Student Loan Debt

[he gone.]

They'll kick the can down the road ... fight about it for 1.5/2 or so years, then get it to a vote before the next 2 year vote cycle .... blame republicans for not supporting, then say they're re-working another angle just in time for the 4 year vote cycle. Democrats will run on student loan forgiveness in 2023/4 to try and sway the young vote their way. Rinse and repeat. And we all eat it up like movie popcorn. 

 

[illinilaw08]

39 minutes ago, BrianAnderson said:

They'll kick the can down the road ... fight about it for 1.5/2 or so years, then get it to a vote before the next 2 year vote cycle .... blame republicans for not supporting, then say they're re-working another angle just in time for the 4 year vote cycle. Democrats will run on student loan forgiveness in 2023/4 to try and sway the young vote their way. Rinse and repeat. And we all eat it up like movie popcorn. 

 

I mean, the system is what the system is right?  Some Democrats don't support loan forgiveness at all (see Pelosi comments last week).  And when you need all 50 of their votes in the Senate (based on the reasonable assumption you can't find 10 R votes in support) AND you need to get it done in a massive reconciliation bill to avoid the filibuster in the Senate, it isn't likely to happen in the legislature right now. Add to that the fact it is not clear Biden can wipe out any student loan debt at issue with the stroke of a pen (and even if he does, I'd assume that act would be tied up in court for awhile re: if he has that authority), and there just isn't a viable path to getting it done right now. If they can get forbearance continued in the interim, at least they are providing some tangible value to people struggling with student loan debt while the Democrats who are in favor try to convince the people who aren't to come to the table.

I don't think there's any reason to question the sincerity of the vocal Reps and Senators who are pro- cancellation of student loan debt. They just don't have the votes for it yet. If you are in favor of cancelling student loan debt, you need to help convince the votes against cancellation that it is in their political best interest to support forgiveness.

[Harry Chappas]

23 hours ago, illinilaw08 said:

I mean, the system is what the system is right?  Some Democrats don't support loan forgiveness at all (see Pelosi comments last week).  And when you need all 50 of their votes in the Senate (based on the reasonable assumption you can't find 10 R votes in support) AND you need to get it done in a massive reconciliation bill to avoid the filibuster in the Senate, it isn't likely to happen in the legislature right now. Add to that the fact it is not clear Biden can wipe out any student loan debt at issue with the stroke of a pen (and even if he does, I'd assume that act would be tied up in court for awhile re: if he has that authority), and there just isn't a viable path to getting it done right now. If they can get forbearance continued in the interim, at least they are providing some tangible value to people struggling with student loan debt while the Democrats who are in favor try to convince the people who aren't to come to the table.

I don't think there's any reason to question the sincerity of the vocal Reps and Senators who are pro- cancellation of student loan debt. They just don't have the votes for it yet. If you are in favor of cancelling student loan debt, you need to help convince the votes against cancellation that it is in their political best interest to support forgiveness.

Why don't they just make the loan interest free instead of cancelling? 

[Balta1701]

48 minutes ago, Harry Chappas said:

Why don't they just make the loan interest free instead of cancelling? 

A change like that would definitely require an act of Congress. There's some potential loopholes that have been left where they could cancel a portion of it just by executive action, but fundamentally restructuring how they are billed - you need Congress for that.

[Ducksnort]

Cancelling 10 grand of student loan debt would wipe away about half my debt and allow me to finally start saving for a house. My wife and I decided when we were married that we'd be debt free before buying a home, and that would be the only debt we'd ever willingly go into ever again.

Do I "need" student loan forgiveness? No...we both have decent jobs with decent pay.

But it sure as hell would help me get ahead. I'm 27, wife is 29. Still renting an apartment...

I am definitely part of the group that didn't really understand the weight of student loans coming out of high school. Don't get me wrong, I highly value the education I received, but would I do it over again had I known then what I know now about money management? Hell yes I would. And if I have kids, they will know at a young age.

[Texsox]

I just bumped into one of my former students today. His plan had been to save money on his undergrad and then spend on his grad degree. Funny thing happened on the way. He earned great grades, heard his friends who were not going to grad school discuss what will eventually be their payments and decided to again save some money. 

