http://www.msnbc.com/msnbc/ex-students-income-based-loan-payments-face-huge-tax-bill
Cliff Notes version: 33 year old lawyer making $90,000/year is paying $575/month in student loans on an income-based repayment program and is complaining about the tax bill he’ll have in 25 years when the balance of his loans are forgiven.
Really?
^ Yeah because paying the income tax on debt you don’t have to repay is so terrible compared to not repaying the debt that you took out.
I weep for the future.
^If the government wants to forgive my $50k in student loans and charge me $7500 in tax, I will take it.
And if my mortgage lender wants to forgive my $250k mortgage balance and force me to pay $37.5k in taxes, I will take it.
And the attorney at the end of the piece advises his clients to not worry about paying down the full balance. This article describes so much of what is wrong in America. $90k is $7500 per month, this guy is only paying 8% of his pay each month towards his debt. When did it become OK to not take responsibility for our choices??
Not only that, but how about stepping up the payments a bit? $575/month with a $90,000/year job? Assuming an effective tax rate of 30%, that’s $63k after taxes, or $5,250/month. He can’t pony up $1,000/month and live off of the remaining $4,250 or really man up and pay what he should be paying in full?
I’m confused on how people find themselves in this situation. Didn’t he do a cash flow analysis when he took out $150k in loans?
^He probably did.
You might think I’m crazy for having taking out $60k in student loans to make only $60k per year. Sounds like a bad deal.
But had I never taken out the student loans, I would probably be making $35-40 per year, tops. So $60k in student loans is actually a good thing. From a certain point of view.
They couldn’t have found a better example to garner some sympathy? 90k/year dude paying 575/month is going to elicit rage. At least find some poor idiot who has the same type of debt but only makes minimum wage or something.
This is what happens to a lot of people. It’s a lesser of two evils situation. Plus the chance of making enough money to make your life NPV positive and not miserable is higher under the go-to college scenario than under the non-go to college scenario.
People often look at the college thing as just giving away education to people as if it were giving away rolexes and chrome rims. But to me it’s more about having a non-idiot workforce and population. We need people to have the skills to be employable so that they don’t spend their time on welfare rolls or something. Effectively, an intelligent population is an infrastructure investment in the nation’s economic productivity.
While I don’t necessarily think that college needs to be free, it shouldn’t be the sort of thing that is net NPV negative in most cases. Maybe that means that Art History majors must have some kind of business education requirements, or something, because Art History is mostly valuable to rich art collectors, and you need to know how to extract money from those guys once you graduate.
I also think that the traditional college experience may need to be revised in favor of something else. Maybe it’s universal community college or Associates Degree stuff, like an extra two years of high school to cover the fact that more skills are needed than were envisaged when high school was designed. Maybe it’s more vocational kinds of things and retraining centers, so that when someone does physics and discovers that there are too many physicists, they can retrain to do plumbing quickly.
The real challenge these days is that entire fields are becoming redundant faster than people can be retrained by traditional methods. Career planning these days is about guessing what skills will be needed and crossing your fingers that 5-7 years from now, those skills will still be in demand and that you won’t be overwhelmed by everyone else that thought your particular skill set was the golden key and now is faced with oversupply.
So I am not sure that traditional college is where we should be focusing our resources (though there is value in kids learning to live without their parents around). I think training programs that are linked to employer requirements for their workforce are more and more required at all ages, plus maybe an extra two years of high school (that people have the option to drop out of if they feel they are ready for the workforce).
I agree bchad, I think the answer isnt free college, the answer is we should probably change the system. The whole 4 year undergraduate degree seems a bit dated at this point for most careers.
To get the skills needed (generally, obviously there are plenty of exceptions) to be successful you have to take on a mountain of debt that you just dont have to in other countries. If the end goal is preparing people for careers, maybe there is a smarter way to go about it than arguing about free college/other silly changes/status quo etc.
Not if the goal of the article was to cause outrage.
The problem is that everyone in the US thinks they are more special than they actually are. I don’t think it is wrong to pursue higher education. However, when the best law school you can get into is one that no one has heard about and has only probationary accreditation, that might be a sign that your “specialness” should be deployed elsewhere.
So, the ‘if this guy who is making really good money is getting screwed imagine what is happening to the people not making good money’ angle? I suppose.
But revealing how much he makes and pays per month has most of the people in this discussion focusing on that rather than the real underlying “issue” they’re trying to present.
Milton wants to know why we shouldn’t subsidize your new business if we are going to subsidize your higher education. https://youtu.be/w3-_r_t7AZU
You’re getting better and better with the one line zingers. I approve. Kudos to you!
What a pity that almost no one is educated enough to understand what Milton is saying.
Fortunately, for entertainment purposes, most have trouble coming to terms with being overmatched by a five foot man that raised from poverty not recognizable within our borders today. What’s fascinating about Friedman, whether you subscribe to him or not, he had always already considered what his audience may have thought was an original obsevation. That is obvious.
Higher education is already subsidized and the costs have skyrocketed. Let’s subsidize it 100% and pass all those costs on to the entire tax base instead of just the beneficiaries of the education. Might as well subsidize grad school while we’re at it, the bachelor’s degree that everyone gets for free will soon be worthless.
I agree putting more kids through school devalue their degrees, but what are people supposed to do? Everyone wants a better life, a degree is still generally the path to that. Generations before were able to walk into a factory, get hired, have a career where they learned tasks & skills and progressed. That life is not available for people anymore, or at least in enough numbers to support our population.
There can be an arguement for the government subsidizing the education if it leads to a more educated and thus higher earning population paying them more in taxes. I dont know that fully subsidizing education is the go, but certainly if the end goal is having a trained workforce something has to be done. Corporations dont seem to want to grow employees and train them anymore and require specialized skills, they are always discussing the skills gap. The only way to close that gap is via education and training which many people cant afford. I have been for specific training like the coding bootcamps that have been popping up, I think those short intensive training programs are fantastic if what you are looking for is an agile workforce.
I looked on the web for the econobabble generator that this must have come from, but I couldn’t find it. Do you have a link?