.

And really we are looking at an looming economic and social disaster if the feds do not compel some compromises from the edudebt companies in regards to the debts they hold. The first generation fed into their maw will be heading to retirement in the next 10 years, and due to the 'enhancements' placed on these loans by these companies a sizable portion of that population will not be done paying these loans by 65 or 70. What then, masses of indigent elders because what is left of their social security is being seized by these corporate raiders? Or an increase in desperate acts by the elderly?

Its astonishing and appalling that we ever had such a system, or let it become a 500+ billion monster of debt...

everytime

Okay, I am a bit confused. I am still in college, so do I wait until I am out of college to apply? Or do I apply now then when I am out of college they decide what my payments would be?

Atana

Your decision there could be influenced by political factors as much as your individual student status. The current USDOE has fired quite a shot at the existing structure of student lending, albeit not directly aimed at the corporate lenders.

As such there is going to be a massive lobby campaign to take the guts out of Duncan's proposal before there is a substantial amount of public pressure to somehow extend it to the FFEL sub loans. Could be complex because the lobby cabal has been subtly undermined when Buck McKeon elected to step back from the education committee. But at the same time Moody's recent downgrading of the status of SMC bonds is going to haunt the halls of the USDOE and Congress.

Could be a problem, because if you sign up now loans after that point may not be eligible. But if you don't sign up and the corporate lobbyists later take the guts out of Duncan's initiative, that ship has sailed.

Lots more going on here than is being covered adequately in the general press...but since your a student make sure to read "Chronicle" and "Inside Higher Ed" as these are the niche sources for educational policy.

Eriatarka

Indeed we do. A degree here is also capped at 8k in terms of fees by the Govt too, unlike the ridiculous numbers I read on CC.

sk8rmom

I agree with Atana that this leaves students with FFEL consolidations out in the cold for now. But, if students consolidated under the DoE or, have not yet consolidated their FFEL loans, they can participate by rolling them into a federal direct consolidation loan. From the link above at finaid.org:

toadstool

Government loans only work if the private sector is will to buy them. The risk on a loan where the borrower can walk away after 10 years is through the roof. Nobody will buy that debt and the market will either dry up or the interest rate demanded will have to be pushed sky high to overcome the repayment risk.

Even if you borrow from USDOE, where do you think they got the money from? It comes from buyers of government debt!

IF you set up a loan program where large numbers of borrows can walk away, you kill the program for everyone.

thumper1

I don't believe they are setting up a "program were a large number of borrowers can walk away". They are setting up a program whereby they can collect SOMETHING from these underemployed folks instead of having them default entirely.

Atana

"I don't believe they are setting up a "program were a large number of borrowers can walk away". They are setting up a program whereby they can collect SOMETHING from these underemployed folks instead of having them default entirely."

Well that's exactly it. What's not being fully revealed is that the student loan situation is a debacle in the making. SMC was recently downgraded to almost junk bond status, and they control some 40% of the 580 billion of student debt in the US. And as the economy continues to sink, more and more people will not be able to pay the notes to such companies.

At that point SMC, NNC and etc will be coming to the federal government for more 'liquidity' payments. Problem is the government has already given them billions (on a ongoing basis for more than a decade with such as the SLP subsidies) and that government doesn't have the resources to keep giving them sugar and cake.

Likely what Duncan is trying to do with the equitable arrangement with the federal directs is to either provide a cushion for the impending bubble implosion of such as SMC, or to begin the move to extend that cushion into a very troubled area of the economy.

As far as the contention that millions will walk away from loans, that's the same red herring initially used to privatize the student loan programs. It was a fiction 20 years ago and is even more of a fiction now. Simply because Duncan's program will make it possible for people to pay something. Very different from the 220% fee enhancements and other tricks by the educational lenders which make it impossible to pay.

As far as killing the FFEL program, its going to die anyway. It's a matter of how it dies, and if it does so with the explosion of a credit bubble how much damage it will do...

