Public Service Loan Forgiveness Program again at risk and other proposed budget changes...

stepharizona

So once again the new budget has potential catistaphic implications for students.

So is it too risky to LARP? So many schools have programs that work within the Public Service Loan Forgiveness Program.

While they didn't act in these last budget the new one again calls for :

Trump's blueprint would streamline income-based loan repayment plans, eliminate the Public Service Loan Forgiveness Program and scrap subsidized loans.

Repayment:

The new budget plan would collapse income-driven repayment plans - monthly student loan payment calculated based on income and family size - into one, under which student loan borrowers would pay 12.5 percent of their monthly income toward student loans. Borrowers in general pay 10 percent under current plans. 

Borrowers may have their remaining balance forgiven after 15 years if their loans covered undergraduate education. But those who borrow for graduate-level studies would have to make 30 years of payments before their balance can be forgiven. Under current law, loan forgiveness for private-sector employees kicks in after 20 or 25 years. 

If you want to read more: http://www.12news.com/article/money/magnify-money/what-president-trumps-budget-would-mean-for-student-loans/524707241

LSAT_Wrecker

My wife and I have been watching this topic with particular interest since the new administration took over. She is in community mental health care. Access to this program is a large incentive for many people to work in the public sector. Abolishing it or diminishing its resources will have negative impacts to those that prioritize community service across a large spectrum of career fields.

cstrobel

@stepharizona I'd check the specific schools that you are considering, some have released statements on how they'd try to make up any potential deficit and/or how their programs might change.

Some have said (given their endowment, that they'd be able to cover, at least, current students enrolled in LRAP. Some of the top schools, probably because of their endowment, have said they don't expect to change their LRAP.

Hopefully they wise up and realize that helping those who help others is worthwhile, especially when they cut assistance programs left and right.

Seeking Perfection

I have thought that for a while. This isn't even a bill so I don't want to be too histrionic about it.

However, it seems to me that sooner or later if these things keep coming up, one will pass. At that point, those interested in public interest will need to go the scholarship at a lower ranked school route over the Top school they get into with a big scholarship.

They usually write these things so that they only go into effect for future borrowing(though since it is a loan forgiveness program and not really a contract I don't think they have to write them like this).

Assuming that stays reliable, our main concern has to be going to law school under a plan of using the LRAP and then finding out after a year or so that the next two years of debt will not be forgivable. The options are basically always drop out, switch to Big Law, or stay the public interest course.

In this scenario, you already have a $50,000 or more tuition bill plus room and board if you drop out, so whwther droppibg out is viable would depend on your non-law job prospects.

Switching to Big Law might still be possible if you found out after your first summer job was locked in, but before OCI for Big Law has occurred. If it is after OCI, you would be able to try the same strategies as those Big Law people who fail to get a summer internship at OCI, but hopefully with better credentials. Depending on how late it is, getting a good 2L summer job might be tough and the 2L summer job is very important for Big Law hiring.

Finally, you stick with public interest, pay the higher percent of your income and do it for 30 years instead of 10. Obviously that hurts your financial position severely. It is also possible that your school could revert back to their pre-LRAP program which might be better than the new government option, but worse than the old one.

So I guess it all depends on what you think the government will do on this in the next couple years. Do democrats stand together on this? If so it seems like it would be hard to pass it through the Senate with the filibuster and a 51-49 senate. How do the midterms go? I would lean towards the belief that something probably won't pass, but that the most likely time for it to pass would be in early to mid 2019 if the senate either gets more Republican or stays about the same. It shouldn't happen in a Presidential election year so we are probably safe in 2020. Then again, I'm not willing to risk my financial future on a bet based on political outcomes.

There is one thing that is clear. Each time these things come up, the LRAP at best school you get into strategy looks worse and the full or nearly full scholarship at slightly less lofty school option looks like the safer opion.

stepharizona

However, it seems to me that sooner or later if these things keep coming up, one will pass. At that point, those interested in public interest will need to go the scholarship at a lower ranked school route over the Top school they get into with a big scholarship.

I agree that's the approach I'm taking.

lTexlawz

Hey @stepharizona,
I have want offer options to you to consider. Now, politicians no matter what stripe they are will do things to get you upset. It doesn't matter if it is a Democrat,Republican,Independents,Libertarian,Conservative,Liberal, Socialist,Communist or the alien being landing on the Earth. Here are things you can do avoid the hyperventilating and fear mongering from the media and the politicians.

Get a spreadsheet together with all of the money that you currently owe on your student loans and build budget to stick to it.

1) Open a gofundme account and market yourself heavy through social media
2) Open an online store on Amazon or on Ebay

Learn to think like a rich person meaning an investor and entrepreneur

The option if you are not comfortable with the other two options are capital markets and learn to use leverage to pay off your loans and fund your law school education is option 3. Capital markets use leverage. It is where you are going to grow your money and become powerful enough not allow the media and politicians to control you.

3) Save some money to open a brokerage account on Nadex,Forex.com,Interactive brokers,Oanda,AlleyInvest,Think or swim,Scott Trade,E*trade,and Tastytrade. Learn about capital markets most of all. There is lots of money there and plenty of opportunity there to line your law school dream and pay off your outstanding student loan debt.

https://www.investopedia.com/articles/forex/011515/top-usregulated-forex-brokers.asp
https://www.investing.com/

Most open a brokerage account require $250 to get started.