Instead of applying at the best environmental science schools and accepting what was issued,  he targeted scholarships and has almost a full ride set at UWM. He's been told Madison is a cold weather version of Austin. 

[BigHurt3515]

When I was in college I really had no idea about student loans or what was going on. My mom basically took out loans for me to help pay for college but I really had no education on the topic or what would happen. Now I have 25K left in loans (I am 28) and my wife will probably have 30K after her masters program she is about to start. Feel like we will just be paying it for the rest of our lives. I can't say it has stopped us from doing anything in life, we have two kids, bought a house at 25, sold that house recently and now are building a house. My monthly payment will be $158 and my wife can defer while she is back in school

[he gone.]

20 hours ago, Harry Chappas said:

Why don't they just make the loan interest free instead of cancelling? 

This. It's the perfect meet in the middle. Instead of the trillion of debt being footed by the government, the number drops a ton. Borrowers should get to borrow at the Fed rate. If it's zero? then zero for student loans. If it's negative? negative. if it's 2%, 2%. 

 

[illinilaw08]

6 hours ago, BrianAnderson said:

This. It's the perfect meet in the middle. Instead of the trillion of debt being footed by the government, the number drops a ton. Borrowers should get to borrow at the Fed rate. If it's zero? then zero for student loans. If it's negative? negative. if it's 2%, 2%. 

 

I'd be all for making student loans interest free as well!  I'd think you might even be able to get all 50 D Senators to vote for that.  But again, show me the 10 Republican votes you are going to get to pass that - because you need 60 votes in the Senate to get anything passed which isn't part of a reconciliation bill...  

[jasonxctf]

A question worth asking... how much responsibility of student loan debt falls on the parents of the students themselves? 

I went to College from 97-01. Went to UIC. Total cost of tuition was $15k a year including room and board. No scholarships or grants for me. I was lucky to have parents who scrimped and saved for 18 years to allow this happen. But there's a trade off in that. We didn't have cable tv growing up, didnt go on expensive vacations to Disney World, or other places, they didn't buy expensive cars, jewelry, furniture. I never had the newest Nikes or Jordans. IOU Sweatshirts or Z Cavaricci pants. (remember those) We were lower middle class. My dad never made more than $35,000 a year. Mom worked part time. I hated every minute of it, and didn't understand why my friends had these things and I didnt... until I graduated from College with $0 in debt while my friends had $50,000+. 

[raBBit]

16 hours ago, jasonxctf said:

A question worth asking... how much responsibility of student loan debt falls on the parents of the students themselves? 

I went to College from 97-01. Went to UIC. Total cost of tuition was $15k a year including room and board. No scholarships or grants for me. I was lucky to have parents who scrimped and saved for 18 years to allow this happen. But there's a trade off in that. We didn't have cable tv growing up, didnt go on expensive vacations to Disney World, or other places, they didn't buy expensive cars, jewelry, furniture. I never had the newest Nikes or Jordans. IOU Sweatshirts or Z Cavaricci pants. (remember those) We were lower middle class. My dad never made more than $35,000 a year. Mom worked part time. I hated every minute of it, and didn't understand why my friends had these things and I didnt... until I graduated from College with $0 in debt while my friends had $50,000+. 

It's a fair question. Particularly when people have degrees that aren't really useful from an earnings standpoint. There are certainly people who went your route and made others look ridiculous for spending what they did.

I remember taking the one required science lab for gen ed at my local community college during the summer. The counselor or whoever I talked to was explaining that the lab was more expensive than most classes because of the lab materials required. It was $600. One of my regular classes at my university was over $3k. At the end of the day, the kids I knew who went to community college and worked hard and transferred to a university for junior year got the biggest bang for their buck. I worked at a prestigious place out of college and we had kids that did the community college to university route and they were looked at no different as the kids that went to university for four years. 2 years at community college and working and then transferring is probably the best route but societally it's hard for a lot of people to do that. There's unfortunately a stigma with community college. If you can get past the stigma, get past the loss of the social experience and tackle the learning curve with the increase in difficulty from community college to university it's almost inarguably the best path for kids. 

