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I went to grad school in 2009 to 2011 for an MBA and took out massive student loans. While things were not unexpected, basically everything went as badly as they could. (A) not qualifying for in-state tuition. (B) massive tuition increase between first and second year (C) not qualifying for an assistantship either year (D) not obtaining a paid internship and working for free over the summer.

While I did have a risk plan going in, every single risk occurred simultaneously and my mitigation strategy for this outcome was to use Income Based Repayment and qualify for forgiveness after 25 years. Had at least half of the things went right, I intended to pay back the student loans within 5 years. But everything possible went wrong and $150k of federal student loans at a weighted average of 7.4% interest is not something I can reasonably pay back. While this intro has nothing to do with the question in the post, I list it for background information.

The strategy now is to legally use the system in my favor and that will involve taking new federal student loans, because our president's student loan executive order in 2012 only helps people who have at least one student loan in 2012 or later, and who have no loans prior to 2008. If I get in that plan, then my IBR drops from 15% of my discretionary income down to 10% and the 25 year repayment period drops to 20 years.

I ran the numbers and it would make sense for me to stop working for a year and do one more year of school, in any program, it doesn't matter what, just so I can take out new federal students and thus put all $150k onto the new 10%/20 year plan. The new IBR rules apply retroactively to all previous loans, if you have at least one loan in 2012, not just to loans in 2012 and later.

The problem is only federal student loans work and certain criteria, of which I'm not certain of, must be met in order for federal loans to cover tuition. It's my understanding it must be some kind of "degree-seeking program." I don't think I can get a federal student loan to cover massage therapy school, for example.

Can anyone recommend how I might get a new federal student loan issued, considering I already have an MBA and a BA degree?

For anyone who thinks I'm a deadbeat, consider that anyone with student loans prior to 2009 got a variable rate, which in current terms is around 2%. When I got to school they just changed the rules to lock in at a fixed rate of 6.8% and 7.8%. And it took until 2012 for the President to realize that was insane and impossible to pay back and change the rules, but only for people who got loans in 2012 and later. So essentially, by being a student between that 2009 and 2011 period, I got significantly screwed (by not qualifying for the low variable rates of 2008 and earlier, and not qualifying for the more leniant IBR rates of 2012 and later). The only fix is to go back to school somehow, hopefully part-time and online, just anyway to qualify for at least $1 of a new federal student loan.

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For icing on the cake, you can get the tuition you paid back when you get the Lifetime Learning credit when filing your ... (more)

avalon6 (Aug. 28, 2013 @ 1:24p) |

Is there a class in college that teaches students how unreliable government programs are?

axiom (Aug. 28, 2013 @ 8:27p) |

In doing some research based on a previous poster's comments, it seems there's a lot of online-only "Graduate Certificat... (more)

perpetualstudent (Aug. 29, 2013 @ 12:15p) |

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You don't need to be working toward a degree or take time off to go to school. Fill out the FAFSA, take a night class at your local (accredited) community college, and be done with it.

The other bonus is that you get six months of in-school deferment.

There is something fundamentally wrong with the student loan system when someone is allowed to take out $150,000 for an MBA. Frankly I don't think even a Harvard MBA requires that much in loans, although I could be wrong. OP, I am curious, can you elaborate on what sort of plan you had that still ended up in a debt load this large where you went from thinking you could pay it off in 5 years to now 20 years? Out of the factors you list, only (A) (not qualifying for in-state tuition, in the second year I presume) and (C) (no TA position) should cause the need to take out a larger loan, and you should have expected (C) as if you don't qualify for an TA in the first year you rarely get one in the second year in the vast majority of graduate programs. Item (B) would be predictable (tuition increases every year, and its always higher for professional programs) and item (D) (no paid internship) may not have been foreseen but how could your living expenses so high that it would cause needing a huge increase in your loan amounts? I sure hope for that price tag you received a top 10 MBA, as I can't imagine why anyone else would take out that much in loans.

As far as your question, debtblag is right - take continuing education classes at your local community college.You can probably take a online course for a few hundred dollars at most local CCs.

Or...
You could get a second job and pay back your loans.

