Monday, January 7, 2013

How To Not Pay Your Student Loan

Want to pay as little as possible back on your student loan? Well the first step is to make sure you got your loan from the government. Did you do that?


Well guess what. The government has practically done the rest for you! With the introduction of Income Based Repayment, or Pay As You Earn, up to 1.6 million borrowers could have their payments capped at 15% of their discretionary income.

So what is discretionary income?
Your adjusted gross income minus the poverty guidelines for your family size.
Here's a chart for the poverty guidelines [chart].

So, if a single person was lucky enough to get a $20,000 a year job in this economy, their discretionary income would be $8,830. This means they would not owe more than $1,324. That is a real slow start to paying off a large college loan. When interest gets figured in it could take decades to pay off a loan.

Or not.

Once again the government steps in and makes it possible that after 25 years the debt can be forgiven. Isn't that nice? But still, 25 years is a long time.

Guess what! There is an express lane to debt forgiveness!

Debt can be forgiven after 10 years if the borrower has been employed full time to a public service organization. What sort of job is that? You guessed it, a state job!

So the state takes our money and lends it to a student. The student then pays as much as they can for 25 years and then doesn't pay us, I mean the government, back the remaining balance.

Let us not forget. If the student instead works for the state and gets paid from our tax dollars, after 10 years they don't have to pay us, again I mean the government, back the remaining balance.

1.6 million students that don't need to pay back the full amount of what they borrowed? But the government thinks that the solution to the fiscal cliff is to tax some people more money!?


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