I am confused about the Student Loan Forgiveness Act. I read the quick outline of how it works and I understand that you will pay only 10% of your income for 10 years then the rest of your loans are forgiven. What I don't understand first of all, has this gone into effect yet? I didn't think that it had, but then I read on here where someone said they were already only having to pay the 10%. Second, will this by any chance help people who have already defaulted on their student loans? I pretty much gave up on paying my student loans a few years ago, just because I coudln't afford the payments and also I knew they would never in my lifetime be paid off! If I had known that help like this would have been available in the future I would have tried much harder to keep paying! Either way, even if it can't help me now it sounds like a godsent for others. I did sign the petition below.
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Hopefully my post about this isn't removed like it was in the past - Robert doesn't seem to want people to know about legal options that will actually help them....
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
2) Dear Borrower Letter
3) Instructions for Employment Certification
4) Employment Certification Form
5) Q & A's (PAY ATTENTION TO Q53 - YOU CAN CERTIFY YOUR OWN TIME)
The bill is a proposal. It has not been enacted. There will be no chance of it passing the House and/or Senate in it's entirety. Fiscally responsible legislators are not inclined to throw good money at those who (like you) decided to quit paying their financial obligations. There were plenty of opportunties available to avoid getting into debt you couldn't afford. No need to explain those opportunties.....if you didn't do your due diligence, then that's your fault. Not the fault of responsible taxpayers and not the fault of those students who chose to borrow responsibly.
The cold hard truth is that American's will be forced to own up to their personal irresponsibilities, and rightfully so.
Disappointed that hidden in the fine print is the fact that this legislation will only apply to loans obtained to private lenders. For the vast majority of us who are indebted to the government, no such luck.
@bah3688, you are mis-informed. All borrowers would be eligible for the 10/10 plan, holders of federal and private loans. (after "debt swapping" the private for Direct loans).
But like DebtFreeDude says, there is no chance in hell of this passing. That is the reality of it. Some people on this site are on the complete opposite side of each other over the "student loan debacle," but rather than biased towards one group or another, try thinking outside the box, or inside the box rather. See my post on 501(c)(3) organizations. You will be pleasantly surprised....that is, if you have the initiative, time, diligence and sense to do something.
"Not paying" your loans is not the right answer, nor is walking away from the problem. Try using the current legislation and plans to your advantage wherever possible.
Under this proposed bill, private loans have the option to be consolidated into a new federal loan to be included under the 10/10 repayment plan. So all loans, private loans, federal loans and parent plus loans will be included in this plan. No one is left out.
Pay up your loans as well as its interest.
If I have already paid 10% of my loan, do I have to pay more?
Also what are the income limits to be eligible?
You don't pay only 10% of your loan.
H.R.4170 proposes a repayment plan of 10% of your discretionary income for 10 years.
If this bill is enacted, your previous payments would be retroactive...from the date of application (should this bill pass), they would look at your payment history for the past 10 years and factor in your income for the previous 3 years (I believe) to calculate what 10% of your discretionary income would be. If you've been paying for 4 years and your payments meet 10% of your discretionary income, you only have 6 more years of payments on your loans.
There are no income limits. You could make $200,000 and still qualify to pay under this plan if you really wanted to...you'd still have to make monthly payments of 10% of discretionary income (150% above poverty guideline). There is however, an income limit when it comes to consolidating private loans into a new federal loan to be included in this plan...your income from the previous three years (from date of application) would have to be less than or equal to your total student loan debt (private loans and federal loans combined).
This bill has not passed yet. It was just introduced a little more than a month ago, so it could take a while still. Click the light blue box on the left side of the screen to "Take Action NOW!" and help spread the word about H.R.4170 to garner more support....contact your local reps to see if they will co-sponsor it!
The person who was saying they were already paying 10% is probably talking about IBR (income based repayment). Where people pay 10 or 15% of their income for 20 or 25 years and the remaining balance is forgiven but considered taxable income (forgiven amount under H.R.4170 would not be considered taxable income).
This bill would help those who have defaulted. Unlike the Income Based Repayment (IBR) plan, there is no requirement for the borrower to be current on their loans in order to qualify for enrollment in the new 10/10 program (H.R.4170).