Forgive Student Loans?

[hog88]

Ok thanks. Your case does show it is a lucrative business. Those are pretty damn nice returns. If it’s all private party transactions with only government protection in default then the lenders need more flesh in the game I’d submit. If it is indeed all federal there isn’t a good reason for the Feds to be making those margins from citizens that they’re lending to with other citizens money.

Debt collectors and the loan service companies the government hires are the ones making the money.

 

[RockyTop85]

Ok thanks. Your case does show it is a lucrative business. Those are pretty damn nice returns. If it’s all private party transactions with only government protection in default then the lenders need more flesh in the game I’d submit. If it is indeed all federal there isn’t a good reason for the Feds to be making those margins from citizens that they’re lending to with other citizens money.

Some of that return accrues before the loan repayment begins. Some of my loans were subsidized, meaning no interest until 6 months after graduation. Some were unsubsidized and that’s where the bulk of that initial $3000 came from.

Point 3: the only argument I can see in favor of any amount of student loan forgiveness would be the drag on the economy. If I hadn’t been faced with compounding interest, or if that interest had been capped, I would have kept my apartment. I would have eaten out more, gone out drinking more, bought furniture, bought a new car sooner, and gotten cab rides home from bars. All of this would have churned more of the money through the local economy.

The argument is not compelling given the low amount of forgiveness. For many people, $10,000 probably isn’t a significant enough amount of their debt to change their discretionary spending habits. Many are still years away and others are probably past the point where payments are a struggle. If my debt disappears next month, we’ll probably remodel our kitchen. If not, we probably won’t for another two years.

With that said, I thought some of the other changes that Biden made to the program were more sensible. I believe he capped payments at a % of income and may have capped total interest. I’d have to go back and look. They weren’t pure headline items, which this clearly was intended to be.

Honestly, this whole situation probably goes to the ****ed up incentive structure in Washington. In normal times a president should be touting those other reforms that were maybe more meritorious. Instead he throws this out there to rile people up when it gets shut down.

 

[OrangeBoro]

edit: We don't care if it's legal

 

[WoodsmanVol]

The only student loans being forgiven are those backed by us the taxpayer.

Doubt that. In my experiences, financial institutions have their greedy little fingers inside every cookie jar via some scheme and fiscal acrobatics or another. Including every government loan imaginable. And shared by their lobbyist controlled puppets in Congress. Which why the Republiars mainly are against the forgiveness, they fear missing out on sucking permanently at the teat of financial slavery of student loans.

 

[WoodsmanVol]

I think forgiving the loans based on them being predatory is a poor argument but if that's where you stand, fine. Take it to your Congressman and get it forgiven through the legislative process. The President doesn't have the power to wipe out $400B of my money on his own

Congress? Those slaves of lobbyists who more or less created the mess to begin with? Yeah, right.

 

[RockyTop85]

Point 4: Biden is going to lose, and it won’t just be because of a conservative majority.

An OLC memorandum on student loan forgiveness said that this statute could be used if the forgiveness were tailored to only borrowers who had been adversely affected by the pandemic.

The Biden admin didn’t even pay lip service to that. They just did it across the board.

There are arguments that everyone has been affected. Take a look at my retirement investments. They’re probably true, but they apply equally to people who don’t have student loans. If anything, older generations who are ready to retire probably don’t have these debts and are probably more affected by their 401k looking like the a used piñata.

The admin was told it needed to be a scalpel and they showed up with a chain saw. It was always just performative. Losing the case is part of the performance.

 

[newyorkvol]

Point 4: Biden is going to lose, and it won’t just be because of a conservative majority.

An OLC memorandum on student loan forgiveness said that this statute could be used if the forgiveness were tailored to only borrowers who had been adversely affected by the pandemic.

The Biden admin didn’t even pay lip service to that. They just did it across the board.

There are arguments that everyone has been affected. Take a look at my retirement investments. They’re probably true, but they apply equally to people who don’t have student loans. If anything, older generations who are ready to retire probably don’t have these debts and are probably more affected by their 401k looking like the a used piñata.

The admin was told it needed to be a scalpel and they showed up with a chain saw. It was always just performative. Losing the case is part of the performance.

100% believe this is performative. And it will continue to be in a list of important matters that will have no solution because the division creates power opportunities.

Student Loans
Immigration
Meaningful medical insurance reform
Etc.

 

[volinbham]

With that said, I thought some of the other changes that Biden made to the program were more sensible. I believe he capped payments at a % of income and may have capped total interest. I’d have to go back and look. They weren’t pure headline items, which this clearly was intended to be.

.

I ran the numbers some time in the past and these new changes basically have people paying back less than the actual interest. In effect it's the equivalent carrying a huge balance on a credit card and only paying the minimum monthly charge. The net effect is that most would never pay off the loan (and it would be forgiven at some time period) or worse, their principal grows as under paid interest is added to it.

 

[RockyTop85]

I ran the numbers some time in the past and these new changes basically have people paying back less than the actual interest. In effect it's the equivalent carrying a huge balance on a credit card and only paying the minimum monthly charge. The net effect is that most would never pay off the loan (and it would be forgiven at some time period) or worse, their principal grows as under paid interest is added to it.

Based on what numbers?

 

[volinbham]

Based on what numbers?

the proposed caps on payment relative to annual salary. I don't recall where the breakeven was but it was well into six figures before your minimum monthly payment based upon a % of your salary came anywhere close to paying of the loan in the 20 or 25 year window they proposed. At lower income levels (40-50K?) if you maxed out loans your minimum monthly payment wouldn't cover the monthly accruing interest.