(radical idea, i know...)

debtblag said:   You don't need to be working toward a degree or take time off to go to school. Fill out the FAFSA, take a night class at your local (accredited) community college, and be done with it.

The other bonus is that you get six months of in-school deferment.

  Does that qualify for a federal student loan? If so, what kind? I was under the impression that federal student loans require a specific program and I could no longer qualify for the loans designed for undergrads, and would have to take some graduate classes to get Grad PLUS loans, but schools that offer graduate classes would require I be in some kind of course of study/program and not just let me take one single graduate level class.

I called a financial aid office at my college that I graduated from last year when the program was announced and they said federal loans were limited to students enrolling in special programs. (not necessarily "special"/weird but degree-seeking or something). I got the impression I couldn't just take a 100-level undergrad anthropology class and qualify for federal student aid.

magika said:    OP, I am curious, can you elaborate on what sort of plan you had that still ended up in a debt load this large where you went from thinking you could pay it off in 5 years to now 20 years?
 

  Before I applied to grad school I ran the numbers and figured that under the "best case" plan, I'd leave with around $40k of debt, and could pay that off within 5 years very easily. That would be if I qualified for in-state tuition immediately (which is a savings of around $25k per year) and if I got a T/A assistanceship (which qualifies one for in-state tuition immediately and also gives a stipend of $10k per year plus pays $15k of tuition per year) and if I got a paid summer internship that would have paid me $10k for the summer (which was common in the 2007/2008 era for an MBA intern to receive), and assuming tuition didn't go up much between the first year (which was a known tuition) and the second year. Those numbers kind of rough ball because it's been several years but they are close enough to make my point.

I made a risk assessment matrix prior to going to grad school which plotted out several possibilities, one of which being the most favorable, as listed above, leaving with around $40k in debt that I can pay off within a few years, along with some possibilities where a few things went right, and I'd leave with $80k of debt that I could pay off within 10 years, to the worst case scenario where everything went wrong and I'd leave with $125k of debt that I'd use IBR to get forgiven. Had IBR not been around at the time, I wouldn't have gone through with this. That was my "nuclear" option.

Since I left grad school 2 years ago, the principal has gone up by around $25k and I have $150k owed in debt owed now because the average rate of interest is 7.4%. That's ridiculous and the government realized that, but not until after I took out the loans and fixed the problem later. So I'm stuck using my nuclear option, which is IBR and now I want to take advantage of the 10%/20 year program.

I'm not acting unethically, I'm simply following incentives that have been placed on the table. Now I'm highly incentivized to take out new federal student loans to significantly reduce the amount of money I'm paying. I'd get to save 5 years of payments and 5% of payments over a 23 year period (since 2 years are down already).

If I can just take any random class at a community college and get a federal student loan to pay for it (even if it's a $300 community college class, I don't care, I just need $1 of new loans to qualify) then I'd be negligent in my work as a Fatwatteer not to do so. So I'm seeking advise on how to best get a new loan.

I think you should have considered the eventual debt burden before taking out the loans and not after. A two year degree that is worth taking out $150k in loans for should enable you to earn more than enough to be able to pay it back. And it's not like $150k is some insurmountable burden even at 7.4%. That's an amortization of under $1,100 a month over 25 years. It may be a large percentage of your income now, but in 10 or 20 years when your income has double or quadrupled (in real terms or nominal) then the loan payment will be quite small in relation to your overall income. If your degree was actually valuable and enabled you to earn 100k+ then you should also just be able to aggressively pay it down in 5 years and be done with it.

awstick said:   I think you should have considered the eventual debt burden before taking out the loans and not after. A two year degree that is worth taking out $150k in loans for should enable you to earn more than enough to be able to pay it back.
 I did consider it. Read my previous post. The numbers I ran determined that if the worst-case situation arose, using IBR would still lead to a net positive benefit for grad school. I'm not going to go into specifics of the math because it gets extremely complex and my plan is in-depth (e.g. shifting to 1099 consulting at a certain point in my career to artificially reduce AGI and thus reduce IBR payments through large individual 401k / "employer" contributions). Regardless, it's a sunk cost and at this point is immaterial to consider. It happened and I have to deal with it the best way possible, which is 10%/20 year IBR.

