Loan question

[confettiflyer]

^^
pretty much sums up my thoughts/plans

my plan A involves PSLF which has no tax bomb at the end of it. my plan B is different in that I believe my debt will have been paid off completely prior to the 25 year conventional IBR plan so I'm not planning for that particular tax bomb.

But if I were, I'd follow the above thinking in claiming technical insolvency. I will concede, however, that planning 25 years in advance is challenging. I also have not fully looked at whether simply quitclaim deeding a home (and other assets) a few years prior to the tax bomb is legal enough to pass muster. My thoughts are yes...people minimize or maximize positions all the time in advance of anticipated tax burdens.

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[type b pharmD]

I wasn't planning to reply to type b's posts because I have done it in the past but I want others to have a better understanding of his situation and hopefully learn from it as well.

His problem: he went to an out-of-state pharmacy school and he was hoping to qualify for in-state tuition after the first year. This did not happen. He also used student loan to pay for medical expenses which was also a mistake because unlike debt from credit cards and medical expenses, student loan debt is not dischargeable in bankruptcy court. Including interest, he now owes $340,000. Keep in mind that expects recommend you only borrow 1x your first year salary so around $110-130,000 for a pharmacist.

His plan: enroll in IBR where he would pay 15% of his AGI (for most people, it is their pretax salary minus 401 k contribution) for the next 25 years. For example, if he makes $120,000 a year and contributes $6,000 in his 401 k then he would pay 140,000 x 0.15 = $17,100 a year. This number goes up and down per year depending how much he makes. It also depends on whether his wife works or not and whether they have any children. In this scenario, his take home income he would around $75,000 after taxes, health and dental insurance. So he would need to pay $17,100 out of $75,000 (or 23% of his take home income).

type b's calculated monthly payment is only $850 per month because his wife is not working, they have children. I am not exactly sure how he comes up with
this low monthly repayment assuming he makes a pharmacist salary and works full time but whatever.

Problem with his plan: he would need to pay tax on the amount that is forgiven which would enormous ("tax bomb") because of the accumulated interest on his high principle.

His hope: one day the government would get rid of the "tax bomb" (best case scenario) or he would somehow use "creative accounting" (basically tax evasion) to hid his assets. If the first two scenarios do not work, he figures he would need to pay the "tax bomb" which would leave him with pretty much nothing and he would pay 15% of his retirement (social security, 401 k) until he dies.

Obviously this is not the way a person should live. There is no way for him to pay back the $340,000 in student loans with a pharmacist salary. He is painting a rosy picture but knowing how he got into this situation, I would not be surprised if this does not end well for him and his family.

Good summary!

Although you did miss a couple important points.. (having other non pharmacy income sources , business ownership, early retirement decreasing overall repayment requirement. Not planning on drawing social security, no children)

I purposely drew as much student loans as possible because once you are past 2x your anticipated salary or 1.5x agi , it is basically free money. My financial situation will be the same with 250k loans as it would be with 500k.

Like I said .. perverse incentives. I guess if you have to choose someone to feel sorry for it would be us govt. But I don't think I can muster that emotion for that entity

 

[BMBiology]

Thank you. Pretty good memory huh?

I disagree with you but that doesn't mean I don't understand your situation.

I still encourage others to pay back their student loans within 10 years. However if you can't then IBR and PAYE are two options but keep in mind that you would
be paying a lot more interest over 20-25 years.

 

[BMBiology]

I purposely drew as much student loans as possible because once you are past 2x your anticipated salary or 1.5x agi , it is basically free money. My financial situation will be the same with 250k loans as it would be with 500k.

This is exactly why I believe the government would not get rid of the "tax bomb". If it did then everyone is going to max out their student loans because it wouldn't matter. They would pay the same if it is $250,000 or $500,000.

 

[type b pharmD]

Thank you. Pretty good memory huh?

I disagree with you but that doesn't mean I don't understand your situation.

I still encourage others to pay back their student loans within 10 years. However if you can't then IBR and PAYE are two options but keep in mind that you would
be paying a lot more interest over 20-25 years.

