I am under the impression that my public student loan payments will go down to a certain percentage of my disposable income on this payment plan (income based repayment). I am up in the air about whether or not to attend Harvard this fall because of some additional loans, but I guess IBR essentially evens the playing field with those who somehow do not need loans to get through school (even though my tuition has been covered with grants and scholarships - those pesky things like rent and food still get in the way). What are your thoughts on this? Should IBR get rid of our anxiety over public student loans?
1. I guess IBR essentially evens the playing field with those who somehow do not need loans to get through school
No, it doesn't - the problematic part of loan repayment is not necessarily the monthly costs (although that is an issue), but rather how much you end up paying over time and, most importantly, the length of time for which you will be shackled to your debt. When you leave school, you will be faced with a number of life decisions - all of which are constrained partly by your monthly student loan costs, but also (and in the long run, this is the most important to you) by your total debt load and the length of time you'll be repaying that debt. So no, you will never have a "level playing field" against those with no loans. All IBR does is make it easier to pay less money, for longer, for a larger total loan cost. When you go to your bank to get a loan for a house, or a car, or a new business, they're going to look at your total debt. And when you are planning your life out, the amount of time you are in debt is what's going to impact your overall life plans.
2. All this is moot because you have free tuition?!?! Are you kidding? How much do you need to take out for this? $20,000? If so, then I wouldn't worry about it - that's really not much debt. I mean, it's a lot, but most likely not enough to say, make a loan officer kick you out the door of the bank.
Also - beware that typically you can't take out subsidized student loans for anything other than tuition. So you'll probably need to take out private loans if you only want to cover rent + necessities - and private loans can have rough terms (not sure if they have to offer IBR?)
With the IBR + the 25 year forgiveness plan, the payoff can be a moving target, and is different for different people. I've had to crunch the numbers on my loans to see for myself. With 75k at 7% interest making minimum payments under IBR, I would have no benefit from IBR plan (and in some scenarios, pay even more net). The only party that benefits is the government, which collects 20-30% through taxes on the amount forgiven at the end of the 25 years, plus all the interest on the balance of the loan you are barely paying, which compounds further, the more you don't pay.
If the loan is for 20k at 4-5%, on the other hand, there is no reason to not get on the IBR. It's cheap money put towards what I would consider a good investment (it's a Harvard degree after all).
Whatever you do, just don't end up taking private loans, federal loans are 1000x better than private, because they give me at least the most minimum rights. Private loans are killers, no rights, no nothing, just pay them each month, no IBR no nothing, must pay full amount, with super high interest rates... this industry will burn to the ground!
May 24, 10 10:27 am ·
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IBR
I am under the impression that my public student loan payments will go down to a certain percentage of my disposable income on this payment plan (income based repayment). I am up in the air about whether or not to attend Harvard this fall because of some additional loans, but I guess IBR essentially evens the playing field with those who somehow do not need loans to get through school (even though my tuition has been covered with grants and scholarships - those pesky things like rent and food still get in the way). What are your thoughts on this? Should IBR get rid of our anxiety over public student loans?
1. I guess IBR essentially evens the playing field with those who somehow do not need loans to get through school
No, it doesn't - the problematic part of loan repayment is not necessarily the monthly costs (although that is an issue), but rather how much you end up paying over time and, most importantly, the length of time for which you will be shackled to your debt. When you leave school, you will be faced with a number of life decisions - all of which are constrained partly by your monthly student loan costs, but also (and in the long run, this is the most important to you) by your total debt load and the length of time you'll be repaying that debt. So no, you will never have a "level playing field" against those with no loans. All IBR does is make it easier to pay less money, for longer, for a larger total loan cost. When you go to your bank to get a loan for a house, or a car, or a new business, they're going to look at your total debt. And when you are planning your life out, the amount of time you are in debt is what's going to impact your overall life plans.
2. All this is moot because you have free tuition?!?! Are you kidding? How much do you need to take out for this? $20,000? If so, then I wouldn't worry about it - that's really not much debt. I mean, it's a lot, but most likely not enough to say, make a loan officer kick you out the door of the bank.
Also - beware that typically you can't take out subsidized student loans for anything other than tuition. So you'll probably need to take out private loans if you only want to cover rent + necessities - and private loans can have rough terms (not sure if they have to offer IBR?)
With the IBR + the 25 year forgiveness plan, the payoff can be a moving target, and is different for different people. I've had to crunch the numbers on my loans to see for myself. With 75k at 7% interest making minimum payments under IBR, I would have no benefit from IBR plan (and in some scenarios, pay even more net). The only party that benefits is the government, which collects 20-30% through taxes on the amount forgiven at the end of the 25 years, plus all the interest on the balance of the loan you are barely paying, which compounds further, the more you don't pay.
If the loan is for 20k at 4-5%, on the other hand, there is no reason to not get on the IBR. It's cheap money put towards what I would consider a good investment (it's a Harvard degree after all).
Whatever you do, just don't end up taking private loans, federal loans are 1000x better than private, because they give me at least the most minimum rights. Private loans are killers, no rights, no nothing, just pay them each month, no IBR no nothing, must pay full amount, with super high interest rates... this industry will burn to the ground!
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