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Obama's Pay As You Earn Repayment Plan? Good/Bad?

 
 
Miller
 
Reply Tue 10 Jun, 2014 06:11 am
What do you think of Obama's Pay as You Earn Repayment Plan for students on college loans ? Good or bad?

As far as I can tell, the interest rate on these (Federal) loans will stay at about 6.5% (?) . Six months after a student leaves school, the loan re-payment usually begins.

With the new Obama plan, repayment of these loans will be capped at 10% of annual income and will be a function of salary, and size of family.

Why is this plan favored over another propsed plan, that would allow interest rates for the loans to be lowered to a new rate of about 2-3%year?
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Type: Discussion • Score: 2 • Views: 1,395 • Replies: 10
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woiyo
 
  1  
Reply Tue 10 Jun, 2014 06:53 am
@Miller,
Its an incentive to not pay the loan off. It an incentive for the school to charge anything it wants.
Public sector workers getting a 10 yr limit vs 20 years for private is insane !!!

Imagine a kid goes to law school, pays 250K, gets a job in the DA's office making 80K/yr on average. The kid has no reason to pay anymore than 8K/yr towards the loan. Do the math. 8 k times 10 years is 80K. The kid still owes 170K !!! It is forgiven????
Miller
 
  -1  
Reply Tue 10 Jun, 2014 01:06 pm
@woiyo,
woiyo wrote:

Its an incentive to not pay the loan off. It an incentive for the school to charge anything it wants.
Public sector workers getting a 10 yr limit vs 20 years for private is insane !!!

Imagine a kid goes to law school, pays 250K, gets a job in the DA's office making 80K/yr on average. The kid has no reason to pay anymore than 8K/yr towards the loan. Do the math. 8 k times 10 years is 80K. The kid still owes 170K !!! It is forgiven????


Very true. But also, consider the amount of interest that will accumulate during the whole time, the kid is paying bit-by-bit off of the loan.
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roger
 
  0  
Reply Tue 10 Jun, 2014 01:40 pm
Hopefully, the entire amount including can be extracted from the debtor's estate, though that is surely a long term plan, and might be circumvented by good estate planning.
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mysteryman
 
  1  
Reply Tue 10 Jun, 2014 04:13 pm
I think the whole idea is a bad one.
The reason I say that is if people know they can get away with paying ooff only a fraction of what they owe, what have they learned?

EVERY student in college today started school while the economy was bad, knowing that job prospects were limited.
They all signed the student loan papers, they all agreed to the terms, now they are crying about those same terms.

IMHO, they should all man up and abide by the agreement they signed.
Its called personal responsibility.
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Miller
 
  -1  
Reply Wed 11 Jun, 2014 06:11 pm
The student loan repayment starts 6 months after the student leaves school.
So, one way to avoid paying off your loans is to keep going to school in an approved degree program.

I met a man once, who did just that and I wouldn't be surprised to find out that he's still going to school.
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engineer
 
  1  
Reply Wed 11 Jun, 2014 06:15 pm
@Miller,
I favor a plan that says that any college charging more than $10k/semester in tuition to any student is completely ineligible for any federal financial aid for any student.
Miller
 
  -1  
Reply Wed 11 Jun, 2014 07:29 pm
@engineer,
The cost per 4 hour semester course this summer at Harvard University is $3000 and students ( many Internationals) just keep on coming in... Where's the money coming from?
roger
 
  1  
Reply Wed 11 Jun, 2014 08:50 pm
@Miller,
Maybe you just lost a decimal, but even that doesn't quite work.

https://college.harvard.edu/financial-aid/how-aid-works/cost-attendance

Miller wrote:

The cost per 4 hour semester course this summer at Harvard University is $3000 and students ( many Internationals) just keep on coming in... Where's the money coming from?
roger
 
  1  
Reply Wed 11 Jun, 2014 08:53 pm
@roger,
Okay, not terrible for summer.
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felcanadaloan
 
  0  
Reply Tue 27 Jan, 2015 02:56 am
@Miller,
I think it is best. Because If a monthly payment in this plan doesn’t cover the loan’s interest while you are still under a financial hardship, the federal government will pay the unpaid accrued interest on a subsidized Stafford Loan for up to three years from the time Pay As You Earn is implemented.
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