I take more exception to the government's involvement in it all. Guaranteeing the loans is what allows the universities to charge whatever they want. That's what makes it so tuition grows at twice the rate of inflation/time value of money. The government is making crazy money off of interest for anyone who gets over $20k in loans and anyone who has grad loans. 

In my situation, as a 17-year-old, I didn't really think of the ramifications of going to a private school. Of course in Illinois our state school situation is awful but it's really hard to make sense of private school tuition once you understand the dollar and cents of it all. I graduated high school in 2012. I finished my undergrad and grad degree in 5 years and 1 trimester. I lived with family and never paid rent. My freshman year tuition was over $33k. My last year of grad school was $39k. That's not including room and board or books. So for two degrees it was just under $200k. My parents had 529 plans set up for me and helped a great deal with my undergrad degree. I got decent scholarships for undergrad for my ACT score and even got financial aid the first year because my dad was in between jobs. However, once he returned to work, I was never eligible for financial aid because my parents made too much even though I was footing the bill at the end. I was never eligible for scholarships past the standard ones offered at admission. I tried, i looked and signed up for all the email lists. So with scholarships, a touch of financial aid and a great deal of help from my parents, I still ended up being on the hook for over $60k in loans and that's after I cleared my savings (about $15k) at 22 because I didn't want to take out additional grad school loans (interest rate offered for that additional government loan was over 8%).

So I never needed to go to private school and I get that now. I am lucky to have a great degree in a useful industry where I can keep employed and I am thankful for that. That said, I think I am very fortunate with all the help with my parents and being able to live with family in the city during college. I got $10k a year in undergrad because I scored a 28 on my ACT. If I scored a 27, I would have only got $2.5k in scholarships. So that one point, which could have been from rounding, on the ACT was worth $30k in scholarships which is just crazy. So given my good fortune with my family/living situation, getting a pretty significant scholarship and even getting a touch of financial aid, I still ended up clearing my savings ($15k) and taking out about $61k in loans with a WACC around 5%. I am not complaining and delighted to say my loans are under $25k now after refinancing and staying with family my first few years after school to hammer down the principal. So suffice it say to say, I had a very fortunate situation. Of course I didn't need two degrees and didn't need to go to private school but given my good fortune, I still think it's insane that the cost was what it was. For someone who didn't have my parents and got a 27 instead of a 28 on the ACT, how could they even stomach this? Just be in debt forever? Obviously they could be eligible for financial aid if they didn't have the great situation I did but man it's a lot to put a teenager/young twenty something.

TLDR - If you have a kid in high school and you're not made of money, start coaching them up on the economics of this stuff as soon as possible. Staying home going to community college while working could be a huge cost saver if you have a disciplined kid who will get the grades required to transfer to a good school. Sending your kid to the community college next to their desired university for two years could be a nice "meet-in-the-middle" situation. If you're footing the whole bill for your kid, incentivizing (monetarily, with a car, etc.) them to stay home or to get good grades at community college could be one of the best financial decisions you make. Buying your kid a $5k used Camry to help them cope with staying home for two years could very easily save you $50k in the long run. 

[CentralChamps21]

I am going the route of community college for a year (had a year's worth of credit in HS) and a state university regional campus for two years. Will graduate with zero debt. Then I can go into debt as needed to go to the best possible school for my MBA, which I feel is more worth it.

[raBBit]

1 hour ago, WhiteSoxFan1993 said:

I am going the route of community college for a year (had a year's worth of credit in HS) and a state university regional campus for two years. Will graduate with zero debt. Then I can go into debt as needed to go to the best possible school for my MBA, which I feel is more worth it.

That's awesome. Grad school is a cash program. It is nowhere near as rigorous as undergrad. Try and find an employer who will help with the MBA. There are a still a few that exist. 

[ptatc]

2 hours ago, raBBit said:

It's a fair question. Particularly when people have degrees that aren't really useful from an earnings standpoint. There are certainly people who went your route and made others look ridiculous for spending what they did.