The way a person "should" live is something that an individual judges for themself.. unless you are god or have had a perfect life in my circumstances, I don't really feel your judgment is applicable. I follow and plan to continue follow the law as it is written.

I also am not planning on using 401k or IRA accounts. None of my businesses are incorporated in the US either although I do currently pay US taxes as applicable.

I also always give the disclaimer that my situation is relatively unique and that each person should think for themselves. In my case I don't feel like donating an unnecessary $400k of my lifetime earnings to uncle sam. If someone else chooses to do so based on a principle of "the right way to live", that is their choice.

Personally I think it is a greater sin to take such a substantial loss than it is to minimize debt obligations using legal means... but maybe that is because I have studied economics and finance more than I should have! I should have been working to pay the govt usury!

 

[BMBiology]

I also am not planning on using 401k or IRA accounts. None of my businesses are incorporated in the US either although I do currently pay US taxes as applicable.

So tell me did you use your student loans to start a business oversea?

This reminds me of this group of investors. They purchased this house. They did not pay the mortgage and let the house foreclose. They then started another business and purchased the same house for pennies on the dollar. They hired some contractors to fix it up
and sold it. They made a killing and then they left the country without paying the contractors.

 

[type b pharmD]

So tell me did you use your student loans to start a business oversea?

This reminds me of this group of investors. They purchased this house. They did not pay the mortgage and let the house foreclose. They then started another business and purchased the same house for pennies on the dollar. They hired some contractors to fix it up
and sold it. They made a killing and then they left the country without paying the contractors.

Negative. I have been working since I was 14 and put a degree of my savings into it before pharmacy school. While speculating / investing with student loans is attractive.. it is blatantly illegal. I have not spent any student loans on anything besides education related expenses (incl healthcare) . I did weigh the risks and benefits of strategic bankruptcy for medical and personal debt but decided against it due to the fact it would likely delay home ownership and my early retirement plans. Student loans seemed like a no brainer to cover health costs since that was life or death and I would never feel the financial impact.

And the reason for basing overseas is not to use as a shelter either, although having a potential income outside of uncle sam's grip if I choose to renounce citizenship someday is a bonus... rather it was that I was able to find some good values in terms of operating costs vs returns that couldn't be found here. While the US has low corporate income taxes, the regulatory climate in general raises the cost of inputs too high to make it a business 'destination' unless you need to employ highly skilled, highly educated workers (also highly entitled).

 

[BMBiology]

Negative. I have been working since I was 14 and put a degree of my savings into it before pharmacy school. While speculating / investing with student loans is attractive.. it is blatantly illegal. I have not spent any student loans on anything besides education related expenses (incl healthcare) . I did weigh the risks and benefits of strategic bankruptcy for medical and personal debt but decided against it due to the fact it would likely delay home ownership and my early retirement plans. Student loans seemed like a no brainer to cover health costs since that was life or death and I would never feel the financial impact.

what did you do with the extra student loan money then?

I purposely drew as much student loans as possible because once you are past 2x your anticipated salary or 1.5x agi , it is basically free money. My financial situation will be the same with 250k loans as it would be with 500k

 

[type b pharmD]

what did you do with the extra student loan money then?

Never had any extra.. I would wager I am more broke (cash wise) than 90% of pharm students... suffice it to say I ran into some very extenuating circumstances. . And at some point gave up caring about the principle #

A large part of my debt burden is compounded interest. The rest relates to basically everything that could go wrong, did.

 

[confettiflyer]

oops, my post was supposed to follow type b, not BMB.

but BMB your last post on the last page...the tone of your post is as if debt is destiny. The ultimate tool in his pocket is filing bankruptcy, but it's easier to claim insolvency vs. discharging income taxes due to cancelled debt.

Debt is not destiny, the tools exist to mitigate or discharge debt. I'm a firm believer that only suckers don't take advantage of the tools presented to them. The example you listed with the contractors is genius...if I had the foresight prior to the economic crash, I would have overextended and leveraged multiple houses, pulled cash out on refi, and take advantage of the one-action rule in CA and walk away.

