Obama does a little something for low-income student loan holders:
At a press briefing Tuesday afternoon, Melody Barnes, director of the Domestic Policy Council, said the president would use his executive authority to expand the existing income-based repayment program with a “Pay as You Earn” option that would allow graduates to pay 10 percent of their discretionary income for 20 years and have the rest of their federal student loan debt forgiven. That plan would start next year.
Most of the 450,000 low-income student-loan borrowers currently enrolled in income-based payment must pay 15 percent of their discretionary income for 25 years before having their debt forgiven, although terms are easier for those in public service.
Speaking of forgiveness, I’ll forgive anyone who thinks this is a typo or transcription error, since I, too, can’t remember the last time a benefits program was improved for anyone under 65.
freelancer (iPhone)
Carlin and Stanhope have bitched about domestic policy being totally batshit because “old fucks vote”! This is just a start in encouraging “young fucks” to vote.
arguingwithsignposts
WORSE THAN BUSH!
Comrade Javamanphil
I now feel incentivized to borrow even more money to pay for college education! Darn government handouts always keeping me down.
JPL
MSM will say he should do more without pointing out that executive order only goes so far.
bkny
and meanwhile …:
President Obama supports passage of House GOP legislation that would eliminate a tax compliance rule affecting big government contractors and pay for it by limiting Medicaid eligibility, the White House announced Tuesday.
MattF
Well, I’d take a careful look at the details. How, in particular, is the interest rate for the loan determined? I only ask because back in the ’70’s, Yale offered a ‘Tuition Postponement Option’ loan where you paid a specified percent of your income per year and the interest rate varied according to the prevailing rate. The interest rate spike in the 80’s left all the borrowers with huge debts (which Yale, to its credit, forgave). So, Borrower Beware.
superdestroyer
How does the government define discretionary income? It seems like a loophole that means that only the foolish will have to repay anything.
RSA
Excellent news. Of course, if I were a teabagger, I’d be thinking about my own student loans, which I paid off in full, walking to the bank uphill through the snow every month, barefoot, to make my payments.
Kelly
If they keep the same calculation they use for the current IBR program, discretionary income is anything you earn over 150% of the poverty rate (depending on family size).
Mark S.
OT I know Patterico is a dumbass, but the fact that David Duke made a youtube decrying “Zionist Wall Street” does not actually prove that OWS is anti-Semitic. This guy’s a fucking prosecutor?
Fucen Pneumatic Fuck Wrench Tarmal
this means more to the colleges and universities than it does to most students.
singfoom
That’s good. Glad to see them doing something even while Congress is fiddling. Can someone clear something up for me? I thought that a year or two ago, they had passed a law to remove private lenders from student loans. I know this isn’t the case, but what the hell happened?
Was it just for one class of loans?
Argon
The extension for adding children (up to the age of 26) to your insurance plan is an example of a benefits improvement for some under 65.
cleek
@Mark S.:
well, he’s a professional liar with a wide range of things he’s willing to lie about.
cleek
@bkny:
context is for losers
boss bitch
@singfoom:
http://articles.cnn.com/2010-03-30/politics/student.aid.faqs_1_student-loans-pell-grant-program-white-house?_s=PM:POLITICS
scottinnj
This isn’t all that new – Australia has had a government loan program whereby repayment is a function of your income. Basically as your income rises, you pay a slightly higher % of your income in repayment (eg today if your income is below A$44k, you pay nothing, if it is say A$50k you would pay 4% per annum until repaid. The interest rate on the loan is basically the inflation rate so you have to repay the real value of the debt.
http://en.wikipedia.org/wiki/Tertiary_education_fees_in_Australia#HECS
MomSense
@singfoom
Yes, they did eliminate the program whereby government subsidized student loan lenders (because they didn’t pass the savings onto the borrowers) but it wasn’t retroactive. So this is some much needed relief for heavily indebted students.
singfoom
@boss bitch: Thanks for the link. So they removed the banks as middlemen driving up the percentages on federally based loans. They didn’t get rid of private lending all together. A step in the right direction.
When I looked recently, federal loans are capped between 4% and 8%, private loans at 18%. I think I calculated that I’ll be in my late 50s before I pay off grad school, and that’s at 4% consolidated. I can’t imagine how I’d ever pay anything off if I was near 20% interest.
I hope they’re able to pass legislation to really help out students beyond what the administration has done here. There’s no reason to have someone be in crippling debt at the beginning of their career.
El Cid
@RSA: This is a good point. I make it a project to dip into a deep well of bitterness whenever someone now seems to get some sort of break which I didn’t get in the past.
I can barely hold back from going in and smashing all those computers in the classroom ’cause I sure didn’t have no damn gubmit-bought computers in my classes! Undeserving little shits!
jsfox
@bkny: You know it would really help if you bothered to really look at what the GOP wants to do and what Obama has agreed or not agreed to do.