I remember taking the one required science lab for gen ed at my local community college during the summer. The counselor or whoever I talked to was explaining that the lab was more expensive than most classes because of the lab materials required. It was $600. One of my regular classes at my university was over $3k. At the end of the day, the kids I knew who went to community college and worked hard and transferred to a university for junior year got the biggest bang for their buck. I worked at a prestigious place out of college and we had kids that did the community college to university route and they were looked at no different as the kids that went to university for four years. 2 years at community college and working and then transferring is probably the best route but societally it's hard for a lot of people to do that. There's unfortunately a stigma with community college. If you can get past the stigma, get past the loss of the social experience and tackle the learning curve with the increase in difficulty from community college to university it's almost inarguably the best path for kids. 

I take more exception to the government's involvement in it all. Guaranteeing the loans is what allows the universities to charge whatever they want. That's what makes it so tuition grows at twice the rate of inflation/time value of money. The government is making crazy money off of interest for anyone who gets over $20k in loans and anyone who has grad loans. 

In my situation, as a 17-year-old, I didn't really think of the ramifications of going to a private school. Of course in Illinois our state school situation is awful but it's really hard to make sense of private school tuition once you understand the dollar and cents of it all. I graduated high school in 2012. I finished my undergrad and grad degree in 5 years and 1 trimester. I lived with family and never paid rent. My freshman year tuition was over $33k. My last year of grad school was $39k. That's not including room and board or books. So for two degrees it was just under $200k. My parents had 529 plans set up for me and helped a great deal with my undergrad degree. I got decent scholarships for undergrad for my ACT score and even got financial aid the first year because my dad was in between jobs. However, once he returned to work, I was never eligible for financial aid because my parents made too much even though I was footing the bill at the end. I was never eligible for scholarships past the standard ones offered at admission. I tried, i looked and signed up for all the email lists. So with scholarships, a touch of financial aid and a great deal of help from my parents, I still ended up being on the hook for over $60k in loans and that's after I cleared my savings (about $15k) at 22 because I didn't want to take out additional grad school loans (interest rate offered for that additional government loan was over 8%).

So I never needed to go to private school and I get that now. I am lucky to have a great degree in a useful industry where I can keep employed and I am thankful for that. That said, I think I am very fortunate with all the help with my parents and being able to live with family in the city during college. I got $10k a year in undergrad because I scored a 28 on my ACT. If I scored a 27, I would have only got $2.5k in scholarships. So that one point, which could have been from rounding, on the ACT was worth $30k in scholarships which is just crazy. So given my good fortune with my family/living situation, getting a pretty significant scholarship and even getting a touch of financial aid, I still ended up clearing my savings ($15k) and taking out about $61k in loans with a WACC around 5%. I am not complaining and delighted to say my loans are under $25k now after refinancing and staying with family my first few years after school to hammer down the principal. So suffice it say to say, I had a very fortunate situation. Of course I didn't need two degrees and didn't need to go to private school but given my good fortune, I still think it's insane that the cost was what it was. For someone who didn't have my parents and got a 27 instead of a 28 on the ACT, how could they even stomach this? Just be in debt forever? Obviously they could be eligible for financial aid if they didn't have the great situation I did but man it's a lot to put a teenager/young twenty something.

TLDR - If you have a kid in high school and you're not made of money, start coaching them up on the economics of this stuff as soon as possible. Staying home going to community college while working could be a huge cost saver if you have a disciplined kid who will get the grades required to transfer to a good school. Sending your kid to the community college next to their desired university for two years could be a nice "meet-in-the-middle" situation. If you're footing the whole bill for your kid, incentivizing (monetarily, with a car, etc.) them to stay home or to get good grades at community college could be one of the best financial decisions you make. Buying your kid a $5k used Camry to help them cope with staying home for two years could very easily save you $50k in the long run. 

The only time these truly make a difference is if you are planning on going to graduate school. In some instances you may need to retake many of those courses or just not get accepted into programs.

[he gone.]

21 hours ago, illinilaw08 said:

I'd be all for making student loans interest free as well!  I'd think you might even be able to get all 50 D Senators to vote for that.  But again, show me the 10 Republican votes you are going to get to pass that - because you need 60 votes in the Senate to get anything passed which isn't part of a reconciliation bill...  