Credit trashed, cash rich, and in 3-4 years my score would recover enough such that I'd be welcomed back into the credit markets with open arms. Hindsight is 20/20, though.

 

[type b pharmD]

oops, my post was supposed to follow type b, not BMB.

but BMB your last post on the last page...the tone of your post is as if debt is destiny. The ultimate tool in his pocket is filing bankruptcy, but it's easier to claim insolvency vs. discharging income taxes due to cancelled debt.

Debt is not destiny, the tools exist to mitigate or discharge debt. I'm a firm believer that only suckers don't take advantage of the tools presented to them. The example you listed with the contractors is genius...if I had the foresight prior to the economic crash, I would have overextended and leveraged multiple houses, pulled cash out on refi, and take advantage of the one-action rule in CA and walk away.

Credit trashed, cash rich, and in 3-4 years my score would recover enough such that I'd be welcomed back into the credit markets with open arms. Hindsight is 20/20, though.

Understanding markets and macro economic trends and factors change the nature of debt. If you are blind or stick head in sand, you can become a real slave to debt. On the other hand if you can understand market trends a bit in the short term and make good broad bets on the long term, debt is just another temporary # on the books like anything else.

I am not one to put any stock in future returns or obligations. . Personally I mean.. (financially of course i do) they obviously affect business , investments, and balance sheets. But having cash in hand is really all that counts in this world and is what determines your quality of life in the present.

Setting aside questions of legality or morality... lets say a person took every penny earned and stuffed it into a hole in the ground as diamonds or gold bars or even just as stacks of bills... they could be 50 million in debt and with no income stream on paper but they would still be better off than most americans.

Just reiterating that there is a difference between present and anticipated future. You use the future as a tool to improve the present. Holding onto it as a dark cloud in the form of liabilities that more or less exist only on paper makes you a slave. Live for the present. . Plan for the future, but do not live for the future. Student loans to me represent .. say.. a 12% tax on wage income earned in the us over the next x amount of years. That is their impact on the present.. the fact that the gross # is so high doesn't mean anything to me right now.. and in 25+ years will likely mean even less given a large # of factors.. globalization, potential hyperinflation, insolvency, strategic bankruptcy, politics, emigration, exchange rates, tax policies, etc

 

[iBeast]

1) 2016
2) Roughly 240k after the interest is tacked on after I graduate.
3) Still in school
4) About 7.0% I take out the 6.8% Stafford loan and a much less from a 7.9% Grad PLUS loan.

How long would it take to pay this all back?

 

[boriqua]

1) 2012. did not get my license till this February though
2) about 80k without the interest added in. too lazy to do the math with the interest. gonna pay it all off before they can tack it on anyways
3) knocked out about 15k so far
4)something like 6.25% for unsubsidized and 6.75 for subsidized. at work right now so can't check lol

 

[BMBiology]

Nice. Cant wait for this one to heat back up! I will bite ! (And keep coming back)

My final #s will come out to $340k .. avg interest of 7.5%

How much of it is federal and private loans?

 

[type b pharmD]

How much of it is federal and private loans?

All federal

 

[BMBiology]

All federal

Is it all your loans or you and your wife's loans? That is crazy if it is all yours. All pharmacy loans? The gov let you borrow 85 k a year? How much of that is interest?

 

[type b pharmD]

Is it all your loans or you and your wife's loans? That is crazy if it is all yours. All pharmacy loans? The gov let you borrow 85 k a year? How much is interest?

All mine. It IS crazy! Interest is about $1.5k/month atm although will rise to about $3k/month toward the end

 

[BMBiology]

All mine. It IS crazy! Interest is about $2k/month atm although will rise to about $5k/month toward the end

I mean out of 340 k, how much of it is principle?

 

[type b pharmD]

Is it all your loans or you and your wife's loans? That is crazy if it is all yours. All pharmacy loans? The gov let you borrow 85 k a year? How much of that is interest?