Suffice it to say that if I wind up sticking with the 15%/25 year plan, it was still worthwhile. However, now that 10%/20 years is on the table, it's well worth even taking a full year off work if necessary to get involved. If I can take an online 3 credit class at community college and qualify for a few hundred dollar federal loan for that class, then I can save tens of thousands of tax-free dollars.

perpetualstudent said:   
debtblag said:   You don't need to be working toward a degree or take time off to go to school. Fill out the FAFSA, take a night class at your local (accredited) community college, and be done with it.

The other bonus is that you get six months of in-school deferment.

  Does that qualify for a federal student loan? If so, what kind? I was under the impression that federal student loans require a specific program and I could no longer qualify for the loans designed for undergrads, and would have to take some graduate classes to get Grad PLUS loans, but schools that offer graduate classes would require I be in some kind of course of study/program and not just let me take one single graduate level class.

I called a financial aid office at my college that I graduated from last year when the program was announced and they said federal loans were limited to students enrolling in special programs. (not necessarily "special"/weird but degree-seeking or something). I got the impression I couldn't just take a 100-level undergrad anthropology class and qualify for federal student aid.

  
You may not qualify for subsidized loans but you can still get unsubsidized loans.   Either qualify for income based repayment.

TO get a loan you'd have to be in a degree / certificate granting program.     You'd also need to be taking 1/2 time credits, so a single course likely isn't  enough.  So find a community college, pick any major and enroll in the program and sign up for half time classes.   You can maybe even find some online courses so you don't have to physically go to the CC.

ref:
http://studentaid.ed.gov/types/loans/subsidized-unsubsidized
"To receive either type of loan, you must be enrolled at least half-time at a school that participates in the Direct Loan Program. Generally, you must also be enrolled in a program that leads to a degree or certificate awarded by the school. Direct Subsidized Loans are available only to undergraduate students who have financial need. Direct Unsubsidized Loans are available to both undergraduates and graduate or professional degree students. You are not required to show financial need to receive a Direct Unsubsidized Loan."

I'm not sure if theres other requirements or tests to get unsubsidized loans.

I really wish the government would simply drop the interest rate on these loans (to zero or the rate of inflation) and let people pay back what they borrowed. That would make far more sense than wholesale writing off millions in debt via IBR. But to be fair, IBR hasn't been around long enough for anyone to actually have one dime forgiven, so we'll see if it holds up once the first 10-year mark (for public service employees) hits. If the balances that need to be forgiven are far more than the models predicted, I think we'll see a wholesale rewrite of the program.

ltcm said:   I really wish the government would simply drop the interest rate on these loans (to zero or the rate of inflation) and let people pay back what they borrowed. That would make far more sense than wholesale writing off millions in debt via IBR. But to be fair, IBR hasn't been around long enough for anyone to actually have one dime forgiven, so we'll see if it holds up once the first 10-year mark (for public service employees) hits. If the balances that need to be forgiven are far more than the models predicted, I think we'll see a wholesale rewrite of the program.
  
I don't see IBR being that big of a problem because the student pool is large enough to absorb the cost. Even without loan forgiveness, someone could perpetually delay having to make payments on student loans by enrolling in a community college class every semester in order to get a loan deferment. 

I think the government will clamp down on free tuition for the military. Anyone in the military attending medical school or similarly expensive program is getting a steal with getting med school paid for by the government.

avalon6 said:   
I think the government will clamp down on free tuition for the military. Anyone in the military attending medical school or similarly expensive program is getting a steal with getting med school paid for by the government.

  
From what I gather the military only gave up to $4500 a year in free tuition and those programs are suspended.

I think that paying for people to go through med school in exchange for a military service commitment is one way they get doctors to serve in the military.   I imagine they have a harder time reccruiting doctors if it means a large pay cut vs private practice.

EDIT : oops, I spoke too fast.  Read more about the military tuition assistance and it seems it was suspended but then later restarted, not sure on exact status.