Based on your screenname you may be in the same boat as me .... 

i married into law school debt ... and my wife did not come from any money ... so she took out a full loan for all of law school. needless to say we have a second mortgage for a vacation home called law school. we pay $15-20k a year and the balance 5-7 years from now will be higher than today  

it's a f****d up system. not to mention she doesn't practice law anymore. 

i hate that the government is so inefficient and so against meeting in the middle. they both dig in. 

 

The only thing I can hang my hat on is that as old people die off and get people under 40 into politics that this topic becomes more an more important and eventually has enough pressure to get done. Dont hold any hope that it happens in the next 8 years. 

[he gone.]

20 hours ago, jasonxctf said:

A question worth asking... how much responsibility of student loan debt falls on the parents of the students themselves? 

I went to College from 97-01. Went to UIC. Total cost of tuition was $15k a year including room and board. No scholarships or grants for me. I was lucky to have parents who scrimped and saved for 18 years to allow this happen. But there's a trade off in that. We didn't have cable tv growing up, didnt go on expensive vacations to Disney World, or other places, they didn't buy expensive cars, jewelry, furniture. I never had the newest Nikes or Jordans. IOU Sweatshirts or Z Cavaricci pants. (remember those) We were lower middle class. My dad never made more than $35,000 a year. Mom worked part time. I hated every minute of it, and didn't understand why my friends had these things and I didnt... until I graduated from College with $0 in debt while my friends had $50,000+. 

this. my parents technically qualified for food stamps for a lot of my time as a child. my dorm room was bigger than the room i shared w my brother for 18 years, no cable, never went to a sox game, never left IL or WI, never was on a plane, never had new clothes, only pass me downs ... never really had anything. But they did pay for my college and for that I'm thankful. You dont know any better as a kid anyways. the only thing i wish we did a bit more was travel. 

There's a way to do save, but it's tough, and they don't teach financial responsibility in school. people love spending ... love it. nobody has any fiscal responsibility. we're taught to be on a wheel of consumption. Even now, I can definitely afford a bigger house, nicer cars, etc. I choose not to. I'll buy used cars, fix them, and live in a tiny house. Life defined by material goods is a fruitless endeavor. 

[jasonxctf]

some math for the mom and dad's out there...

putting $100/month into a 529 savings plan in Month 1 of kids life, 18 years later is nearly $50,000 assuming an 8% a year return. 

$250/month ends up with over $120,000. 

If you live in Illinois, you get 5% off your annual contributions as a credit back for state income tax. 

[Texsox]

5 hours ago, BrianAnderson said:

 

There's a way to do save, but it's tough, and they don't teach financial responsibility in school. 

They do in most high schools. 

[ptatc]

5 hours ago, jasonxctf said:

some math for the mom and dad's out there...

putting $100/month into a 529 savings plan in Month 1 of kids life, 18 years later is nearly $50,000 assuming an 8% a year return. 

$250/month ends up with over $120,000. 

If you live in Illinois, you get 5% off your annual contributions as a credit back for state income tax. 

It's too bad they aren't taking any new contracts for the College Illinois. We made so much money for the kids in the program. I can see why they got in trouble though because of it.

[The Beast]

On 8/5/2021 at 3:22 PM, jasonxctf said:

some math for the mom and dad's out there...

putting $100/month into a 529 savings plan in Month 1 of kids life, 18 years later is nearly $50,000 assuming an 8% a year return. 

$250/month ends up with over $120,000. 

If you live in Illinois, you get 5% off your annual contributions as a credit back for state income tax. 

How do parents set up a 529 savings plan? What about an IRA for my wife who is a teacher in Illinois? We would use her 403b but I thought an IRA through Fidelity might be good. Not sure what I’d need to do though.

[Two-Gun Pete]

On 8/5/2021 at 9:15 PM, ptatc said:

It's too bad they aren't taking any new contracts for the College Illinois. We made so much money for the kids in the program. I can see why they got in trouble though because of it.

Morningstar on prepaid tuition plans

 

From the article:

..."Take the cautionary tale of Illinois, a state besieged by budget woes. According to College Illinois, the state's prepaid tuition plan, new contracts have not been sold since 2017, and the plan has reached out to Illinois Governor Pritzker's office for emergency funds to help address the plan's unfunded liabilities. The plan reported that as of June 30, 2020, program assets totaled about $588.6 million, corresponding to a 63.4% funded ratio--an amount sufficient to cover payments only through fiscal year 2024."

