ATTN: Student Loan-drones [Archive]

Ultralight

9-30-16, 1:02pm

I discovered something wonky that may prevent problems for other loan-drones.

When I signed up for classes the university sent my student loan service provider a directive to put my loans into educational deferment. This means I am not required to pay but interest still accrues.

This deferment was unbeknownst to me.

So my auto-deduct payment should have gone out on the 28th. But it did not. So I looked into it and found out about this deferment.

Then I had to call and request that they lift this deferment, which takes at least 24 hours.

If all goes well I should have the deferment lifted tomorrow and be able to pay off this month's payment manually. Then next month's payment should go back to auto-deduction.

This is one of the many, many reasons one must check with your student loan servicer several times a month.

catherine

9-30-16, 1:09pm

Good catch, and good follow-up.

I honestly was so inattentive when my DD and I filled out student loan applications that I was clueless about how they structured the debt. This is how stupid I was.

About 2 YEARS after my DD graduated and I had been paying her loan (that was the deal I had with her) I realized that the principal had not dropped a penny. So I called them up and they explained that that was in line with the debt repayment--basically interest-only for years. I was appalled.

So, you are absolutely right, UA. Lenders are banking on the expectation that many students will want to put off paying for as long as possible, even if it means they'll wind up paying thousands more. You need to read that fine print and stay on top of those "generous" deferments they give you!

Ultralight

9-30-16, 1:25pm

Well, I want to make all the payments I can toward my Public Service Loan Forgiveness plan. But the system is tricky.

Ultralight

10-17-16, 10:46am

The problem I outlined above is continuing. So keep this in mind, Loan Drones! You have to call weekly and make sure your payments go through or manually make your payments.

Float On

10-17-16, 11:54am

Sorry that's an ongoing issue UA. My college loans in the late 80's were pretty easy to combine, not a bad interest rate, early pay off was easy and I didn't have any issues with lost payments or miss-applied even during the combining time period. I took out $7,000.00 in loans (that wouldn't even cover a semester any more) and had it paid off with-in 2 years. Really trying to instill in my kids to put off loans as long as possible for their education goals.

JaneV2.0

10-17-16, 11:56am

From here, student loans seem hopelessly predatory and unforgiving. I should think it would be just the opposite. Are all federal loans structured this way?

Lainey

10-17-16, 8:24pm

From here, student loans seem hopelessly predatory and unforgiving. I should think it would be just the opposite. Are all federal loans structured this way?

When the Federal government outsourced the lending basically privatizing it, then these issues started. Just focus on the fact that poor college students are considered something to profit from. Disgraceful.

Alan

10-17-16, 8:47pm

When the Federal government outsourced the lending basically privatizing it, then these issues started. Just focus on the fact that poor college students are considered something to profit from. Disgraceful.The Federal Government sets the rates, which eliminates competition among lenders. Another reason we should resist allowing the feds to control every aspect of our lives.

bae

10-17-16, 9:07pm

Why did the students take out those loans in the first place?

JaneV2.0

10-17-16, 9:23pm

Why did the students take out those loans in the first place?

Because tuition wasn't readily affordable as it was when I was going to school? Because not all students have rich parents? Because they didn't think of working their way through school as pole dancers?

Ultralight

10-18-16, 7:26am

Why did the students take out those loans in the first place?

There are lots of reasons, bae. You are aware of this.

You are an incredibly smart guy -- super-high IQ, math skills, etc.

Not everyone is as smart as you. I admire you for coming from a hillbilly culture and making amazing strides in life. But remember than your life and what you have done is not the rubric for judging others.

For instance, a person of average intelligence may come from a family who is financially literate. So this person may bumble their way through university and take out very few loans (by living at home, starting out at community college, putting away some savings from summer jobs, etc.) and walk away with no crushing debt. They did not have to be a genius to do this. They just had the good fortune to be brought up by reasonably financially literate parents.

I took out loans for lots of reasons, some of them were really dumb -- especially when I look back through the lens of frugality I have now.

But I try to make the best of it by being on the PSLF program, working for the gubmint, and spreading the word to others: "Avoid loans!" or "Get on the PSLF program!" or "Get on income-based repayment."

I also try to explain all the little loopholes and pitfalls to others too, so maybe they can either avoid getting this monkey on their back or get the monkey off their back sometime soon-ish.