 

[RockyTop85]

the proposed caps on payment relative to annual salary. I don't recall where the breakeven was but it was well into six figures before your minimum monthly payment based upon a % of your salary came anywhere close to paying of the loan in the 20 or 25 year window they proposed. At lower income levels (40-50K?) if you maxed out loans your minimum monthly payment wouldn't cover the monthly accruing interest.

What to Know About Biden’s Income-Driven Repayment Proposal

Not sure how you do that without a principal balance, but it seems moot. The rule accounts for this possibility.

 

[newyorkvol]

 

[NorthDallas40]

the proposed caps on payment relative to annual salary. I don't recall where the breakeven was but it was well into six figures before your minimum monthly payment based upon a % of your salary came anywhere close to paying of the loan in the 20 or 25 year window they proposed. At lower income levels (40-50K?) if you maxed out loans your minimum monthly payment wouldn't cover the monthly accruing interest.

Assuming that’s correct and I know you’re smart enough to do that math correctly so it likely is correct, the government set non fiscally educated naive college kids up for lifetime indebtedness. That’s pure bad faith legislation. The Feds aren’t helping anyone achieve their dream here they are selling them into financial slavery. That’s pathetic.

 

[volinbham]

you can run some basic numbers here.

Discretionary Income Calculator for Student Loans - NerdWallet

under the old system a single person with an AGI of 40,000 would pay a minimum of 151 a month and up to 424

under the proposed system the same person would pay 30 a month.

assume a modest student loan debt of 20K @7% and the annual interest alone is 1400 while the minimum payment is 360. Borrow up to the maximum and the story gets even worse. Under the existing system the borrower makes some slight head way on the principal paying the minimum.

It's free money. The loan is forgiven after 20 or 25 years depending on the plan.

I'll revise the scenario to match the current subsidized interest rate of 5%. Now the student would only under pay the annual interest by (1000-360) 640 a year. In year two assuming the income doesn't change the underpayment is greater.

The borrowers AGI (not gross income) has to be $52-53K for the minimum payment to match the annual interest.

 

[hog88]

Question. During the Covid "pause" on payments were the loans still accruing interest or was that paused also?

 

[OrangeBoro]

One of the most dangerous and evil people in the country

 

[RockyTop85]

Question. During the Covid "pause" on payments were the loans still accruing interest or was that paused also?

Paused

 

[volinbham]

Assuming that’s correct and I know you’re smart enough to do that math correctly so it likely is correct, the government set non fiscally educated naive college kids up for lifetime indebtedness. That’s pure bad faith legislation. The Feds aren’t helping anyone achieve their dream here they are selling them into financial slavery. That’s pathetic.

It's not a lifetime as the loans would be forgiven after 20 or 25 years.

A single person could borrow 40k for college and earn close to 100K and never pay back any of the principal - monthly payments of about 165-170 until it's forgiven. A banging deal if you ask me.

 

[NorthDallas40]

It's not a lifetime as the loans would be forgiven after 20 or 25 years.

A single person could borrow 40k for college and earn close to 100K and never pay back any of the principal - monthly payments of about 165-170 until it's forgiven. A banging deal if you ask me.

Ok thanks. And that pisses me off even more. It still puts burden on them financially when their earnings are lower and they need to qualify for car and home loans. But then to magically write it off is just wrong. It’s sanctioned theft.

 

[volinbham]

Ok thanks. And that pisses me off even more. It still puts burden on them financially when their earnings are lower and they need to qualify for car and home loans. But then to magically write it off is just wrong. It’s sanctioned theft.

I don't know about burden - a single person taking the standard deduction only would be making about 85K or so gross and only be obligated to pay 165 a month for the 40K they borrowed? If you can't swing that you have bigger problems. In the current system the person would have a minimum of 418. It basically works out to an interest free loan paid over 20 years (165 a month for 20 years is about 40K).

 

[NorthDallas40]

I don't know about burden - a single person taking the standard deduction only would be making about 85K or so gross and only be obligated to pay 165 a month for the 40K they borrowed? If you can't swing that you have bigger problems. In the current system the person would have a minimum of 418. It basically works out to an interest free loan paid over 20 years (165 a month for 20 years is about 40K).

Was more referring to their balance sheet on loan applications. Could be an over reaction of how student loans are treated I don’t know. I only had one small one my senior year and it was paid off in my first year of employment.

 

[volinbham]

Was more referring to their balance sheet on loan applications. Could be an over reaction of how student loans are treated I don’t know. I only had one small one my senior year and it was paid off in my first year of employment.

Gotcha. I had 30K - mostly grad school. Took about 6 years and some work on the side to pay them off but that was a great day.

 

[RockyTop85]

I don't know about burden - a single person taking the standard deduction only would be making about 85K or so gross and only be obligated to pay 165 a month for the 40K they borrowed? If you can't swing that you have bigger problems. In the current system the person would have a minimum of 418. It basically works out to an interest free loan paid over 20 years (165 a month for 20 years is about 40K).

The calculator in your link says an AGI of 85k in the lower 48 pays $217/month, which works out to 52k over 20 years. Where are you getting 165?

 

[NorthDallas40]

Gotcha. I had 30K - mostly grad school. Took about 6 years and some work on the side to pay them off but that was a great day.

Honestly I was pretty damn fortunate that the earning power of a BSEE was strong by itself. I started down grad school twice in my younger years but work program commitments always prevented me from engaging. It didn’t prevent me from learning it was just self study and OJT as needed. And there wouldn’t have been additional school debt as most tech companies cover grad degree expenses on approved degree plans too.

 

[volinbham]

The calculator in your link says an AGI of 85k in the lower 48 pays $217/month, which works out to 52k over 20 years. Where are you getting 165?

I said gross of 85. Take the standard deduction of 13K or so and you are at AGI of 72 which I think comes out around 165. AGI is not gross.