But this does state a $4500/yr cap : https://www.goarmyed.com/public/public_tuition_assistance_polici...

perpetualstudent said:   
magika said:    OP, I am curious, can you elaborate on what sort of plan you had that still ended up in a debt load this large where you went from thinking you could pay it off in 5 years to now 20 years?
  Before I applied to grad school I ran the numbers and figured that under the "best case" plan, I'd leave with around $40k of debt, and could pay that off within 5 years very easily. That would be if I qualified for in-state tuition immediately (which is a savings of around $25k per year) and if I got a T/A assistanceship (which qualifies one for in-state tuition immediately and also gives a stipend of $10k per year plus pays $15k of tuition per year) and if I got a paid summer internship that would have paid me $10k for the summer (which was common in the 2007/2008 era for an MBA intern to receive), and assuming tuition didn't go up much between the first year (which was a known tuition) and the second year. Those numbers kind of rough ball because it's been several years but they are close enough to make my point.

 

  
I appreciate the explanation, but I have to say I find it all kind of strange. I wrongly assumed your assumptions were based on getting in state tuition the second year but it sounds like you knew you wouldn't get it before you started. And of course you knew that you were declined for a TA position the first year when you got your financial aid award letter, and as anyone who goes to graduate school knows you have to really impress someone to get declined for a TA your first year but end up with one the second year. It seems like it was highly obvious you were about to engage in a "worst case", and did it anyways, and only now are using FWF thinking to try to minimize the damage. The highest ranking MBA offered by a public university (since your talking about in-state/out-of-state tuition) is UC Berkley, which for two years would cost $105k - even with living expenses, way cheaper than your loan amount. Thats why I am just kind of aghast at the amount of money we are talking about.

I'm not judging. I get it, people make mistakes. But you should be aware that while if you do a CC class now you might qualify for the 20 year debt forgiveness, that is two decades that will have to pass and at a minimum 10 different congresses and 3 different presidents that could change the program.

ltcm said:   I really wish the government would simply drop the interest rate on these loans (to zero or the rate of inflation) and let people pay back what they borrowed. That would make far more sense than wholesale writing off millions in debt via IBR. But to be fair, IBR hasn't been around long enough for anyone to actually have one dime forgiven, so we'll see if it holds up once the first 10-year mark (for public service employees) hits. If the balances that need to be forgiven are far more than the models predicted, I think we'll see a wholesale rewrite of the program.
  The government still makes money on student loans even with IBR. Graduate students with the kind of debt and lack of income to make up for it make up a fraction of the student loan pool. The primary beneficiaries of IBR are grad students who took on too much debt for their program and with poor job prospects(mostly law students and people who paid for graduate programs in liberal arts, although some are MBA students like OP.)

The outcomes for other expensive grad programs, such as medical school, are still pretty good, making IBR not that lucrative for them unless they work in a hospital(10 year loan forgiveness is a lot better than 20 or 25.) 

It is also worth noting that as it currently stands student loans forgiven under the 20 or 25 year program count as taxable income, so whatever amount you don't end up paying at the end is going to get taxed at whatever tax bracket that income would be in for you. Who knows what the tax brackets will look like in 20 or 25 years, but you can rest assured the government is going to get a hefty piece on the back end. 

similar question to OP. I have 90K in UHEAA consolidation loans, @2.8% thanks to FWF.

Do they qualify for IBR loan forgiveness like direct Fed loans? or do I have to get a new loan and reconsolidate

Shaudius said:   It is also worth noting that as it currently stands student loans forgiven under the 20 or 25 year program count as taxable income, so whatever amount you don't end up paying at the end is going to get taxed at whatever tax bracket that income would be in for you. Who knows what the tax brackets will look like in 20 or 25 years, but you can rest assured the government is going to get a hefty piece on the back end. 
 

  It's hard to predict the future, but I find it hard to believe politicians will not "patch" this failure in the legislation and make it tax-free. Otherwise, my $125k will be around $400k at 7.4% in 25 years and somehow I'd have to pay $150k in taxes in one shot. And I'd go to prison because I won't be able to. Then the judge would say "hey a$$hole, pay your taxes deadbeat, you shouldn't have spent all of that $400k you didn't actually get."

