Student Loan Forgiveness

[YULACU]

Student loan forgiveness has been brought up on occasion, but it seems like it garners a negative reaction from people on the forum. People actively discourage people from participating. Why the animosity towards the program? Is it due to a generational divide?

I'm a millennial and I'm currently participating in the Public Service Loan Forgiveness program. I'm dedicating my life to public interest law, which I enjoy, and in exchange the government will forgive the balance of my student loans. My payments are pegged to my income and I have 75 payments towards the 120 required for forgiveness. I think this is a great program that allows people to serve the less fortunate despite their student loan balance. I always counsel people to consider PSLF because I think it's a great program. Why do people dislike the idea of student loan forgiveness in exchange for public service?

[kork13]

I don't know where you've seen discouragement for the PSLF program... I know there were some comments a while ago regarding universal loan forgiveness as a political goal. But in any case...

I fully support the idea of using PSLF, if it makes sense for you. I'm in the military, and know a number of people who have taken advantage of the program. If you have every intention of making it the full 10+ years in public service to earn the forgiveness, I think that's great, and thank you for your time & service.

Three cautions that I typically see with PSLF:
- If you aren't certain that you'll make it the full 10 years, better to just pay off the loans & not drag them out.
- You need to be sure that it'll actually save you money -- if you will pay more interest dragging out the loans for 10 years than you'll get forgiven after the 10 years, PSLF is not worth it for you.
- Be ready for the tax hit -- when the loans are forgiven, the forgiven amount is considered taxable income, so you'll have a sizeable tax bill that year.

[disneysteve]

Student loan forgiveness has been brought up on occasion, but it seems like it garners a negative reaction from people on the forum. People actively discourage people from participating. Why the animosity towards the program?

Fundamentally, I believe that if you have the means to repay your debts, you should. So the question becomes if someone is making enough to where they could afford the repayment but choose not to just so they can take advantage of the forgiveness program or if they are doing the forgiveness program out of financial need because they are significantly underpaid based on the work they're doing.

[YULACU]

Three cautions that I typically see with PSLF:
- Be ready for the tax hit -- when the loans are forgiven, the forgiven amount is considered taxable income, so you'll have a sizeable tax bill that year.

I agree with your first two recommendations. For clarification, the public service loan forgiveness program does not come with a tax bill at the end. Other student loan forgiveness programs that require 20 to 25 years of payments come with a huge tax liability for the amount forgiven though. I don't think the 20-25 year forgiveness programs make a lot of sense for the borrower. I suspect they will end up paying most of their loan amount during that time and they will be hit with a huge tax bill at the end.

[greenskeeper]

Student loan forgiveness has been brought up on occasion, but it seems like it garners a negative reaction from people on the forum. People actively discourage people from participating. Why the animosity towards the program? Is it due to a generational divide?

U borrowed, U repay, this means U.

Nobody held a gun to your head (or to any other borrower for anything financed) so pay your debt and move on with your life.

I own everything (aside from my mortgage, which will be gone by the time I'm 40) free and clear. May not be the shiniest or latest and greatest but it's all mine and nobody will be coming looking for a payment.

[YULACU]

Fundamentally, I believe that if you have the means to repay your debts, you should. So the question becomes if someone is making enough to where they could afford the repayment but choose not to just so they can take advantage of the forgiveness program or if they are doing the forgiveness program out of financial need because they are significantly underpaid based on the work they're doing.

I agree for the most part. The income based repayment program and the forgiveness programs are part of the promissory note so the borrower is paying back the loan according to the agreed upon provisions. I think of it as akin to taxes. You can take legally steps to decrease your taxes just as you can legally take steps to reduce your student loan debt.

[BlackLight]

Student loan forgiveness has been brought up on occasion, but it seems like it garners a negative reaction from people on the forum. People actively discourage people from participating. Why the animosity towards the program? Is it due to a generational divide?

I don't know if it's so much a generational divide as it is a basic feeling that nobody should be given any sort of special consideration when it comes to paying off their debt. That if one person did the hard work of paying off all the money they borrowed without assistance, that it's somehow immoral for anyone else to do anything less.

Add to that, a more broad-based antipathy you see manifest when someone sees what they regard as "their tax money" paying for things of which they don't approve.

Personally, I've never found the various moral hazard arguments put forward to be all that compelling.

