Student Loan Relief... An Alternative View & Idea
Apologies for the long post. I'm thinking a lot today.
It seems most polling shows there isn't huge support for student loan debt relief. I think the last poll I saw was close to 50/50.. I'm torn about it. I borrowed too much for school ($52k) and years later ended up with six figure loans ($136k). I took a while to finish school so years of deferments, then forbearances. I made all my payments on time, but had them discharged last year when I became 100% disabled with the VA and started on SSDI.
I took advantage of IBR when I had loans (income based repayment). My payment was around $370 a month instead of the $920 it would've been. It was based on it being 15% of my discretionary income. This is the difference between your AGI and 150% of the poverty level.
Sure even $370 was a lot of money, but years I made lower money I paid less, or almost nothing. There were things you could do to lower your AGI too. Needless to say I was making high 401K contributions those years.
What killed me was the interest rate. I was paying 8.75% and there was no way to refinance. Why not? So even when I made monthly IBR payments, the balance still climbed. I wasn't even covering the interest so I would never have paid them off. But after 20 years with IBR the balance would've been cancelled. Of course then I'd have a giant tax bill because that would've been considered income.
I knew a lot of people who worked their way thru school. I only worked about 15 hours a week. That was my fault. I was lured into the loan trap, easy money, a big check, and no education about how it would affect me after i got out of school. My parents were upper middle class, but they didn't cover my college. But a lot of parents do save to help their kids. They sacrificed vacations and luxuries for education.
I'm torn because this seems grossly unfair. Some people worked and made their payments and struggled. People with low income got Pell grants and work study to help pay for college. I got neither due to my parents income so I had to borrow. Yet at the same time I got my loans discharged. A 100% VA rating will get that for you. Part if me says yes because I sacrificed and ended up damaged for life. I struggled for a decade (poor, homeless a while, sleeping on couches or in my car), then another six years, before finally finding my footing. Sure I made a lot of money in the end, but how much could I have made were it not for my illness?
I like the idea of them helping those who were scammed by these for profit schools. I'm OK with that. I think for everyone else the real answer is IBR with 10% of discretionary pay, and a discharge after 20 years with no tax penalty. The big thing though is I'd also like to see a restriction on interest rates. They would be recalculated yearly so your IBR payment would cover all interest and that would be 75% of the payment. The remaining IBR payment would be principal. That way youd see SOME DROP in your balance. Making payments znd seeing it climb, that's ridiculous. Finally, mandatory financial education for those who take out a student loan on the reality and obligation. Not related to loans but I'd also like to see them be included in a bankruptcy if filed. I filed about 20 years ago and honestly that would've ended it for me.
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