Ahhh I think there is about 40-50k of interest in there . I misunderstood.

I'm also not to 340k yet but will be at the end

After std Grace period and 1 year of ibr @ $50/month

 

[Jibby321]

All mine. It IS crazy! Interest is about $1.5k/month atm although will rise to about $3k/month toward the end

Wow.

 

[PriorAuth]

I'm not really familiar with the loan repayment programs so please understand if my question is dumb.
So, is there any downside of taking out as much student loans as possible if you are qualifed for PAYE?
It just sounds silly that one pays 10% of AGI for 20 years + the tax of the forgiven amount at 21st year whether one owes 200k or 500k in student loans.
Am I missing something here?

 

[TheWeeIceMan]

I'm not really familiar with the loan repayment programs so please understand if my question is dumb.
So, is there any downside of taking out as much student loans as possible if you are qualifed for PAYE?
It just sounds silly that one pays 10% of AGI for 20 years + the tax of the forgiven amount at 21st year whether one owes 200k or 500k in student loans.
Am I missing something here?

If the government decides to restrict who is eligible for these programs in the future or eliminates them altogether you would be completely boned.

 

[owlegrad]

If the government decides to restrict who is eligible for these programs in the future or eliminates them altogether you would be completely boned.

Well, you would be in the same position as someone who didn't use it in the first place I guess.

 

[BMBiology]

I'm not really familiar with the loan repayment programs so please understand if my question is dumb.
So, is there any downside of taking out as much student loans as possible if you are qualifed for PAYE?
It just sounds silly that one pays 10% of AGI for 20 years + the tax of the forgiven amount at 21st year whether one owes 200k or 500k in student loans.
Am I missing something here?

Yes, the amount of tax you will pay depends on the amount that is forgiven.

Unfortunately there are a lot of misperceptions about IBR/PAYE.

 

[TheWeeIceMan]

Well, you would be in the same position as someone who didn't use it in the first place I guess.

Wouldn't the person counting on IBR or PAYE have a significantly ballooned debt load since they probably aren't touching principle?

 

[PriorAuth]

It still sounds like a deal too good to be true.
If inflation outpaces the interest rate, that tax balloon at the 21st year might not be that bad.
Also even if the Congress restricts the eligibility in the future, wouldn't people who are already enrolled in the program be grand-fathered in?
Anyway, thank you for the clarifications.

 

[BMBiology]

It still sounds like a deal too good to be true.
If inflation outpaces the interest rate, that tax balloon at the 21st year might not be that bad.
Also even if the Congress restricts the eligibility in the future, wouldn't people who are already enrolled in the program be grand-fathered in?
Anyway, thank you for the clarifications.

Yes but lets say your salary increases or you married someone who also works then the monthly payment would also go up.

I think someone here showed if you are on IBR and owe less than 2.5x your starting salary, there is nothing left after 25 years to be forgiven. You would pay all of your student loan plus interest over a 25 year period.

type b's situation is unique and frankly even if he tries to pay it off, there is virtually no way for him to do so on a pharmacist salary. He would be in debt to the government for the rest of his life.

 

[pezdispenser]

For anyone who is thinking about the newer Pay As You Earn repayment plan which is basically the 10% of discretionary income x 20 years then the remainder is forgiven, you are not eligible for this plan if you had loans from before Oct 1, 2007 (including undergrad).

Furthermore, only direct loans are eligible for this plan. I believe it was 2010 that they stopped FFEL loans from commercial lenders like Sallie Mae, and started having only direct loans from the government.

http://studentaid.ed.gov/repay-loans/understand/plans/pay-as-you-earn

However you can still use the older Income Based Repayment plan which is 15% discretionary income x 25 years. I calculated this to work out around 13% of your gross salary (if you max out $17.5k 401(k) to reduce AGI).

 

[BMBiology]

For anyone who is thinking about the newer Pay As You Earn repayment plan which is basically the 10% of discretionary income x 20 years then the remainder is forgiven, you are not eligible for this plan if you had loans from before Oct 1, 2007 (including undergrad).

