Loan caps already exist for Federal undergraduate loans - $5500, $6500, $7500 and $7500. Total of $27,000. If you have to borrow more - it is thriugh private student loans and/or Parent Plus loans.
I feel the biggest change needs to be a cap on loans for grad school and law school, and limits on deferrals. No one should be able to go 25 years without making payments, and borrowing more at the same time.
For DS’s grad/prof school loans (originally called Stafford but then changed to Federal Direct in later years) from Federal government, the amount is $8500 each year, for the first 3 years at least.
Somehow the Federal Direct loan amount for the last year is much larger.
We remember these numbers because we have paid off two of these $8500-per-year loans (and it seems my wife is “working” on the third $8500-per-year loans right now.)
Not sure whether anyone here has any experience in paying down the Federal Direct loans using their web site. There are two options when you pay online: 1) Balance 2) Refund. The second one is for paying down the principal only, but not the overall balance. My wife asked me which one is “better” and I really did not know the answer. But she needed an answer to proceed from there so I told her the latter is better (but I actually have no clue but my wife was happy as long as I gave her an answer, correct or wrong – even though she knew I did not know the answer 
) I hope we have made the right choice in the past few years.
(We did pay off two of $8500-per-year loans and they sent a “congratulations” letter to us each time we had paid one of the loans off.)
I suspect that when you choose “Refund”, a portion of your payment is applied to some fees for recalculating your loan amount. So it may make sense if you almost pay a larger amount each time (say, $1500.) But if you pay only $200, it may be a poor choice.
If it were you, would you choose balance or refund?
The web site I pay federal loans on doesn’t at anything about applying a payment to refunds.
It says there are rules about how a regular payment is applied “there are rules in your student loan agreement we’re required to follow when we apply payments to interest, late fees (if any), and your unpaid balance? This means it’s not possible for you to direct a payment to be applied entirely to the unpaid balance of a loan. For all loans other than federal loans with income-driven repayment (IDR) plans, payments must be applied first to late fees, if any, then interest, and finally the unpaid balance. For federal loans with an IDR plan, payments must be applied first to interest, then late fees, and finally the unpaid balance.”
But extra payments can be applied as you choose “However, when it comes to extra payment amounts (see examples below), after all interest and late fees due have been satisfied, we automatically apply the extra amount to the unpaid balance on the loan with the highest interest rate (if there are multiple loans in your account). If you don’t want the extra payment amount to be applied this way, contact us. If you, instead, want an extra payment amount to be applied to a specific loan, you must provide us with the loan’s account number and interest rate. If multiple loans in the account have the same interest rate, and you want an extra payment amount applied to one and not the other, please contact us to ensure the payment is applied to the loan you want.”
No idea what refund would mean in this scenario.
@swimcatsmom, Thanks for the explanations. (We all know that you are an expert as long as the issue is related to finance or tax.)
At age 48, she wanted to begin saving for retirement. But the monthly loan payments of $2,750 stretched for 30 years, far more than she could afford and long past retirement age.>>>>>>
Holy Toledo!!
I learned something from this article: it is possible to owe this much to the government.
What advice would you give this woman now? If she never pays it off is the debt discharged at her death?
can she do the thing where she pays what she can for X years and then it is written off? Sounds like all govt loans?
she should research which countries she can move to and potentially live enough off the grid to… maybe somewhere in Latin America
If the loans are written off, guess who pays?
The taxpayer!
of course, but she’ll never be able to pay.
…
Actually, this can be done without having to make subjective judgements about the school quality or type of degree. As with undergraduate student loans, post-graduation (or drop out) earnings and loan repayment/default for those who take government loans for graduate or professional school can be aggregated by type of degree and school; such information can then be used to determine government loan limits for students in those graduate and professional school degree programs.
However, there are limitations with this type of approach, which is inherently backward looking in order to get enough history of earnings and loan repayment/default for a given degree program. If the job market for graduates of the degree program is getting worse, then the backward looking history may underestimate the risk of loans for new students in the degree program. It can go the other way if the job market for graduates of the degree program is getting better.
After more discussions with the person (my wife) who has actually paid the student loans online in the past 3(?) years, I think I understand now what the “refund” means in this scenario.
