Student loan forgiveness—is it possible?

 

No doubt about it, student loans have become a crushing burden on young adults. Sure, we older folks can be all self-righteous and make speeches about how we put ourselves through college—I did, both college and graduate school. I don’t believe it’s possible any more—what a student is able to earn summers and part-time will not be the $30,000 or so that is needed to attend a year at the University of Illinois. Forget the $60,000 needed at a private school. Even if you could do it, I’d hate to see your grades.

Yes, of course there’s the extraordinary student who can put together a scheme to spend two years at a junior college, start a business on the side, etc., etc. That’s not my kid, probably not yours, and it’s not do-able public policy for how to go through college. I’m not even going to get into how the Europeans have it so good, because I’ll only start frothing at the mouth. Queue up the methods of loan forgiveness.

Actually, no. If you want to know about how you can work for a non-profit for 10 years and get the remainder waived at the end, read this. For certain mostly health-care professions, you might be able to unload the Perkins loans this way.

I doubt anyone has actually had their loans cancelled in these ways. If you have, I’d like to talk to you.

Here are some reasons why I think you need to be extremely careful about depending on these programs for a solution to your debt. No such thing as a free lunch and you’re going to jump through a lot of hoops and there’s a pretty good chance they’ll still get you in the end. So be careful:

The non-profit repayment is only good for money you borrowed under the Ford Federal Direct Loan program. Perkins loans and others can be consolidated under a Direct Consolidation program, but all the payments you made before you consolidated will not be counted towards the 120 required payments (10 years). No payments before October 1, 2007, will be counted. So as far as I can tell, NO ONE yet has had their loans actually forgiven.

The Perkins loans are often the smallest of your loans, because the limit per year is $5,500 for undergrads, $8,000 for grads, and an interest rate of 5%. Even if you were granted the limit (and most people aren’t granted the full amount), getting this forgiven may not help you much.

Being chained to working for a non-profit for many years may cost you more in lost salary and promotion potential than the loan forgiveness is worth. It may not seem like it for a year or two, but the forgiveness for public service is because public service may pay so low (and have low promotion potential) that no one with loans could afford to work in it.

You must be fully employed in a non-profit. Want to take time off to have a baby or stay home with a child? Uh-uh. Get fired? Quit an untenable job? Get reduced from full-time to part-time? Your forgiveness evaporates. You are now responsible, again, for the full amount of the loan (even though your earnings for some part of your career were lower by working for a non-profit).

Income based repayment is another option that has some hidden consequences. If you’re drowning in the amount of loans in relationship to your salary (or lack thereof), you will probably look into it. This is probably a situation where you would be considering bankruptcy if those loans were anything but student loans. However, don’t get married. If you do, family income will be taken into account and unless you file separately (costing the higher earning spouse a nice chunk of change in increased taxes) you may lose eligibility. You will also pay a lot more in interest under these plans (for 20 years) than you would under a standard 10 year payment plan.

In most cases, your energies would be better focused on making a financial plan that includes job strategizing, spending reduction, and minimizing living costs.

These plans have been touted as relief for student borrowers crushed under our now-outrageously inflated college costs, as if they are some kind of get-out-of-jail free card. I wonder if anyone can actually use these programs, or if they’re just window dressing with some pretty heavy penalties.

 

 

 

College planning—this year’s version of what we’ve learned

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I’m the sort of person who mulls over mistakes, but it’s mostly to do better next time, or advise other people in a better way. There’s no point in it if it’s just to beat yourself up for something you can no longer fix. In all financial planning, you have to go forward from where you are. However, dear daughter is now a junior, and there’s nothing like continuing first-hand experience.