Just note you would also need to pay taxes on any amount that is forgiven, just like IBR.

 

[BMBiology]

Ahhh I think there is about 40-50k of interest in there . I misunderstood.

I'm also not to 340k yet but will be at the end

Your situation is very similar to this student mentioned in the NY Times:

"Today, her debt exceeds her salary by a factor of five — much higher than the recommended twice-starting-salary ratio. She signed up for income-based repayment, a government program available to federal student loan recipients. (A newer program with slightly more generous terms, called Pay As You Earn, or PAYE, is available to more recent graduates.) Both income-based repayment and PAYE allow graduates to lead relatively normal lives by paying back a modest percentage of their income based on a formula. After a fixed amount of time, from 10 to 25 years, the balance of the debt is discharged.

That's the good news. The bad news is that the interest on the debt keeps growing and taxes must be paid on the amount discharged, as if it is income. Dr. Schafer sends $400 a month to Sallie Mae, a sum that will rise. But what kind of tax bill awaits her? Asked to run the numbers, GL Advisor, a financial services company that specializes in student loans, calculated that Dr. Schafer's debt is likely to exceed $650,000 when her tax bill lands 25 years after the start of the loan, which means she will owe the Internal Revenue Service roughly $200,000. That will happen while she is still deep in her career, perhaps around the time she wants to send some children to college."

http://www.nytimes.com/2013/02/24/b...ed=1&_r=1&smid=tw-nytimes&partner=rss&emc=rss

If I were you, I would contact the financial service company mentioned in the paragraph above to see if your plan is even feasible.

 

[BMBiology]

However you can still use the older Income Based Repayment plan which is 15% discretionary income x 25 years. I calculated this to work out around 13% of your gross salary (if you max out $17.5k 401(k) to reduce AGI).

Just a reminder, the amount you pay is determined by your adjusted gross income (for most people, it is their pre-taxed salary substrate 401 k), not by your take home pay (after taxed salary).

Calculator here: http://studentaid.ed.gov/repay-loans/understand/plans/income-based/calculator

 

[type b pharmD]

It is a little sad that nyt made the bogus assumption that debt forgiveness income is taxed at a flat % without doing their homework

 

[Pharmacy Kid]

God dam, these loan amounts are mind-boggling.

 

[All4MyDaughter]

Your situation is very similar to this student mentioned in the NY Times:

http://www.nytimes.com/2013/02/24/b...ed=1&_r=1&smid=tw-nytimes&partner=rss&emc=rss

If I were you, I would contact the financial service company mentioned in the paragraph above to see if your plan is even feasible.

Are you obsessed with type b? Why do you care so much what he does?

 

[BMBiology]

Are you obsessed with type b? Why do you care so much what he does?

Feeling neglected? Okay fine, how is IBR treating you? How much interest has accrued?

 

[All4MyDaughter]

Feeling neglected? Okay fine, how is IBR treating you? How much interest has accrued?

Oh, that's sweet. But if you search my posts you can see that my repayment strategy has been working really well.

I just think your obsession with type B is cute. But I hate to tell you, I think he's married.

 

[Member4481]

Would it be a bad idea to take the longest repayment option(smallest monthly payments) and in the beginning pay a lot more than your payment needs (such as your payment is $100/month but you pay them $1000/month) until your loan amount gets to a more manageable number like under 100k? Say that takes you a year of losing a lot of money but at least you get it down to an amount that the interest isn't killing you. Also, is there any sort of fee or bad results of paying off a loan early? Or should you just get the payments down to almost nothing than wait out the whole loan repayment period? Thanks!

 

[type b pharmD]

Would it be a bad idea to take the longest repayment option(smallest monthly payments) and in the beginning pay a lot more than your payment needs (such as your payment is $100/month but you pay them $1000/month) until your loan amount gets to a more manageable number like under 100k? Say that takes you a year of losing a lot of money but at least you get it down to an amount that the interest isn't killing you. Also, is there any sort of fee or bad results of paying off a loan early? Or should you just get the payments down to almost nothing than wait out the whole loan repayment period? Thanks!

