I don’t believe there is any question as to the negative aspects of student loans. I really want you to studying up on them before you commit yourself to signing on the dotted line. Student loans are up to $1.2 trillion in the US alone. Talk about a ball and chain.
I was counseled prior to starting back to college on student loans. What I didn’t understand at the time was the “counselor” was an employee of a for-profit student loan company, not a federally governed program, but a federally backed program. So I completed two associates, a bachelor, masters, and about a third of my doctorate.
Let me back up for a moment. I highly value education and believe that formal education through higher education institutions is crucial for growth and development for a majority of people. I do not believe getting yourself into a debt crisis is worth the pain in some situations.
Public Service Loan Forgiveness
I work in the public sector and qualify under the 2007 Public Service Loan Forgiveness Program. So what does this entail? Well, when you look at the face value, it is like winning the lottery. You go to school, pay 120 months of your payments in full and on time, while working in a full time qualifying role, and the rest of your debt is forgiven.
But is it that simple? Short answer, NO! If you make 120 payments (10 years) on a 10 year debt payment plan, guess what, Uncle Sam has nothing to forgive you for (other than your stupidity). You just became a political pawn.
Wait! There is some legitimacy to this program though. If you qualify for a couple of their approved repayment programs you can benefit. Programs such as Income-Based Repayment, Income Contingent Repayment, Pay As You Earn, etc, allow for reduced monthly payments based on income and family size. For example, I can change my tax status to married filing separately and shave $150,000 off my student loan repayment.
So why am I complaining? By changing my tax status I’ve begun playing the bureaucratic games. Nothing changes to my income other than my tax filing. Just seems shady to me.
Student Loans: But Wait There’s More
So everything is looking on the up and up, well I thought so. Once my loan has been “forgiven”, I know have to claim that $150,000 as income to the IRS in the tax year the write off occurs. That is going to be a hell of a tax return and payment to Uncle Sam.
I’m a fiscal conservative. I don’t believe in handouts. But something must be done with these student loan companies. I truly believe they are out of control and are going to wreck on economy. For the next 10 years, I’m $500.73 a month farther away from investing or shopping.
Question: What experiences have you had with student loans? You can leave a comment by clicking here.