  1. Order it online. I strongly urge you not to buy a lot of stuff for the dorm room for your child’s first year. Dorm rooms can be shockingly small (maybe smaller than your master bath). Once you see it, you’ll be able to drive to the local Target or Bed, Bath, and Beyond and purchase identical items to what every other parent/child team is purchasing at the same time (wait until you see the lines during move-in week!) However, if you thought the dorm room purchases were then over, well, ha! Ha! Chances are your little darling will discover new stuff he or she needs every year. Do your looking at home, then order online and have it sent. The benefits? You get to curb what your kid is buying, they may deliver it for free (instead of you paying to send it), and in the case of Target they also give you 5% off—and another 5% if you wait for a one-day pharmacy rewards discount pass. Not a plug for Target, it’s just a card we have.
    Yes, I hate paying shipping. Particularly since it’s been 4 times a year—back to school, home for the month at winter break, back after winter break, home again for the summer. Oh wait, there’s that other season: the-stuff-I-forgot-on-the-first-shipment. Then there’s the care package season, the mom-misses-you season, the can’t-find-this-nearby season…
  2. The job on campus is sometimes better than any at home. Dear daughter has had more responsibility and learned more skills with her on-campus jobs than the few crappy jobs she’s landed during the summer. Don’t bank on the summer job—at least for DD, they’ve been really hard to land. And be sure your child looks hard for some good jobs on campus where they might actually learn something.
  3. Think carefully about choosing a school far from where you live. Although DD’s school has been perfect for her in many ways, we both wish she was in driving distance. I’ve blogged before about the cost of transportation and shipping, so I won’t hammer that again. However, even a prominent school’s best network may be in a fairly close radius to campus. Resources for internships, summer jobs, etc. may be best nearby. If your child wants to stay on either coast, that’s fine, but if she wants to return to the Midwest, not so much.
  4. Find a doctor near the school, but make sure they’re in your provider network. The farther away, the less likely your current doctor really knows anyone. Student health services can handle a lot (although they generally won’t bill insurance—have fun) but some events require real medical consultation. I hope you will never confront this, but be sure you understand the benefits available if your child needs emergency treatment or has any sort of psychological crisis. Mental health reimbursement varies greatly.
  5. If your child has the option of taking classes among several different schools, find out how they’ll get there. It’s a trend lately for nearby schools to form consortiums which allows schools to tout 5,000 classes available through our consortium. Okay, this is dumb but be sure to ask what transportation is available. Is there a dedicated van? How often does it run? How long a trip? (really affects scheduling of other classes) How can the student meet with the prof on another campus (particularly those who are, ahem! somewhat cavalier about office hours). If there’s no van and it’s a lab class, it might meet 4 times a week x $8 for the train and it can really add up over a semester.
  6. What will the school do if the student needs a class that’s not offered at the school? Now we know that every single child knows exactly what they will major in and want to do in life at the point where they enter college. And they’ll never, ever change their minds or develop other interests, right? Okay, I have the only one. But let’s say your child discovers that they want to go into a medical field after choosing the school based on the archaeology department. Will the school help your child find an Anatomy Lab? Any extra cost on that one? If you have to pay thousands for them to snag the class over the summer at another school, well, you’re not going to get any financial aid for that one.
    This requires some pretty close scrutiny if it happens. After all, the child who has to take a summer class isn’t going to be earning money, she’s going to be costing more. It’s probably only going to result in “extra credits”, not a reduction in tuition at the primary school. If the primary school arranges the class at a nearby school, check to find out if the academic calendars mesh—we had already booked the return-to-campus flight when we found out the other school started a week earlier.
  7. Make sure your child checks into what other people are giving away. You absolutely cannot believe what kids throw out. DD’s school has a “free box” system at every dorm. I think a kid could make a business selling on eBay what they can scrounge from these boxes. Some of DD’s major finds: bags of unopened pistachios, a new pair of Ugg boots, countless t-shirts and tops, and a $300 pair of Bose noise-cancelling headphones that were still under warranty and which Bose replaced for $97. (Then again, there was the container of Jello shots.) If your child’s school doesn’t have a free box, encourage them to suggest starting one. If you have some means to store the stuff, check out what’s dumped the week before graduation—refrigerators, coffee makers, bookshelves. I’d have a heart attack if I were the parent that paid for this stuff.

We’ve got one more year after this one. I can’t wait to see more surprise costs—I bet they’re still out there.

The College Visit—stuff I didn’t think to ask

Back of an Ambulance

I’ll be honest—we didn’t do a ton of visits, when dear daughter was applying. As usual I had a divergent view and couldn’t really grok spending thousands of dollars to see colleges where she might not go. Plus, the few we did visit she hated. Maybe it helps with admission and maybe it doesn’t much matter, but who knows. Personally, I don’t think student guides walking backwards have all that much influence.

But now that she’s happily ensconced in a school, there are a bunch of things I wish we’d known enough to ask. I include them herewith, as they may save you some money or allow you to do better calculations.

Is there a college sponsored way for kids to get to the airport?

