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Student Loan Disasterr


Doug1066
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I just got an email form FedLoan Serv, the company administering the Public Service Loan Forgiveness Program.  My students have taken out 38 loans;  FedLoan had the wrong balances on all of them, as well as the wrong projected forgiveness date.  In all, 77 payments on each had been made; FedLoan showed less than half.  Two loans were shown as forgiven when they weren't supposed to be, the monthly installment on each was $59 smaller than it should have been and $30,000 in loans had just disappeared.

These are just 38 people.  There are millions of people with student loans.  FedLoan told me it is eight months behind in updating its files.  With less than six weeks to go before FedLoan turns the files over to Mohela, there is little hope of this mess getting straightened out before then.  And the transfer will only make it worse.

When Betsy DeVos, the incompetent administrator of the program under Trump,resigned, she disapproved over 30,000 forgiveness applications without even reviewing them.  That's part of the problem, but not all of it.  The program is Biden's baby, passed under his efforts as a Senator.  He is desperate to save it - something that won't happen if he implements blanket forgiveness.  So he comes up with ways to forgive some loans, but not others, producing a program that is nearly impossible to administer, especially with all the mistakes.

As it stands, fixing each application before it can be considered will take up a huge amount of administrative time.  Time isn't free.  That money comes out of student aid.  It would be far cheaper just to forgive all Federally-held student loans.  How so?  It costs nothing just to say "Debt forgiven."  No administrative time needed to trace mistakes and figure out the correct amount due.  Most of that money is money the govt is never going to get anyway.

Student loans are a sunk cost.  You can't recover most of them.  The "borrowers" can't pay them off so the govt makes their lives miserable.  When the borrower dies, the loan is capitalized and added to the income taxes - leaving the borrower's spouse in poverty.  After three years of not paying off the taxes, the surviving spouse can seek and probably get, tax forgiveness.  The result is that the loan is discharged at a fraction of its face value.  You - the government and the taxpayers - are never going to see most of that money.  AND you have ruined someone's life, maybe two or more lives, to do it.

We need a better way of financing higher education.

Doug

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Posted (edited)

I talked to the daughter who is struggling and she has not heard anything.  I remember the other daughter thought her loan was supposed to be forgiven last year because she has worked over 10 years in a state job.   

Edited by Desertrat56
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2 minutes ago, Desertrat56 said:

Both my daughters have student loans, one makes enough money to pay hers, the other is barely scraping by.    I haven't heard if they have gotten any information about the forgiveness program.   I am going to ask them.

There are several forgiveness programs as well as payment deferral and forbearance.  There are also several program that cut monthly payments, but result in ever-increasing balances.  

Doug

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2 hours ago, Doug1066 said:

There are several forgiveness programs as well as payment deferral and forbearance.  There are also several program that cut monthly payments, but result in ever-increasing balances.  

Doug

It took my brother over a decade and a half to pay his medical school loans. Maybe more.

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6 minutes ago, Piney said:

It took my brother over a decade and a half to pay his medical school loans. Maybe more.

That would be a very good record.

Excepting the Public Service Loans, most forgiveness programs are designed for a 20 to 25-year repayment plan.

Doug

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4 minutes ago, Doug1066 said:

That would be a very good record.

Excepting the Public Service Loans, most forgiveness programs are designed for a 20 to 25-year repayment plan.

Doug

He keeps his priorities and plans everything. He didn't marry his fiance and have children until they were both done they're internships and working at a practice.  

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