"discretionary" income? 10%???
Posted on 08/27/2022 10:45:45 AM PDT by karpov
Wiping out 10k in student debt is not the most expensive part of the Biden student loan program. Most Federal student loans are now eligible for an income based repayment plan, under these plans students pay a small percentage of their “discretionary” income, say 10%, and then after a fixed number of years the debt is wiped off the student’s books. At first glance these plans don’t seem crazy, but as Matt Bruenig points out they create perverse incentives.
Under the Public Service Loan Forgiveness (PSLF) program, law graduates that go on to work in the public sector, which is a lot of them as the public sector employs many lawyers, only have to pay 10 percent of their discretionary income for 10 years in order to have their debt forgiven.
Law schools figured out many years ago that, for a student who is planning to enroll in PSLF upon graduation, prices and debt loads don’t matter. Ten percent of your discretionary income is ten percent of your discretionary income regardless of what the law school charges you and how much debt you nominally have to take on.
Law schools also realized that they could make the deal even sweeter by setting up LRAPs [repayment programs, AT] that give graduates money to cover the the modest repayments required by the PSLF.
The LRAP schemes work as follows:
The school increases their tuition. The student takes out federal loans to cover the tuition increase. The school squirrels away the debt-financed tuition increase into an LRAP fund. The school disburses money from the LRAP fund to cover PSLF repayments. Did you get that? Here’s a stylized example. Suppose a student will make 150k per year for 10 years working in the public sector.
(Excerpt) Read more at marginalrevolution.com ...
This is just another step towards making college into 13th grade, paid for by the government.
The government ruined the high schools, making a high school diploma worthless and they now plan to do the same with undergraduate degrees.
Undergraduate degrees will soon be free. Making and Masters or PH’d the new required norm.
Before long everyone will have to go to school until 30. This is getting out of hand.
churning out govt lawyers as fast as they can
Going to school until 30, coupled with obamacare insurance until 25….
Al Smith had to drop out of school at 14—during or at the end of 8th grade. The school was Catholic—but more importantly it was 1887. Throw in 30 years of experience in the work force and politics, and he was competent to run the country.
I would be willing to bet that his 8th grade education was superior to 90% of the undergraduate educations presently dished out—and in terms of breadth and human formation, probably 98%+.
I’m in Canada, and my second is off to University fully aware that he will need a bit of further education of some sort after he finishes with undergrad.
BFL
I’m curious. When a $10,000 debt is forgiven, does it count as income for Tax purposes?
87k new irs w a budget of 80 .. ex order 14067..in march total Surveillance if you want food .. Pumping all reserved dry sending it to China refused to stop twice Chinese confueld 100,000,000 easily... Military heavy equipment manufactured by Russia and China in south America and Mexico... Canada sold the Chinese a deep water port last year... Chinese state run company manufactured most of the Pfizer vaccine... Biden sent home 60,000 says he’s going to send him 60,000 more sent 200,000 Ukraine in Uganda... And you’re worried about college loans
"discretionary" income? 10%???
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