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Yes, you can make higher payments if you want. I agree that if you are on IBR and yet are somehow still able to make the original full payments that you don’t pay more and that IBR is basically a free insurance policy that would allow you to pay less if you had to…</p>
<p>…however, I think you’re overestimating the ability of many on IBR to make such substantial debt repayments. </p>
<p>It really depends on a case by case basis with looking at someone’s income, their non-debt expenses and the size of the student loans but generally speaking if someone is on IBR it’s likely going to be difficult to make payments that are substantially larger. </p>
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With IBR it’s not uncommon to actually go into negative amortization (i.e. you pay money each month and each month you owe more than the previous month). This is where my comment about payday loans originated from. This is especially true with law school sized debts where someone comes out and then does not land a big-law job. </p>
<p>I certainly do not think a payday loan would be better… my point is that many people don’t understand that IBR can often be way for one to get stuck in a similar crazy financial situation where you just keep throwing money at a black hole. </p>
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Uncle Sam is not like a normal creditor. If you have a tax liability that you don’t pay, but you have assets, the IRS will just go after those assets and literally take them away from you to cover the taxes you owe. You can’t have assets (even non-cash assets) and owe the government money in unpaid taxes.</p>
<p>If you have a bank account they will just take money out of there… literally you’ll check your account one day and the money will just be gone. If you’re employed at the time they will take money right out of your paycheck… literally you’ll get your paycheck and you’ll be paid less. </p>
<p>A while back I used to work at a bank and we would simply get these notices from the IRS that said “so and so has an outstanding unpaid tax liability… we know they have an account with you… take $XXXXX from their account and send it to us”</p>
<p>What you’re referencing says that if you have no assets for the IRS to go after then they’ll go away… but if you have no monthly income, no savings, no investments, no property then you’re hardly in a desirable place. </p>
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One should keep in mind that many with such optimistic views are likely in a boat where they’ll desperately need this bill to pass because they borrowed way more than they could afford. </p>
<p>Who knows what the future would bring, but it would be very unwise to make a decision to borrow a massive sum of money on the basis that a law might change at some point down the line. The law is what it is today… that could always change but for the foreseeable future that seems highly unlikely. </p>
<p>I appreciate that you’re trying to find the positives in IBR and as you pointed out with the “insurance” analogy there can be some. However, this isn’t a magic wand. If you borrow a massive sum and then don’t end up making a massive income things are going to be really rough for a long time. A smaller monthly payment simply masks the fact that the debt isn’t really being repaid and instead you’re just paying more interest. </p>
<p>Yes, IBR will help provide some protection from allowing the student loans on their own to make you go bust… but on the flip side unlike most loans you’ll still owe the money back even if you do end up going bankrupt. </p>
<p>If you borrow the money you’ll pay it back one way or the other eventually… and if you don’t make full payments from day one you’ll end up paying back a lot more one way or the other.</p>