This is generally considered a supreme winning strategy. There are no penalties for early payment. I think a4md did this.

The only potential worst case scenario is that you slack off on payments long tern and pay more in interest.

Chief benefits of this strategy are twofold: having the cash stream flexibility of extended payment, and the reduced interest burden and payback of the short term payback. It is the best of both worlds really...

Again though.. there would be no barrier to you to just stop paying extra.. it can be easy to 'forget' to pay extra.

Also one other tidbit. . Your servicer may attempt to take advantage of you a bit with extra payments (have only heard a couple of case reports) .. by applying it to either the lowest interest rate loan (if multiple) or by applying it to interest rather than principle. Thus, to really maximize this strategy, you will need to write a note to the servicer each time you make an extra payment indicating for them to apply it to either principle specifically or to your highest interest loan (or both, depending on if you consolidate)

Hth. Good strategy!

 

[All4MyDaughter]

This is generally considered a supreme winning strategy. There are no penalties for early payment. I think a4md did this.

The only potential worst case scenario is that you slack off on payments long tern and pay more in interest.

Chief benefits of this strategy are twofold: having the cash stream flexibility of extended payment, and the reduced interest burden and payback of the short term payback. It is the best of both worlds really...

Again though.. there would be no barrier to you to just stop paying extra.. it can be easy to 'forget' to pay extra.

Also one other tidbit. . Your servicer may attempt to take advantage of you a bit with extra payments (have only heard a couple of case reports) .. by applying it to either the lowest interest rate loan (if multiple) or by applying it to interest rather than principle. Thus, to really maximize this strategy, you will need to write a note to the servicer each time you make an extra payment indicating for them to apply it to either principle specifically or to your highest interest loan (or both, depending on if you consolidate)

Hth. Good strategy!

Exactly. Agree with all of this.

Want to reiterate the importance of specifying where you want your extra payments to go. A friend sent a large payment to her servicer and they just applied it to the next five years of payments, not to the principle. She got a statement that her next payment due was in 2017.

When I sent my extra payments, I called first to verify specific account numbers and made sure the payment would be applied to higher interest accounts first.

I've slowed down on my aggressive repayment because we decided to buy a new home. Just sold my current starter home for a nice profit. Conserving some cash for things we might want to do with the new home. Despite what *some* naysayers on this forum claim, we had no trouble qualifying for a mortgage.

IBR was the best move we could have made. Taking advantage of the low required monthly payment let us put aside lots of cash for other things, including large principle payments. However, I may have to switch to the 25 year repayment at the end of this year. We made way too much money last year, so I think my IBR payment will be less than favorable after readjustment.

 

[type b pharmD]

Oh, that's sweet. But if you search my posts you can see that my repayment strategy has been working really well.

I just think your obsession with type B is cute. But I hate to tell you, I think he's married.

Some people just believe that if you try to do something different from the norm that sounds too good to be true, that you are somehow unethical or doing something illegal or are crazy.

I think most people with unorthodox ways of life (financially or otherwise) are generally viewes with suspicion / jealously. I'm sure you understand that feeling having gone off into the treacherous waters of self employment.

I bet most people who have gone into independent thinking and then independent business were told that they were taking too much risk and should stick with more conservative ways of life (at least i was, by my family regarding my business).. but without them we would be so much worse off.

If you don't take risks to take advantage of what could be "out there" you will never find out what you were really capable of in life.

How many people want to be at their deathbed and say .. I'm so proud of myself for making successful standard repayments and working for a corporation that profited off of me for my career. That was maybe an OK accomplishment in the 20th century.. but going forward... workers as a whole are being crushed over time. If you want to really own your own life, you have to go out and take risks and act for yourself these days.

 

[BMBiology]

Exactly. Agree with all of this.

