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Have your student loans forgiven....create a 501(c)(3) organization yourself, legally.

4 replies [Last post]
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Joined: 05/02/2012
Points: 220

First of all, I would like to introduce myself; my name is Mark Sadowski. I have a bachelors in Architecture from SUNY Buffalo (2006), a Masters in Construction Management from NYU (2011) and a Masters Certificate in Real Estate from NYU (2012). I finished undergrad with about $28k in student debt, and have now tallied another $72k at NYU, even whilst working full time during my studies. $100k total for people who are too tired to do math after a long day trying to fathom their student loan debt calculations. (-:

Just consolidated (all federal loans....You have to do what is smartest. More protection on fed loans) and chose IBR which I barely qualify for, but due to having a son, business expense deductions and max allowable IRA contributions, my determining AGI is below the cutoff. Fine.

I have a steady, good job which provides me enough income to make my IBR (~$700/month) payment or extended (~$790/month) payment for 25 yrs. I also started a consulting business which I intend to gain business from (www.mStudiosArchitecture.com). I live in NYC, so I know these numbers all seem high, but it is all relative, I assure you - I came from a poor family in Buffalo, NY looking at $28k as a daunting amount of debt. Now, $100k doesn't even phase me.

The problem, as we all know, is that by paying this sum of money to the DofEd each month, it does not allow me (us) to save for anything - referring to real property. This inherently deters growth, hence, controlled inflation, and ultimately, the real estate market. The last thing people with student debt will do is try to buy a house, yet alone, start saving for a house - especially those indentured to a 25-year plan.

So if the government isn't going to help ease the burden, we should come about a more intuitive way to ease the burden on ourselves. Obviously under IBR, your balance is forgiven after 25 yrs, but 25 yrs is a lifetime, and will be detrimental to this economy. That lengthy term will only add to the growing income/wealth gaps with age and class.

The other method, working for a "public service agency, such as a state, federal or
local entity," OR working for a "certified tax-exempt 501(c)(3) organization," will allow the federal loan borrower to achieve forgiveness in just 10 years!

Now I know you are saying; "501(c)(3) organizations pay nothing" or "how would I even begin to find a job at a 501(c)(3) organization." Well, it is easier than you think.

YOU SET UP THE ORGANIZATION YOURSELF OR UNDER SOMEONE ELSE's NAME AND FILE FOR 501(c)(3) status through the IRS. @RobertApplebaum just filed for (c)(4) status - if he wanted to create a way out, he should have filed as a (c)(3).

How does this work? Well, let me tell you that after sitting on the phone with the Dept. Of Education, Great Lakes Student Loans Borrower Services, Direct Loan Consolidation and the office for the Secretary of Education, there are NO stipulations within the Dept of Ed that do not allow you to do this!!!! I had every single person on the phone baffled over my inquiry. They were all speechless.

Details: I am already filing a new Corporation as a (c)(3) sometime in the next month or so, after which I will start paying myself minimum wage at the required 30 hrs/week mandate that is outlined in the forgiveness clause. I will be an "educational/charitable"entity dedicated to (here's the best part) educating and making students or grads aware of the student loan lending world, repayment plans, as well as a link to other great/helpful sites such as Robert's. More details to come, but I will have a website set up soon.

How and why will this work? The D of Ed doesn't set the 501(c)(3) standards, the IRS does. D of Ed doesn't determine which (c)(3) organizations qualify, because if you achieve that status, they all do. Done.

Math: In my example, by paying myself minimum wage ($7.25/hour) at 30 hrs/ week x 52 wks a yr = $11,310/year (yes, this is additional taxable income, but you can "donate" these funds back to your (c)(3) each yr to avoid tax). Now, under IBR, that additional $11,310 above and beyond my other (normal) income will have a sum taken out for the IBR payment. ($11,310 x .15 = $1,697/12 months = $141/month additional payment for 10 yrs).

So, $141 x 12 months x 10 years = $16,920 extra payment over 10 yrs WITH FORGIVENESS DUE TO PROOF OF EMPLOYMENT FOR A 501(c)(3)

Beats the hell out of the original option: additional/remaining 15 years under IBR NOT working for a (c)(3) = $700 x 12 months x 15 years = $126,000

$126,000 - $16,920 = $109,080 savings

Yes, I would rather save $110,000 And according to the way the loan terms, repayment terms, promissory note and D of Ed mandate is written, it is the current, legal law.

I would also like to say that I am by no means "complaining" about my student debt; I would do it all over again if I had the chance. I am just trying to come up with legal ways of "paying off" the debt, and/or utilizing the current systems in place to get some of the debt thrown out.

Hopefully Robert Applebaum doesn't delete this post like he did the last one - it seems like he is trying to hide something from his followers by NOT allowing this post to show up on the blog, even though it is a LEGAL route and HELPFUL for many.

Links to many of your questions below:

1) Loan Forgiveness Fact Sheet

http://studentaid.ed.gov/sites/default/files/public-service-loan-forgive...

2) Dear Borrower Letter

http://studentaid.ed.gov/sites/default/files/DBL_PSLF.pdf

3) Instructions for Employment Certification

http://studentaid.ed.gov/sites/default/files/public-service-employment-c...

4) Employment Certification Form

http://studentaid.ed.gov/sites/default/files/public-service-employment-c...

5) Q & A's (PAY ATTENTION TO Q53 - YOU CAN CERTIFY YOUR OWN TIME)

http://studentaid.ed.gov/sites/default/files/public-service-loan-forgive...

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Joined: 11/20/2013
Points: 10
Interesting idea....some thoughts.

Mark,
I find this a very interesting idea. I do have some questions and thoughts on your strategy.

1. How do you justify working a full time job as well as providing 30 hours a week at your 501(c)3?
2. Are you basing your IBR on the 501(c)3 minimum wage income? You can't really live on that income so how do your supplement without showing more income in the IBR calculation?
3. Would this be considered fraud? It seems like the original "Intent" is to get out of paying some student loans, even though it appress to be a loophole in the system.
4. What about the moral decision. I am not against bending the rules to achieve my personal and financial goals but do you find any moral angst with your strategy?

I am going to look into this even more because if I can justify it in my mind I'll do it but wanted to share some thoughts and am interested in your response.

I'll post any information I find that may help.

Thank you for the valuable information.

Best regards.

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Joined: 05/02/2012
Points: 220
Any Questions?

Any Questions, let 'em fly....I have been doing due diligence on this for weeks, and researching the whole student debt problem for years.

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Joined: 09/03/2012
Points: 20
Brilliant

Well done, Mark. I hadn't thought of this. I'm putting it on my list of projects to research. Have you read through tax code, Ed code, corp code? Does DoEd (fed or state) have oversight rights when you operate your education-supporting 501c3? I suppose not, unless you're taking in govt apportionments, which wouldn't happen. But, if your company receives other govt benefits from its status, might you expose yourself to oversight?

I wonder how this would impact my taxes, both personal and business, for the forgiveness year if we all end up paying taxes on the "forgiven" portion?

So many windmills, so few hours.

Sarah

Offline
Joined: 09/03/2012
Points: 20
Brilliant

Well done, Mark. I hadn't thought of this. I'm putting it on my list of projects to research. Have you read through tax code, Ed code, corp code? Does DoEd (fed or state) have oversight rights when you operate your education-supporting 501c3? I suppose not, unless you're taking in govt apportionments, which wouldn't happen. But, if your company receives other govt benefits from its status, might you expose yourself to oversight?

I wonder how this would impact my taxes, both personal and business, for the forgiveness year if we all end up paying taxes on the "forgiven" portion?

So many windmills, so few hours.

Sarah

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