Atana

"I agree with Atana that this leaves students with FFEL consolidations out in the cold for now. But, if students consolidated under the DoE or, have not yet consolidated their FFEL loans, they can participate by rolling them into a federal direct consolidation loan. From the link above at finaid.org:"

And that's why the sweetheart regulation which only allows consolidating once has got to be removed. The big lenders (SMC, NNC) have been attempting to block consolidations by even private entities, they will show all their fangs if there is even the remote possibility of the federal government taking over these loans.

Problem is whether its another pointless liquidity payment to these companies, or it is the feds buying up their inflated notes its still going to cost quite a bit.

Ironically for a system which never should have existed in the first place...

OperaDad

Let's say that Spouse A has $1,000/mo payment and has a nice job. Let's say that Spouse B also has a $1,000/mo payment but stays home to raise the kids. What is the incentive?

Spouse A and Spouse B never get legally married.

That way, Spouse B reports $0 income, and doesn't have to make any payments towards the loan. When the loan is finally forgiven in 25 years, then they can get legally married.

Spouse A looses the benefit of Married Filing Joint on tax returns, but that is a small compared to the Student Loan payments.

OperaDad

IBRinfo :: What are these new programs?
Direct Loan Repayment Plans

"What about interest? In some situations, your reduced payment under IBR may not cover the interest on your loans. If so, the government will pay that interest on your Subsidized Stafford Loans for your first three years in IBR. After three years and for other loan types, the interest will be added to the total amount you owe. While your debt may grow if your affordable payments are low enough, anything you still owe after 25 years of qualifying payments will be forgiven. "

"If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment. Interest will continue to accumulate but will no longer be capitalized." [from Income Contingent Repayment, and may not be applicable to Income Based Repayment]

Note: Payments you make first go to unpaid, uncapitalized, interest.

Because you have to pay the Income Contingent Payments for those 10/25 years in order to qualify for forgiveness.

"It will forgive remaining debt after 10 years of eligible employment and qualifying loan payments."

"What are eligible jobs? In most cases, eligibility is based on whether you work for an eligible employer. Your job is eligible if you:

* are employed by any nonprofit, tax-exempt 501(c)(3) organization;
* are employed by the federal government, a state government, local government, or tribal government (this includes the military and public schools and colleges); or
* serve in a full-time AmeriCorps or Peace Corps position."

"The maximum repayment period is 25 years. If you haven't fully repaid your loans after 25 years (time spent in deferment or forbearance does not count) under this plan, the unpaid portion will be discharged. You may, however, have to pay taxes on the amount that is discharged." [from Income Contingent Repayment, and may not be applicable to Income Based Repayment]

Atana

"Let's say that Spouse A has $1,000/mo payment and has a nice job. Let's say that Spouse B also has a $1,000/mo payment but stays home to raise the kids. What is the incentive?

Spouse A and Spouse B never get legally married.

That way, Spouse B reports $0 income, and doesn't have to make any payments towards the loan. When the loan is finally forgiven in 25 years, then they can get legally married.

Spouse A looses the benefit of Married Filing Joint on tax returns, but that is a small compared to the Student Loan payments."

Even Mussolini never established educational policies which had direct effect on marriages...

Which Opera Dad, shows how unbelievably socially and economically destructive our current educational lending system actually is....so I'm not sure if it is really a form of abuse in the hypothetical model you proposed. What your hypothetical married couple are doing is the kind of necessary action taken by those in failing or predatory political and economic systems. Essentially the underclass is coming to the middle class...or Gods help us Dmitry Orlov is right...

toadstool

"Your job is eligible if you:
* are employed by any nonprofit, tax-exempt 501(c)(3) organization"

In our area we have 503 (c) home builders, and 503 (C) bakeries and 501 9c) printer/copy shops and every kind of unlikely "non profit" imaginable. At this rate every business that stops paying corp taxes by becoming 501(c) will hand their employee the beni of a walk-away provision on student loans.

How about giving tax breaks to the people who pay taxes, and create private sector jobs.

OperaDad

Toadstool: There is a difference between 501(c)(3) and 503(c)

501(c)(3) — Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations

The organization not only has to be "non-profit", but it also must be in one of the above classes.