Zoe Girl

10-19-16, 9:24am

Why did I take out the loans? Well I had a month to either have a decent paying full time job or be enrolled in school based on what the lawyers and ex said. So I knew I could teach, I was good at things like that, I talked to teacher friends and they said there was no way to get a teaching job without having a masters degree. So i took a para job at a school and signed up for a reasonably expensive on-line masters program. I was able to do all my observations and field work while I was already working. I didn't go to classes because my kids were younger and needed me more at home than working and going to school both full time. It went really well, I did great. Then I graduated and looked for a job about the time there was a recession. I would have my student loans paid off if I got a decent job soon after graduation, that was 10 years ago, and I am just getting into paying again. So I had a good plan,

I would actually love to get a PhD, I love being in school, but there is really no way. I will be happy to not retire with loans.

Yppej

6-4-18, 8:59pm

I took out loans for lots of reasons, some of them were really dumb
But I try to make the best of it by being on the PSLF program, working for the gubmint, and spreading the word to others: "Avoid loans!" or "Get on the PSLF program!" or "Get on income-based repayment."

I also try to explain all the little loopholes and pitfalls to others too, so maybe they can either avoid getting this monkey on their back or get the monkey off their back sometime soon-ish.

And put the monkey on some other taxpayer's back.

Ultralight

6-4-18, 9:01pm

And put the monkey on some other taxpayer's back.

That ax you're grinding sure is sharp now.

iris lilies

6-5-18, 11:30am

That ax you're grinding sure is sharp now.

Ok, but how far into this ten year Contract with America are you now? Seems like you must be half way there.

To you younguns, ten years is a loooooooong time. But sweetheart, you are now at the age where time starts to go really fast. Trust me, after age 35, time moves at a different speed.

Tybee

6-5-18, 11:53am

Is it really called Contract With America? Jeesh.

iris lilies

6-5-18, 11:59am

Is it really called Contract With America? Jeesh.
No,
I just made that up.

ApatheticNoMore

6-5-18, 12:05pm

Ok, but how far into this ten year Contract with America are you now? Seems like you must be half way there.

To you younguns, ten years is a loooooooong time. But sweetheart, you are now at the age where time starts to go really fast. Trust me, after age 35, time moves at a different speed.

yea it doesn't seem a bad deal at all of course, seems a REALLY good one actually. Nor does taking out the loans even seem like a bad decision with such a repayment program. But the job stayed at for 10 years is less than ideal, well unless one actually had such a much better job they had to turn down, they almost all are, it isn't better out there for the most part in the private sector or anything.

catherine

6-5-18, 2:41pm

Don't they incentivize people to take certain low-paying positions with this repayment program? My DS is also eligible. He got his master's degree and he works at a state community college. He loves the job, but he has no incentive to pay back the student loans early because of their repayment program if he works there 10 years. But, in return, he earns a ridiculously low wage for what he does. He's one of those who could probably make a lot more in the private sector. My other son, the musician-waiter, makes more money serving tables part time.

Ultralight

6-5-18, 6:03pm

I have about 7 years to go on my Contract with Alan.

In order to be in the PSLF program you must work for the government at any level or for a 501c3 non-profit.

Chicken lady

6-5-18, 6:45pm

What? Crap, i’ve Been working for a 501c for 10 years - I coulda had a masters degree?

San Onofre Guy

6-7-18, 12:02am

I'm tired of people complaining about loans that voluntarily took out. Suck it up. I paid over $100,000 of loans that my ex and current wife took out for school. I don't complain as they got a lot of knowledge from the process. I complain more about people who walked away from their homes and didn't suffer consequences of imputed income related tax bills

ApatheticNoMore

6-7-18, 12:55am

What? Crap, i’ve Been working for a 501c for 10 years - I coulda had a masters degree?

wait I could have worked at the same place for 10 years?!? :laff:

(Ok maybe and maybe not, but I suspect that type of job security is more common in government work.)

10 years might seem like a sentence, but if one assumes they will be working anyway, job hopping is really no funner. It might seem like it is due to variety, but it's a roll of the dice, which sometimes end up losing more than is gained as there's a lot of bad out there, and the process itself sucks.

LDAHL

6-7-18, 9:12am

Tybee

6-7-18, 9:31am

I think wallowing in victim culture obscures the real issue: Canine Privilege.

Who sleeps and plays all day with no thought to the common people toiling to make their sumptuous lifestyle possible? We complain of the rich paying a mere 30-40% of their income for the common good, but what do dogs pay? Nothing!

Whose grain-free salmon food just went up to 4 dollars a pound, while their servant/master tries to limit their own food prices to 1 dollar per pound?

rosarugosa

6-7-18, 12:35pm

I think wallowing in victim culture obscures the real issue: Canine Privilege.

Who sleeps and plays all day with no thought to the common people toiling to make their sumptuous lifestyle possible? We complain of the rich paying a mere 30-40% of their income for the common good, but what do dogs pay? Nothing!