Want to reiterate the importance of specifying where you want your extra payments to go. A friend sent a large payment to her servicer and they just applied it to the next five years of payments, not to the principle. She got a statement that her next payment due was in 2017.

When I sent my extra payments, I called first to verify specific account numbers and made sure the payment would be applied to higher interest accounts first.

I've slowed down on my aggressive repayment because we decided to buy a new home. Just sold my current starter home for a nice profit. Conserving some cash for things we might want to do with the new home. Despite what *some* naysayers on this forum claim, we had no trouble qualifying for a mortgage.

IBR was the best move we could have made. Taking advantage of the low required monthly payment let us put aside lots of cash for other things, including large principle payments. However, I may have to switch to the 25 year repayment at the end of this year. We made way too much money last year, so I think my IBR payment will be less than favorable after readjustment.

Yup, your monthly payment goes up when your income goes up.

It is nice to live in rural America where a house only cost $150,000. I am sure it is easier to get a mortgage there.

Does anybody know if you would still get interest rate deduction when you enrolled in IBR? I received 1.5% deduction (like 6% to 4.5%) with the standard 10 year program by enrolling in the electronic payment program and by paying it on time for the first 6 months.

 

[All4MyDaughter]

Yup, your monthly payment goes up when your income goes up.

It is nice to live in rural America where a house only cost $150,000. I am sure it is easier to get a mortgage there.

Does anybody know if you would still get interest rate deduction when you enrolled in IBR? I received 1.5% deduction (like 6% to 4.5%) with the standard 10 year program by enrolling in the electronic payment program and by paying it on time for the first 6 months.

My new home costs substantially more than $150,000. Just sold my starter home for around that much. I'm sure homes are cheaper in rural areas. I don't know because I don't live in one.

Personally, I don't think California housing prices are anything to be proud of. Paying $300,000 for a little condo that looks like a student's apartment? No thanks.

And yes, you get interest rate discounts in IBR.

 

[BMBiology]

Some people just believe that if you try to do something different from the norm that sounds too good to be true, that you are somehow unethical or doing something illegal or are crazy.

I think most people with unorthodox ways of life (financially or otherwise) are generally viewes with suspicion / jealously. I'm sure you understand that feeling having gone off into the treacherous waters of self employment.

I bet most people who have gone into independent thinking and then independent business were told that they were taking too much risk and should stick with more conservative ways of life (at least i was, by my family regarding my business).. but without them we would be so much worse off.

If you don't take risks to take advantage of what could be "out there" you will never find out what you were really capable of in life.

How many people want to be at their deathbed and say .. I'm so proud of myself for making successful standard repayments and working for a corporation that profited off of me for my career. That was maybe an OK accomplishment in the 20th century.. but going forward... workers as a whole are being crushed over time. If you want to really own your own life, you have to go out and take risks and act for yourself these days.

I can understand if you actually did it and got your loans discharged but you have not. What you are saying is pure speculation and is based on hope, rather than facts.

 

[type b pharmD]

Exactly. Agree with all of this.

Want to reiterate the importance of specifying where you want your extra payments to go. A friend sent a large payment to her servicer and they just applied it to the next five years of payments, not to the principle. She got a statement that her next payment due was in 2017.

LOL. That is predatory lending right there. Crazy but unfortunately believable.

 

[All4MyDaughter]

LOL. That is predatory lending right there. Crazy but unfortunately believable.

You know what annoys me about student loans? All the different account numbers. And I have changed servicers twice this year. Each time I get all new account numbers. I was with my mortgage officer when he pulled my credit for the new home and the report was pages and pages long with all of the various student loan account numbers. We had a good laugh over that one.

 

[type b pharmD]

You know what annoys me about student loans? All the different account numbers. And I have changed servicers twice this year. Each time I get all new account numbers. I was with my mortgage officer when he pulled my credit for the new home and the report was pages and pages long with all of the various student loan account numbers. We had a good laugh over that one.