Some schools do offer a shuttle, but this is generally only on the day when school lets out for breaks (if at all). And getting back to school after breaks? Good luck on that one. If the school is located in one of those charming remote areas, check out how much the cab or airport express costs. Don’t faint. And while you’re doing that, check out the airfares. Add $2,000 or so to what you thought was your budget—because the airlines know when the schools let out, and price accordingly. College students have a lot of breaks.

What does it cost to stay in the dorm over breaks? Can you?

Luckily, I guess, my kid always wants to come home. But there are often special programs, internships, or even paid jobs that run over breaks. Before signing up, check out if the housing & food cost makes them worth it.

What can you do with the kid’s junk, er, room décor, over summer break?

Find out what storage costs average—many campuses have arrangements with storage locker facilities, but surprise, they aren’t cheap. Plan to rent a uHaul? Add up that cost, too.

What’s the policy if the student takes a year off, or quits or gets ill at some point in the college experience?

Right now you’re probably thinking please God not my kid. In the past 2 years I have heard 6 stories of personal acquaintances whose children did not or could not finish. Will the school automatically admit them back if in good standing? What about tuition refunds? And be aware that any loans will then kick into payment mode.

How does the health service bill? Is the local hospital in-network for your insurance?

Can you get bills to submit to your own insurance company? Can they get your kid to the emergency room or will your child have to find friends or EMTs if they need more than the health service can provide?

What can the school do if your child is in bed with the flu?

Surprisingly, at dd’s school nobody seems to have considered how a sick student will get fed. If your child is too sick to get over to the dining hall, she better have friends willing to get infected. Find out if there are beds at the health service—maybe you don’t want to be in the same room as a roommate who’s got the flu. And lock your kid in a room until the HIPAA form is signed so the health service can talk about the kid’s condition with you.

Is there an appeals process for grades that is remotely fair to the student?

This is a hard one to discover. But think for a moment about what each class is costing. Let’s say, total cost of attendance is $56,000 and child is taking 4 classes/semester. $23,000/4=$5,750. I am NOT saying that buys you a good grade, or that ANY child is entitled to a grade they did not earn. But the student ought to be entitled to a FAIR grade. Speaking from said daughter’s experience, there is going to be at least one teacher who

  1. Can’t produce a coherent syllabus
  2. Changes the grading system three or four times during the class
  3. Can’t get assignments back so that the student has some idea how they’re doing and can prepare for a test
  4. Loses assignments, doesn’t appear to read assignments carefully, yadda yadda
  5. Doesn’t show up during posted office hours, and is late to appointments
  6. Grades based on some airy-fairy feeling rather than the actual numbers the kid has scored

Sure, you had some terrible profs and so did I. But we probably weren’t paying  the kind of bills we’re now getting, either. Thankfully, this experience was acquired via study at that other school down the road, okay, it was Swarthmore and not dd’s beloved Bryn Mawr.  And I shudder to suggest that not all profs are equally (remotely) capable and that supervision of exactly what they’re up to is not as closely monitored as, say, the average schmo in an actual job, because that would probably make me sound a little resentful.  Even worse if it’s a required course, a prerequisite, or something the student is profoundly interested in. In such a class with such a prof you would be better off lighting five Grover Clevelands (he’s on the $1,000 bill in case you’re never seen one)—at least it wouldn’t hurt the kid’s grade point average.

I’d ask about appeals and how many have been decided in the student’s favor. Snarky rant over.

Check out the public safety reports often posted on bulletin boards.

The ones over at Swarthmore made daughter and this parent shake in their boots. You really want to know about sexual assaults, armed robbery, etc. before you read about them in the paper. Unfortunately, some of this appears to be the new normal on some campuses (thankfully not aforesaid Bryn Mawr).

Will campus safety escort a student back to the dorm at night, do they actually show up, and how many people use it on an average weekend night?

Yeah, your kid will hate you for asking this. Until some dark and stormy night.

Is there an emergency management plan?

Not that there is ever a big snowstorm or anything, but maybe as a parent you’d be more comfortable if the inmates weren’t running the asylum. The kids are stuck there, but what about food service? Campus safety officers? Fire department, heat , electricity? If I had it to do over, I’d probably find out if a copy of a plan was available. Bryn Mawr did do a terrific job with snow and kid management. Glad it wasn’t me trying to handle both at once.

 

I’ve developed significantly more grey hair over the past two years my offspring has been in college and it’s not even due to her behavior! Find out all you can before you sign that acceptance letter, and you’ll sleep better for the next four years.

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