I think it's a bit species-ist to address this without also discussing the very real issue of Feline Privilege. At least dogs display some degree of gratitude.

iris lilies

6-7-18, 1:22pm

I think wallowing in victim culture obscures the real issue: Canine Privilege.

Who sleeps and plays all day with no thought to the common people toiling to make their sumptuous lifestyle possible? We complain of the rich paying a mere 30-40% of their income for the common good, but what do dogs pay? Nothing!
Oh hell yes, I often remark that the “dumb” bulldogs are smart enough to engineer a life where they sleep on the counch all day, get regular meals and treat, all with no work required. Well, we do ask that our white bulldog make us laugh a couple of times a week, but that isnt real work,for him because that is just his nature.

Teacher Terry

6-7-18, 1:39pm

I have told my spoiled pooches to get jobs yet they refuse. However, DH says they have a job making us laugh and showering us with love :~)

Williamsmith

6-26-18, 8:21am

I read a Wall Street Journal article by Josh Mitchell entitled, “Student-debt Foregiveness is a Wonderful Boon, Until the IRS Comes Calling.” June 24, 2018.

Mitchell addresses what’s been coined the “tax bomb”. Apparently the IRS considers the foregiven loan amounts as income in the year which the loan is expunged. This can result in a large unexpected tax bill. And certain well off enrollees are more likely to minimize their “bomb fallout” than say the struggling minimalist who doesn’t have the resources to tap into. In other words, the poorer segment again shoulders more of the burden, unless the politicians decide to write the IRS out of the business of collecting taxes on “loan drones”. In that event, all tax payers will be on the hook for billions of dollars.

Quote

”Experts say inequities in the student-lending system are also underlined by the looming tax bomb. Many borrowers with large debts hold graduate degrees or attended prestigious private schools. They are likely earning high incomes and have consulted financial advisers on the best way to receive the biggest benefits under income-driven repayment, and how to reduce their tax burden. Meanwhile, many low-income borrowers lack such resources and have a greater risk of being on the hook for unexpected tax bills.”

https://www.wsj.com/articles/student-debt-forgiveness-is-a-wonderful-boon-until-the-irs-comes-calling-1529852411

catherine

6-26-18, 8:59am

Interesting! Reminds me of when my oldest son worked for a large state university and he was lucky enough to get tuition remission for his law degree, which he worked for at night. Fantastic, right?? No student loan debt at all. BUT his tuition was also seen as income, and he had to pay tax on it during those 5 years he was a student. It put him into serious financial hardship for those years.

Obviously he didn't complain about getting a "free" law degree, but still, I think your article points out a factor not many people consider when accepting these freebies.

Tybee

6-26-18, 9:07am

Tybee

6-26-18, 11:09am

Williamsmith, I can't get the article to open but it looks really interesting. Question since you can read the article, is it only the income-based programs where they owe tax on the forgiven amount, or does this also include the programs that people have discussed here, the ones where they work in an identified job for 10 years and then have the loan forgiven?

Okay, this article:
https://www.cnbc.com/2016/09/09/student-loan-forgiveness-can-come-with-a-tax-bomb.html

says the public service ones don't have the tax repayment, but if your loan converts, or if you become disabled, for example, and can't work, you get the tax hit.

Ultralight

6-26-18, 12:53pm

Hey Yppej, you gonna weigh in on this?

Williamsmith

6-26-18, 1:16pm

Tybee

6-26-18, 1:31pm

Well, going to the source it says this.....

https://www.irs.gov/taxtopics/tc431

exception to cancellation of loan debt income includes the student loan foregiveness program who work for specific employers. Provided Congress doesn’t change the law some time down the road. Still, I’d say restricting your options for employment for an extentended period of time....is a tax.

I think we've talked a lot about this on the forums because of the economic benefits of the forgiveness program over time, along with the fact that many of these jobs carry government pensions, which are so rare these days. You can say it is a tax, just like Catherine's son having to pay tax on the value of the tuition repayment at the time he received it while in law school is a tax, but I do think that the value being received in these programs far outweighs the tax issue. On the other hand, getting hit with a tax bill at the end when you think your loan has been forgiven--that seems like quite another tax issue to me, just like the folks who got hit with tax bills when they lost their houses to short sales or the bank took the house in lieu of repayment of the mortgage.

Similarly, I think hitting a disabled person with a tax bill after the student loan is forgiven is unconscionable.

A choice to stay in a job because of the loan forgiveness payoff at the end is a freely arrived-at choice. Not true for these other scenarios in the "tax bomb."

I had heard on NPR something about the loan forgiveness program being done away with under Trump, but that seemed to change very quickly, and the program seems fine for now, although it was an interesting program and worth looking up on NPR.