I do option 3 because it is one that I am familiar with and is working for me right now. Plus, you can be independent and free. Plus, you want to get to where you do not worry about that.

Leah M B

@"Seeking Perfection" said:

So I guess it all depends on what you think the government will do on this in the next couple years. Do democrats stand together on this? If so it seems like it would be hard to pass it through the Senate with the filibuster and a 51-49 senate. How do the midterms go? I would lean towards the belief that something probably won't pass, but that the most likely time for it to pass would be in early to mid 2019 if the senate either gets more Republican or stays about the same. It shouldn't happen in a Presidential election year so we are probably safe in 2020. Then again, I'm not willing to risk my financial future on a bet based on political outcomes.

There is one thing that is clear. Each time these things come up, the LRAP at best school you get into strategy looks worse and the full or nearly full scholarship at slightly less lofty school option looks like the safer opion.

That right there.

There’s been a lot of talk but at this point, I don’t think any of the plans we’ve seen are the ones that will be implemented. That said, I think there’s a strong possibility that PSLF will be greatly reduced or eliminated in the coming years.

That is part of my reasoning that for people who want to pursue PI, you should attend the best school you can with the lowest final cost of attendance. If anything happens and you lose outside support for paying loans, you want to be in the best financial position possible. School loans are a massive risk. You have no collateral like with houses and cars, and they can’t be discharged in bankruptcy (another law that I hope changes). If you are not planning on pursuing a high paying career, you should seek to have the lowest debt possible. Plan for the worst case scenario, and enjoy the relief if you end up in a better one.

stepharizona

Yep I consult for nonprofits so we started having contingency plans to prepare just incase @lsat_wrecker the fallout could be big as it does attract some people or retain them as they continue their education.

@"Leah M B" I have to agree it feels like the reduction is happening. Plus the crazy thing is that the PSLFP sometimes isn't worth it from a loan cost vs interest payment. If it is eliminated before current participants are forgiven we will have paid more in interest then if we'd just paid off. That's a key thing a lot of people don't consider. I kept my loan as its only at 2.5% and my only debt so having it actually benefits me. So I have active payment history.

@LSATsniper not hyperventilating or fear mongering. More bringing awareness and share as it's an interesting topic to discuss to we could share our prospective approaches and beyond the PSLFP the change to loan repayment is also interesting, for all of us. Moving from 10% to 12.5% could be significant especially for big law folks.

Plus the new budget points where just introduced on Monday and again student loans are included.

So many people are focused on LARPS and as @cstrobel mention some skills have independent program that don't use PSLFP but many work with it. It's important for people to look. I'm not counting on LARPs or the PSLRP because a current participant they've already changed the rules and eligible loans a few times and every time that happens the "10 years" has restarted...

But good points for all. Budgets are so important, plus goal setting. I'm currently semiretired doing mostly probono work, so good financially. Although I did intend to only take 3 years off and I'm in the midst of my 4th year. Yay younger self saving for this break!

Agree budgeting will be key for law school as well as selecting a school. For me, I've determined the max amount I'm willing to borrow and worked hard to reduce my spending significantly, so I'm letting that guide my decision process for schools.

Have you ever tried SmartyPig? It's my absolute saving tool. I prefer to save vs a gofundme

My best tip to add is using SmartyPig.com Its fantastic, as it allows you to forecast out savings objectives. For example being 5 years ahead in saving for Roth IRAs. Instead of saving $460 a month for a single IRA. You can use that same $460 to find your 2023,2024,2025, 2025 goals. I started doing the same for law books, school fees, health insurance and more. Plus they used to allow people to contribute to your goal and I think they're bringing it back.

Also have you guys seen how some schools determine COAs?!? Some seem like they're way over evaluate costs and others under evaluate. I'd rather have an over evaluation, but it does cause kinks in scholarship negotiations when COAs are used.

westcoastbestcoast

From what I have read from Toplawschools in 2014 and 2015 was that LRAP and PLSF were always at risk of being gutted. I can't attest to the validity of such claims but they state that both the GOP and the Democrats feel that too many people took advantage of LRAP to game the federal loan process. I'm not entirely sure what they meant by this but my best guess is that the politicians believed students used LRAP and PLSF so they can merely finance their huge debt loads, and not necessarily out of love for public service.

AudaciousRed

If it got people to work for public service that would have otherwise went big law, then what does it matter what someone's motivation was for using the loan forgiveness program? They're still honoring the agreement terms and doing public good, which was the point. And of those who spend 10 years in public service, how many quit to do something else entirely, I wonder.
If anything, I have heard far more stories of people being screwed over after nine years, finding out they have to do their 10 years all over again because of a paperwork error.

Honestly, I think there is just a huge pushback against education, especially education without huge bills that chain you to certain jobs for decades. If there were no student loans, how many people who want to save the world in medical, science, law, teaching, etc., would try? That's not good for partisan politics if we have an educated and empowered populace helping themselves and each other. It ruins the profits of private prisons and private schools, after all, and those are good donors.
Anyway.. I digress.

Good topic, and definitely something to keep an eye on in the news.