Too many student loans outstanding for politicians not to fix this. Fortunately, they'll likely fix it in about 7 or 8 years when the first set of federal loan forgiveness (the 10 year one) kicks in. If not, I guess I'll either have to leave the country in 23 years or go to prison for the rest of my life for "tax evasion" on phantom income.

perpetualstudent said:   
Shaudius said:   It is also worth noting that as it currently stands student loans forgiven under the 20 or 25 year program count as taxable income, so whatever amount you don't end up paying at the end is going to get taxed at whatever tax bracket that income would be in for you. Who knows what the tax brackets will look like in 20 or 25 years, but you can rest assured the government is going to get a hefty piece on the back end. 
 

  It's hard to predict the future, but I find it hard to believe politicians will not "patch" this failure in the legislation and make it tax-free. Otherwise, my $125k will be around $400k at 7.4% in 25 years and somehow I'd have to pay $150k in taxes in one shot. And I'd go to prison because I won't be able to. Then the judge would say "hey a$$hole, pay your taxes deadbeat, you shouldn't have spent all of that $400k you didn't actually get."

Too many student loans outstanding for politicians not to fix this. Fortunately, they'll likely fix it in about 7 or 8 years when the first set of federal loan forgiveness (the 10 year one) kicks in. If not, I guess I'll either have to leave the country in 23 years or go to prison for the rest of my life for "tax evasion" on phantom income.
 

  
Do your really believe what you just wrote? I want whatever you're smoking right now. Our politicians let sequestration happen even though it was designed as a nuclear option. No way there will be a subsidy for student loans. Maybe there will be a HARP refi for student loans, but that is all I can see. Plan on paying it back. And no, I'm not interested in subsidizing your mistake or anyone else in FWF dumb enough to go to law school, MBA, or a BA degree in ethnic studies.

Shaudius said:   
ltcm said:   I really wish the government would simply drop the interest rate on these loans (to zero or the rate of inflation) and let people pay back what they borrowed. That would make far more sense than wholesale writing off millions in debt via IBR. But to be fair, IBR hasn't been around long enough for anyone to actually have one dime forgiven, so we'll see if it holds up once the first 10-year mark (for public service employees) hits. If the balances that need to be forgiven are far more than the models predicted, I think we'll see a wholesale rewrite of the program.
 
It is also worth noting that as it currently stands student loans forgiven under the 20 or 25 year program count as taxable income, so whatever amount you don't end up paying at the end is going to get taxed at whatever tax bracket that income would be in for you. Who knows what the tax brackets will look like in 20 or 25 years, but you can rest assured the government is going to get a hefty piece on the back end. 

  
I don't believe your tax liability can be greater than your total assets. If someone has 100k in loans forgiven but only 20k in assets, they would only be responsible for paying taxes on that 20k amount. It seems like one can avoid this tax bomb because they would have had 20-25 years to plan for it.

perpetualstudent said:   
Shaudius said:   It is also worth noting that as it currently stands student loans forgiven under the 20 or 25 year program count as taxable income, so whatever amount you don't end up paying at the end is going to get taxed at whatever tax bracket that income would be in for you. Who knows what the tax brackets will look like in 20 or 25 years, but you can rest assured the government is going to get a hefty piece on the back end. 
  It's hard to predict the future, but I find it hard to believe politicians will not "patch" this failure in the legislation and make it tax-free. Otherwise, my $125k will be around $400k at 7.4% in 25 years and somehow I'd have to pay $150k in taxes in one shot. And I'd go to prison because I won't be able to. Then the judge would say "hey a$$hole, pay your taxes deadbeat, you shouldn't have spent all of that $400k you didn't actually get."

Too many student loans outstanding for politicians not to fix this. Fortunately, they'll likely fix it in about 7 or 8 years when the first set of federal loan forgiveness (the 10 year one) kicks in. If not, I guess I'll either have to leave the country in 23 years or go to prison for the rest of my life for "tax evasion" on phantom income.