After Federal government releases the loan, the borrower has 3 months period in which he could change his mind and stop (all or a portion) of the student loan. So the “refund” means that the borrower returns all or a portion of loan amount during this period, so if the original loan amount is X and now the borrower returns Y (as a refund to the Federal government), his princal is reduced by Y and his new total loan amount becomes X minus Y.
The reason that it works like this: it is only during the first 3 months that the online payment system will show the additional “refund” option. After that, it only shows the “balance” option.
I also learned more details about the balance of each of these student loans. The total loan amount makes me nervous, even though it is within 5-10% of the target amount that DS is supposed to take out as we “promised” to him many years ago.
That makes sense. Mine just shows balance. Never looked at it in any refund period!
@swimcatsmom, Glad to hear that my “theory” has been CPA-certified. 
That’s not the case universally. Everyone in my father’s college graduating class in the ROC(Taiwan) who received a full scholarship with free room/board and some pocket money graduated with flying colors and went on to do great things.
Also, the same could be said for the periods when Mainland China’s university system was free up until the end of the '90s with the exception of the Cultural Revolution.
Granted, one large reason for this was that in both societies, getting onto the academic track to be eligible to take the college entrance exam wasn’t automatic…but was highly selective process which took only around the top fifth to quarter of middle school graduates. And of those, only a small portion will be successful in gaining admission to any college/major…much less the more desirable ones. Thus, even without the financial “skin in the game”, the motivation necessary to even get into the college admissions race, social/parental pressures, and differences in how one is perceived/treated as a university student/graduate by society at large…especially at an elite compared to those who aren’t provide more than sufficient motivation for the vast majority to finish.
Incidentally, when Mainland China instituted tuition, it was in the same period college entrance became easier overall due to a great number of new colleges opening up from the 90s onward.
Granted, the educational quality difference between the first tier or two and lower Mainland universities tends to be so drastic that many newly wealthy upper/upper-middle class parents would rather opt to pay full-tuition to send their kids to the US or other societies with great universities so their kids won’t be saddled with a second-rate degree and education in a society where one’s degree pedigree can literally open or close doors to entire careers.
And ironically, this was the period when stories of the “less motivated” international students…especially from Mainland China studying in the US became prevalent in US/international mass media.
Something which stunned me as the Mainland Chinese/international students I remembered from my undergrad days in the mid-late '90s tended to more academically qualified/motivated due to admissions hurdles they faced along with being poorer* than most of the student body which was mostly upper/upper-middle class native-born US students.
If there’s anything left in her estate, that’s likely to be called upon to pay off as much of the debt as possible. If nothing’s left…then yes…the debt is effectively discharged.
I thought Federal student loan is automatically forgiven on death. Haven’t looked at the rules in a while but thought that was the case.
From the Fed loan site “For a student who dies, the loan will be cancelled if a family member or other representative provides acceptable documentation to the student’s servicer.”. Phew, I’ve been telling my husband he’s off the hook if I drop dead!
If I interpreted this correctly, did you just say that you have not paid off your student loans (when you are almost near your retirement age)? If this is indeed true, wow, just wow! (Why is the student loan burden so heavy?)
But I think you are just joking.
Re: Motivation of the students in many east Asian countries (about 40-50 years ago at least, not sure what is like today.)
Their motivation is indeed very high. But in the back of my mind, sometimes I feel that when the education craze becomes so extreme, it could waste too much society’s resources (human resources as well as financial resources.) Toning down the craze a notch may benefit everyone.
If I remember it correctly, in one of the countries there, on average, almost one half (at least one third) of household income of a family with K-12 students is spent on after-school “education race.” It is almost like another mortgage (Also, the financing support for purchasing a house is very poor as compared to our system – very high down payment and a very short mortgage payback period.) I feel sorry about the miserable life of a typical high/middle school student there. Isn’t it true that their government has to force the students to be out of the cram school by midnight? There appears to be a saying: If a high school student sleeps 4 hours a day, he could get into the (proper) college, but if he sleeps more than 4 hours, he would fail to get into a college. Some in the US may think Asian American students “work” too hard. Compared to the “good” students across the pond, their efforts could be much less. (Or, we could say: They do it more correctly.)