1) Obama has agreed to nada. All he has said is that he looks forward to working with Congress. The 3% reduction was already in the jobs act.
2) The medicare part makes the assumption that it meets the requirements of ACA and doesn’t effect care to beneficiaries. Here it’s important to note that this move would further clarify eligibility for Medicaid under the ACA. If someone does not qualify for Medicaid ( income <133% of the federal poverty level) under the ACA, they will still qualify for subsidies from 133% to 400% of the federal poverty level to obtain insurance via the Exchange.
gbear
But he’s still the worst president ever for sure by far 100%.
/assholes from yesterday’s comments
boss bitch
Democrats give us student loan relief while Republicans want to gut Pell Grants and advise us to go get 3 jobs. yep both parties are the same.
dave
This is great news for those students who have been totally screwed by our higher education system and the economic collapse. However, it does nothing to address the real problem and creates some perverse consequences:
1. Since college loans are federally guaranteed, this means that taxpayers will be picking up the tab for these loans. By the time 20 years has elapsed, the average IBR debt has accrued so much interest that it is actually 2-5 times the size of the original debt, meaning that taxpayers will be footing a $500,000 per student bill.
2. This creates an incentive (especially for professional school) where students have nothing to lose by seeking more schooling, regardless of that’s schooling intrinsic worth (or even their desire to enter that profession). Students who cant find a job out of college will spend hundreds of thousands getting virtually useless professional degrees and have no incentive to investigate whether it makes economic sense in the long run.
3. Since this makes students even less price sensitive than they already are, schools are free to continue to raise tuition to absurd heights. For the average student, there is no practical difference between owing $200,000 and owing $300,000 since IBR (the taxpayers) will be picking up the tab either way.
4. When the debt is forgiven, the IRS considers the amount of forgiven debt to be taxable income, meaning that these students will end up owing a six figure tax bill 20 years from now regardless of their financial status at that time. Most students don’t know this. Even those who do know this, are too desperate to worry about something 20 years in the future.
Bill H.
@dave:
Thank you dave for pointing out the “mixed blessing” that this move really is. Add to that,
5. It is unknown what portion of student loans were actually used to purchase Mercedes Benz automobiles or were lent to boyfriends or girfriends who were sponging off persons who had these loans rather than actually working for a living, or were used to provide bail money to get either the loan holders, their family members or close friends out of jail after drunken parties.
Yes, we should not throw the baby out with the bath water, but neither should we drink the bath water and call it KoolAid merely because there is a baby in it. The baby may be cute as hell, but the bath water is still full of baby poop and spit up.
Campionrules
As someone with student loan debt, and multiple consecutive years of payments, I like the concept of lessening the burden on a lot of student. (I’ll likely be eligible for IBR under the new plan – but won’t utilize it because i’d can afford barely to make larger payments now and would prefer to reduce the principle as quickly as possible)
However, the really worrying thing here is that students will continue to disregard student loans as anything ‘real’ and continue to accrue debt recklessly for degrees that are in less than useful fields from schools that are basically diploma mills with national(read:useless) accreditation.
Trust me: The schools will continue to kick up the ever growing and ridiculous cost of tuition and new propriety schools will blossom even more. (Get your A.A.S. in Criminal Justice! Only 43K! The FBI will hire you!)
Sigh.
MomSense
“Speaking of forgiveness, I’ll forgive anyone who thinks this is a typo or transcription error, since I, too, can’t remember the last time a benefits program was improved for anyone under 65.”
What about expansion of SCHIP, Under 26ers being able to get health insurance through their parents’ plan, the Health Care and Reconciliation Act, and expansion of Pell Grants. Even though the firebaggers hate to hear it, Lily Ledbetter helps women when we are in our peak earning years. I’m also thinking that making insurance companies include birth control is pretty important to folks under 65.
burnspbesq
@bkny:
That’s a deeply disingenuous way to describe a withholding tax.
geg6
@Fucen Pneumatic Fuck Wrench Tarmal:
How so exactly?
As a student aid administrator, I’m at a loss as to what benefit this provides to my employer. I am, however, not at all at a loss as to what it means for some of my students. This is simply an extension of the existing ICR plan. I have never seen any sort of benefit accrue to my university from the students to whom I’ve steered toward this type of repayment of their federal loans.
FlipYrWhig
@gbear: I just stopped by TBogg, who (it turns out) had a piece yesterday about Elizabeth Warren and OWS. The comments featured people complaining about the insufficient progressive zeal of… Elizabeth Warren. She was just a lackey for the nefarious deeds of the Obama administration, you see. What a world.
geg6
@MomSense:
It will also save those students who have loans through both the defunct FFEL Program (the loans which were administered by banks) and the Direct Loan Program from having to pay two separate bills, which is confusing and is considered one of the (several) reasons for the recent higher default rates on federal student loans. If students were in the middle of their schooling when the change to federal loan administration happened, they have to pay two separate loan payments. From what I read and saw about this this morning, they will now be able to consolidate them into one payment.
geg6
@singfoom:
There is no cap on private loans’ interest rates. Just sayin’.