[PeggyHefferon]

I agree with greenskeeper

[YULACU]

Add to that, a more broad-based antipathy you see manifest when someone sees what they regard as "their tax money" paying for things of which they don't approve.

Personally, I've never found the various moral hazard arguments put forward to be all that compelling.

I would find the argument compelling if there weren't a public service obligation. My friend works as an attorney for child protective services. She makes less than $50k a year. That wage is not possible when you have to pay the full amount of your law school debt. I can't imagine people would see child protective service work as a waste of their tax money. If student loan forgiveness wasn't in place, the state would have to increase the wages for child protective service attorneys so someone pays for it directly or indirectly. Likewise I provide free legal services for veterans. I can't imagine many people would openly say they didn't want their tax money going towards this sort of service.

[YULACU]

U borrowed, U repay, this means U.

Nobody held a gun to your head (or to any other borrower for anything financed) so pay your debt and move on with your life.

I own everything (aside from my mortgage, which will be gone by the time I'm 40) free and clear. May not be the shiniest or latest and greatest but it's all mine and nobody will be coming looking for a payment.

True, no one held a gun to our heads except income based repayment and student loan forgiveness is actually part of the agreement we signed.

You borrow, you repay according to the agreement you signed. Who actually pays more than they have to?

[AJ444]

My employer at the time, an S&P 500 company paid for my MBA. I considered it part of my total compensation.

I view the forgiveness of loans for working in a government position as the same thing. What we really need to is come up with a number- the salary, benefits and loan forgiveness and then we can have a debate if it is appropriate for a job title.

[disneysteve]

True, no one held a gun to our heads except income based repayment and student loan forgiveness is actually part of the agreement we signed.

You borrow, you repay according to the agreement you signed. Who actually pays more than they have to?

This is really the most compelling defense of the loan forgiveness program. I was not aware of the fact that it is actually a part of the loan agreement. So it isn't like students borrow a bunch of money first and then decide, "Hey, if I take a public service job I can get a lot of it written off." It's actually part of the deal upfront.

That said, however, is there any limit on how much can be borrowed or how much can be forgiven? If not, I think that's a problem. If someone plans to go into a low-paying public service job, they need to factor that in to their college selection process. There is absolutely nothing wrong with going to a good private school (we send our daughter to one) but only if you can afford it. If kids can go anywhere they want and know that they'll never have to pay the bill, that's an issue and it is something that contributes to rising college costs.

[disneysteve]

My employer at the time, an S&P 500 company paid for my MBA. I considered it part of my total compensation.

I view the forgiveness of loans for working in a government position as the same thing.

True, but did your employer have a cap on that benefit? Was there a maximum amount they would reimburse?

My employer has tuition reimbursement up to a certain amount. It is not unlimited.

[msomnipotent]

I'm all for programs where you have to work in order to have some or all of your loans forgiven. My sister got her Masters for free for becoming a teacher and I think she earned every penny plus some. The schools she was assigned to were the ones you saw on the news, and not in a good way. The school she is currently at is supposed to be a better one. They found a shot up body on their property last week and I don't think it even made the news.

But going to college for free just because someone feels entitled to go is a definite no-no for me. I really think I would be compelled to actually get out and protest after writing all of my representatives if it came to that. We don't need a nation of Liberal Arts majors with a degree in "Invented Languages: Klingon and Beyond".

[YULACU]

That said, however, is there any limit on how much can be borrowed or how much can be forgiven? If not, I think that's a problem. If someone plans to go into a low-paying public service job, they need to factor that in to their college selection process. There is absolutely nothing wrong with going to a good private school (we send our daughter to one) but only if you can afford it. If kids can go anywhere they want and know that they'll never have to pay the bill, that's an issue and it is something that contributes to rising college costs.

There isn't a limit on how much can be forgiven. The Obama administration floated the idea of a cap around $57k in a budget proposal, but they received a lot of push back from borrowers and universities.

While I went to a public university with a full tuition scholarship (undergrad) and a partial scholarship (law school), I know some lawyers who are in considerable student loan debt ($200k+). Some of them are attracted to the program primarily for the student loan forgiveness.

The program has also drawn some criticism for the "doctor loophole." I'm not well versed in the "doctor loophole" issue but it has something to do most hospitals qualifying as non-profits and the low pay doctors receive straight out of med school.