Same here. Havent consolidated yet and it irks me to get a like 5" stack of account bills every so often and then followed by another 100 page packet of statements a month later when the servicer changes. Its to the point where I am considering hiring a company/secretary to handle it since me and wife are to put it mildly, very paperwork averse. Consolidation is its own bag of worms.

Its hard to wrap my head around having approx 50-60 accts .. some of which (like undergrad subsidized $500 balances) are virtually meaningless compared to the overall situation.

In the future they should just loan them all under one acct with like sub acct #s , and offer an automatic 1 payment/month weighted rate for people who don't want to waste their life with bureaucracy

 

[All4MyDaughter]

Same here. Havent consolidated yet and it irks me to get a like 5" stack of account bills every so often and then followed by another 100 page packet of statements a month later when the servicer changes. Its to the point where I am considering hiring a company/secretary to handle it since me and wife are to put it mildly, very paperwork averse. Consolidation is its own bag of worms.

Yeah, I didn't consolidate. Every time I get one of those huge packets with the SAME letter addressed to each different account number, I weep for the trees. Think of the trees!

I guess I can debunk another myth about student loans... they don't hurt your credit score. I realize you already know this, but it's also been promoted by the forum naysayers. The idea that your student loan balance drags down your credit score is not correct. Mine score was very high. Even a bit higher than my husband's who has no student loans.

 

[type b pharmD]

I can understand if you actually did it and got your loans discharged but you have not. What you are saying is pure speculation and is based on hope, rather than facts.

Has very little to do with discharge of the loans. If forgiveness is off the table , my plan still comes out more or less the same. paying income adjusted payments until I die would likely be just as cheap since I am planning either an early or offshore (or both) retirement.

In the year 2040, do you think a retired or technically unemployed/underemployed person / small business owner who does not draw much reportable income ... would be hurt having to make a $100/month payment for the rest of their life ? That is going to be the cost of a movie rental at that point lol. That is.. if they even have movies or rentals then.. hehe


Edit: clearly yes as inflations and incomes go up so would payments. . But one would hope a financially smart professional would not be not wage dependent at age 55 . At that point of the game it becomes about assets.

 

[type b pharmD]

I can understand if you actually did it and got your loans discharged but you have not. What you are saying is pure speculation and is based on hope, rather than facts.

The facts are that it is almost impossible in any circumstance to lose on ibr with a high balance loan.

Situation 1. You pay what you can and finish early with increased cash flow options during expensive months/years. Impact of forgiveness is minimal to none

Situation 2. You pay the minimum and use legal accounting to get forgiveness with minimal tax and save up to 50-70% overall. If forgiveness disappears, win by reducing your taxable and reportable income. (If you can't get a structure like that set up in 25 years time.. you shouldn't be using this strategy)

Situation 3. You strike out on your own in the business or investment world and use writedowns and corporate structures to pay less than a wage employee, monthly. If forgiveness stays, you are either rich and can pay and you come out ahead due to 25 years of artificallly low payments or you are cash AND business poor and you have paid nothing and will be taxed nothing. If forgiveness disappears.. strategy 3 would likely be win-win .. low payments .. accumulate assets.. then retire


Situation 4. Use low monthly payments to accumulate enough interests (business wise and asset wise) to retire on and then retire early and pay peanuts for the rest of your life. If forgiveness stays.. you are hopefully not in the us or you have legally protected your assets as in #2. if forgiveness disappears , you just flat out retire or take income cuts and pay peanuts out of a large asset pool

If forgiveness disappears.. life gets a lot easier for smart ibr users .. unless they are using ibr to fund a glam lifestyle and not for saving. If forgiveness stays, life gets a lot easier for people who know how to use accounting and small business.

The only conceivable way to lose is by being dumb or lazy .. and even for those people.. they win under about half of foreseeable outcome situations

 

[BMBiology]

Lets add a few more hopes:

Situation 5: get a rich girl pregnant and live off the alimony.

Situation 6: instead of making your monthly payment, use that money to play the lottery.

Situation 7: no point in paying back your loan because the dollar is going to collapse. Buy gold instead.