..."the Illinois' prepaid tuition contracts are not backed by the full faith and credit of the state. (Not that it would be especially reassuring if it was, as Illinois' debt teeters on the verge of a junk rating.) Rather, the College Illinois prepaid tuition plan states it is backed by the moral obligation of the state..."

Edited August 10, 2021 by Two-Gun Pete

[Two-Gun Pete]

On 8/5/2021 at 3:22 PM, jasonxctf said:

some math for the mom and dad's out there...

putting $100/month into a 529 savings plan in Month 1 of kids life, 18 years later is nearly $50,000 assuming an 8% a year return. 

$250/month ends up with over $120,000. 

If you live in Illinois, you get 5% off your annual contributions as a credit back for state income tax. 

Good stuff, although I'd add that the state-specific tax benefits are for only certain 529 plans, not ALL of them. At least, in Illinois.

 

30 or so states have "their own" 529 plans, at least, as it pertains to deriving a state-specific tax benefit. Illinois is one such state.

6 or 7 states allow you to contribute to ANY 529 plan, and get their state tax benefits. 

And then you have states without any income taxes, so that wouldn't necessarily be reason to get a 529 plan if you lived where there are no state taxes. (Although there are a fuckton more reasons to do one than not, IMO.)

Edited August 10, 2021 by Two-Gun Pete

[jasonxctf]

On 8/8/2021 at 1:20 PM, The Beast said:

How do parents set up a 529 savings plan? What about an IRA for my wife who is a teacher in Illinois? We would use her 403b but I thought an IRA through Fidelity might be good. Not sure what I’d need to do though.

https://www.brightstart.com/

[jasonxctf]

21 hours ago, Two-Gun Pete said:

Morningstar on prepaid tuition plans

 

From the article:

..."Take the cautionary tale of Illinois, a state besieged by budget woes. According to College Illinois, the state's prepaid tuition plan, new contracts have not been sold since 2017, and the plan has reached out to Illinois Governor Pritzker's office for emergency funds to help address the plan's unfunded liabilities. The plan reported that as of June 30, 2020, program assets totaled about $588.6 million, corresponding to a 63.4% funded ratio--an amount sufficient to cover payments only through fiscal year 2024."

..."the Illinois' prepaid tuition contracts are not backed by the full faith and credit of the state. (Not that it would be especially reassuring if it was, as Illinois' debt teeters on the verge of a junk rating.) Rather, the College Illinois prepaid tuition plan states it is backed by the moral obligation of the state..."

Important to point out, current 529 plan here in Illinois, is not College Illinois. Here's info on Bright Start, reviewed by Morningstar.

 

Here’s what Morningstar had to say about Bright Start in October 2020:

“The Illinois Bright Start Direct-Sold College Savings Program boasts an impressive fund lineup, strong plan oversight, and competitive fees. It remains a top choice for college savers and retains its Morningstar Analyst Rating of Gold. Illinois residents also enjoy further benefits–contributions up to $10,000 can be deducted when calculating state income taxes”

[ptatc]

22 hours ago, Two-Gun Pete said:

Morningstar on prepaid tuition plans

 

From the article:

..."Take the cautionary tale of Illinois, a state besieged by budget woes. According to College Illinois, the state's prepaid tuition plan, new contracts have not been sold since 2017, and the plan has reached out to Illinois Governor Pritzker's office for emergency funds to help address the plan's unfunded liabilities. The plan reported that as of June 30, 2020, program assets totaled about $588.6 million, corresponding to a 63.4% funded ratio--an amount sufficient to cover payments only through fiscal year 2024."

..."the Illinois' prepaid tuition contracts are not backed by the full faith and credit of the state. (Not that it would be especially reassuring if it was, as Illinois' debt teeters on the verge of a junk rating.) Rather, the College Illinois prepaid tuition plan states it is backed by the moral obligation of the state..."

Yep. Luckily, my last one graduates in 2023. It was a great plan but I can see why they had financial difficulties. We got a nearly 65% return on our investment.