This year’s federal loan interest rates are 3.4% for subsidized Stafford Loans, 6.8% for unsubsidized Stafford Loans, and 7.9% for PLUS Loans. Perkins Loans have always had an interest rate of 5% since that is written into the law creating them.
RSA
@El Cid:
Kids these days. All the educational handouts they could ask for, and they won’t get off my lawn.
OzoneR
@Bill H.:
Fucking idioms, how do they work?
MomSense
@geg6 #31
Great point!
geg6
@dave:
Gromitt Gunn
Geg got to some the corrections before I could.
A couple more:
1. Someone commented about not want to o onto IBR because their payments would increase. That would only happen if your current payments are below the discretionary income threshold – and in that case, you’ll have your loans paid off before you would qualify for loan forgiveness.
2. There is no adverse tax consequence for forgiveness of federally guaranteed student loans. The forgiven amounts are not taxable. The existing programs for health workers, teachers, public service employees, etc. (of which this would be an extension) provide tax-free forgiveness. Note this refers only to federally guaranteed loans, and not private loans.
catpal
@dave:
oh – you mean just like all those $$$ Million-dollar wall Street banksters fraudulent mortgage loans?
like TARP that guarantees the TBTF bankster’s ongoing gambling and fraud?
You are too funny.
dave
geg6 @ 36:
Obviously I just threw those numbers out as examples. However, you are aware that student loans accumulate interest while the borrower is in school and is not making payments, right? As a result students graduate owing significantly more than they originally borrowed, making your “caps” meaningless. I am no math wizard but I would bet that someone who has borrowed a total of $138,000 at 6% interest over four years of undergrad and 2-3 years of graduate/professional school will finally graduate with a student loan debt far exceeding $138,000.
In any case, the specific numbers don’t matter. My point remains that students are not price sensitive when they can qualify for any amount of loan and know that in 20 years their debt will be forgiven.
Gromitt Gunn @37:
You are correct that the public interest version of IBR does not consider the loan forgiveness to be taxable. However, under the regular IBR (for non-public interest employees) does consider the loan forgiveness to be a taxable event.
catpal@38:
I agree with everything you just said but i guess I don’t really get what’s funny about it.
geg6
@dave:
Um, as I mentioned in #29 above, I am a student aid officer for a major U.S. university. So, yes, I am aware that some of those loans accumulate interest while the student is in school. That would be, however, only the portion of a student’s loans that are unsubsidized Stafford Loans. The vast, vast majority of undergrad students qualify for the subsidized Stafford Loan for most of their federal loans (undergrad limit is $23,000 ). In addition, Federal Perkins Loans are also subsidized. By subsidized, I mean that no interest accumulates while the student is in school and during their grace period before beginning repayment (6 months for Stafford Loans and 9 months for Perkins). In addition, principal can be deferred after graduation and interest will not accumulate if you qualify for an economic hardship deferment (or an active duty student deferment). These deferments can be requested at any time during the grace period before repayment begins.
And if you think students even think about price sensitivity or are even the least bit aware of debt forgiveness or deferments or IBR plans or anything else about their student loans (despite our massive and futile efforts to educate them), you live in a dream world. There is no moral hazard here, however much you want to make seem like there is. Hell, even their parents are not economically literate enough to understand anything about the risks you seem to think they take into account. The vast, vast, vast majority of students and parents don’t even understand what a damn loan is, let alone have “price sensitivity” or make any sort of complicated calculations about how to rip off tax payers 25 years in the future.
geg6
And I forgot to mention that a student can qualify for economic deferment for up to 3 years and an active duty deferment up to 13 months following the conclusion of active duty service.
Jenny
@burnspbesq:
TPM is nothing if not “deeply disingenuous”
Jenny
@FlipYrWhig:
This isn’t new. The Hive has been sour on her ever since the Queen Bee said she would make a “terrible” Senator.
Jenny
@MomSense:
It’s disgusting how the PUMAs hate/resent the Lilly Ledbetter Act.
Robert Waldmann
typo indeed “since I, too, can’t remember the last time a benefits program was improved for anyone under 65.| Ever heard of SCHIP (made more generous in 2009) ? How about unemployment insurance (temporarily improved with repeated extensions of the temporary extension to 99 weeks from 26) ?
How about expanded SNAP (the program formerly known as food stamps) ? How about the PPACA ? It isn’t implemented yet (and might be reversed if more people forget about it) but it is scheduled to extend Medicaid to about 15,000,000 more people. Hell, this is balloon-juice the anti firedoglake and you forgot about the medicaid expansion in the PPACA (by far the largest expansion of social welfare in the USA since the 60s). I expect Jane Hamsher to present HCR reform as a mandate plus maybe a public option, but overlooking 15,000,000 people is a bit odd for this blog.
What the hell were you smoking when you typed this post ?