:::: MENU ::::

Posts tagged with: loan forgiveness

Loan Forgiveness Failure

by

When I graduated from my PhD program, I had nearly $100,000 of student loan debt.

So, one might say it’s a topic “near and dear” to my heart. I’ve been opposed to entering into any type of student loan forgiveness program in the past. Ultimately, I just want to repay my own dang loans rather than depending on the government to maybe one-day pay them off for me. In fact, I wrote here about some of the horror stories that make me worried to rely upon a government forgiveness program.

So imagine my surprise (cough *sarcasm* cough) when I saw this story float across my Facebook feed a couple days ago. The headline reads: “This government loan forgiveness program has rejected 99% of borrowers so far.”

According to the article,

“So far, roughly 99% of processed applications for forgiveness under a government program aimed at helping public servants manage their federal student-loan debt had their applications rejected……Of the roughly 29,000 applications processed so far, only 96 borrowers have had about $5.52 million in debt discharged under the program.”

I know a couple of these people. The first year of the program was 2007 and it requires 10-years of on-time payments for debt to be discharged. That means the first “cohort” to receive debt forgiveness would’ve occurred just last year, in 2017. I personally know 2 different friends from grad school who have posted publicly (Facebook) about thinking they were entered into this loan forgiveness program for a full 10 YEARS, fully expecting and planning to have remaining debt discharged….only to have the rug pulled out from under them. Complicated explanations and nitpicky reasons for why they were not eligible.  It’s a pretty devastating thing to realize and come to terms with.

So I keep on making those monthly payments. I may do a temporary forbearance (still paying interest) while my life-situation is so up-in-the-air. But I’ll pay these loans off eventually. Hopefully sooner rather than later!!!

(Unless the US wants to just cancel student loans in order to grow the US economy. That would be pretty cool. I kid, I kid!)

 

 


Debt CON-solidation

by

I’m not a big fan of debt consolidation. I like how Dave Ramsey refers to it as “Debt CON-solidation” because it’s typically some type of scam to make more money. But this is essentially what I’m considering now. Let me back up to explain….

I’ve taken some flak in the past for not entering the Public Service Loan Forgiveness (PSLF) program, for which I qualify. My thought and rationale was two-fold:

  • I want to pay off my debts ASAP! The loan forgiveness period requires 10-years of on-time payments. I want my loans to be gone WAY before that!!!
  • I distrust the service. Simple as that. Who’s to say it won’t be cancelled or eliminated by the time a decade rolls around? This is the first year that people were supposed to qualify for loan forgiveness and I’ve read all kinds of horror stories of people who ended up screwed over for one reason or another. Not to mention, I owe the money so I’d like to pay it back. On a moral level, I feel an obligation for taking out these loans and I want to repay them myself.

Looking for a fun way to make some extra money? Try Heart Bingo today!

So that’s the reason why I haven’t – to this point – ever tried to enter into a PSLF program. But I’ve got to be honest here. We are drowning under high monthly payments. Between the money we owe the IRS, our new credit card debt, student loan debt, and our normal household bills – we have so much outflow that keeping up with my $550/month Navient payments has become a real burden. Like….I don’t know if we can do it. You can’t squeeze blood from a turnip. We just don’t have the money!

I’ve been working and working on our household budget and it’s just a total mess still. So I decided it might be worth looking into the PSLF program a bit more thoroughly.

I called Navient (my loan-holder) and did a bunch of additional research on studentloans.gov. Even though I’m currently in an income driven repayment plan, the way the PSLF program is designed, it requires all loans to be consolidated into a single loan. Why? I don’t know. Makes no sense to me. I was told that’s the rule from an employee at Navient and verified from studentloans.gov (side note: there is an exception – I was told I wouldn’t have to consolidate if I chose to move to a 10-year fixed repayment plan. BUT….I don’t get why anyone would do that because the PSLF doesn’t kick in until 10-years after on-time payments. SOOOOO, if I’m in a 10-year repayment plan….then at the end of 10 years there’s nothing left to be forgiven because everything has already been paid. Someone please clarify if this is wrong. This is what Navient told me and it blew my mind. I still don’t get how that makes any sense. Not to mention, a 10-year plan would put my payment over $900/month, so that’s not really an option for us right now).

So I decided to check out the application and just gather information. Here’s what I discovered.

If I consolidate my loans to a single loan that qualifies for PSLF….

  • My monthly payment will lower by about $100-150/month, depending on the type of repayment plan I select.
  • My interest rate will increase from 5.55% and 6.55% (current APRs) to 6.88% (consolidated)

I intend to stay in academia, so I don’t think there’s any reason to worry about moving jobs outside a field that would disqualify me for PSLF. BUT, if I enter into the consolidation and end up getting our finances under control and want to pay off my debts in full, I’ll end up paying hundreds (thousands??) extra due to the higher interest rate and lower monthly payments.

I don’t know what I think.

The idea of relying on this program still leaves a bad taste in my mouth. Not to mention, if any debt is discharged, I know I’ll owe taxes on the amount that is forgiven (so there’s still a “catch” after all that). BUT, it’s really appealing to me to have a lower monthly rate locked in and know that I’ll be DONE in, at an absolute maximum, 10 years total. I know that’s still a very long time and I want to be debt-free well before that….but it gives a permanent and definitive “END” date that I haven’t had up to this point.

Is anyone else participating in a PSLF program (or a similar loan-forgiveness program)? What are your experiences like? What are your thoughts on these trade-offs between a lower monthly payment and higher overall interest rate? What would you do if you were in my shoes?

You may want to check these out as well:


Pages:12