  

Did you really just say that you would go to prison because you couldn't pay your debt?  What do you think this is?  the 1700's?  If tax liability really does end up working that way (in 25 years mind you, get out your crystal ball), then you will setup a measly payment plan based on your income and they will take your (non-existent) income tax return every year.  boohoo.

perpetualstudent said:   
Shaudius said:   It is also worth noting that as it currently stands student loans forgiven under the 20 or 25 year program count as taxable income, so whatever amount you don't end up paying at the end is going to get taxed at whatever tax bracket that income would be in for you. Who knows what the tax brackets will look like in 20 or 25 years, but you can rest assured the government is going to get a hefty piece on the back end. 
  It's hard to predict the future, but I find it hard to believe politicians will not "patch" this failure in the legislation and make it tax-free. Otherwise, my $125k will be around $400k at 7.4% in 25 years and somehow I'd have to pay $150k in taxes in one shot. And I'd go to prison because I won't be able to. Then the judge would say "hey a$$hole, pay your taxes deadbeat, you shouldn't have spent all of that $400k you didn't actually get."

Too many student loans outstanding for politicians not to fix this. Fortunately, they'll likely fix it in about 7 or 8 years when the first set of federal loan forgiveness (the 10 year one) kicks in. If not, I guess I'll either have to leave the country in 23 years or go to prison for the rest of my life for "tax evasion" on phantom income.

  It wasn't a legislative failure in the sense that they didn't realize what they were doing it, it was by design. We know it was by design because PSLF 10 year forgiveness is specifically not counted as taxable income whereas 25 year forgiveness under normal circumstances is. Whether they will think this was the wrong thing to do in the next 20 years, who knows, but it wasn't an omission it was a design choice.

There are all kinds of postgraduate certificates that will qualify you to apply for and receive federal student aid. Here is an example: http://learn.maine.edu/programs/paralegal-studies/

They normally require between 9 and 40 credits to complete and many of them can be done online. Some certificates are considered a qualifying federal program under Title IV. Not sure why some meet the criteria and others don't - so double check with the fin aid office before enrolling.

Your story is not that unusual and the blowback is on par with other opinions ala net. Many people who graduated before 2000 have uninformed views as to what has recently transpired in the student aid financial arena. They tend to see the situashe in terms of what they experienced, which may have been character building - but not life destroying - which is what students are experiencing now. Costs have absolutely tripled - federal aid is down - and payback is brutal. It ain't like it used to be - you guys that got your degrees pre-gulf wars should not judge those that came after. Your degrees were comparatively cheap, you got jobs coming out. Your risks were nil compared to what students face today. Including the right to discharge student loans in court if things went awry.

This guy is trying to have a life - I say - more power to him! We should be creating wage earners - not debt slaves.

Dave Ramsey says Suck it Up Students You're Spending Too Much - What's Driving the Rise in Student Borrowing?

If your loans are subsidized then just go to community college part time(6 credit hours) indefinitely and get a permanent student loan deferment.

My community college is only $73 a credit hour and they offer lots of classes such as rock climbing, bowling, hiking, etc that you can take.

You can even take out student loans while you do recreational community college... effectively making it a taxpayer financed ponzi scheme that you can defer until death.

brettdoyle said:   If your loans are subsidized then just go to community college part time(6 credit hours) indefinitely and get a permanent student loan deferment.

My community college is only $73 a credit hour and they offer lots of classes such as rock climbing, bowling, hiking, etc that you can take.

You can even take out student loans while you do recreational community college... effectively making it a taxpayer financed ponzi scheme that you can defer until death.

  
For icing on the cake, you can get the tuition you paid back when you get the Lifetime Learning credit when filing your taxes.

Is there a class in college that teaches students how unreliable government programs are?

In doing some research based on a previous poster's comments, it seems there's a lot of online-only "Graduate Certificate" courses available that are between 4 and 5 classes total.

It seems like I can find a few that would actually be something I'd be interested in doing that relate to my career. I will need to contact financial aid offices to determine if they qualify for federal loans, however since the start of the traditional Fall semester just started, they'll likely be swamped with their undergrad students at this time so I'll wait a few weeks.



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