Pay As You Earn. For graduates suffering under the crushing burden of student loan debt, those words sounded so sweet a few years ago when President Barack Obama first uttered them. And then came the details. And the restrictions.
- Ten years of payments ... unless you work in the private sector, in which case you'll pay for twenty years.
- Payments capped at ten percent of discretionary income ... unless you took out loans before October 2007 or stopped borrowing before October 2011.
Basically, it was a more generous Income Based Repayment (IBR) plan for current students, not for those who really needed it -- the ones who went into law school during a good economy, took out loans, and graduated to doc review and living with parents. Yesterday's announcement, a promise of expansion of the program (specifically removing the date restrictions while declining to provide any other details) sounds pretty good for the previously ineligible, but is it really? Let's take a glass half-full approach.
Going solo out of school? Spend more time developing practice skills and leave the marketing work for the experts.
You may pay less money.
Every grad's debt is different, so it's impossible to tell you specifically whether this will help you. For that, there's the federal government's calculator, but let's put it this way: if you have a ton of debt, and make no money, your student loan payments will probably shrink and you'll pay less in the long-term. And if you're in a public sector position, you'll be completely free in ten years, which pretty much guarantees that you'll benefit.
Benefits not limited to current idiots.
We jest, but those who entered law school before the collapse of the industry shouldn't feel too bad about their massive debt burdens -- there was no way to see that coming. Those who have entered since the industry-wide collapse, however, were both eligible for the original PAYE program and were the ones super-gluing an albatross of debt to their necks. Seems a bit unfair, doesn't it? This fixes that.
Makes law school not a completely stupid, terrible decision.
If you're looking at pure sticker price, law school is probably a bad decision -- $150,000 (plus interest) for a degree that may or may not get you a job that will allow you to pay off your income in your lifetime. But, if you take into account the fact that it won't be you, but the rest of the tax base, that will pay off that debt ... meh. Sucks to be a heavily taxed rich dude in Wisconsin, we guess.
But Wait, There's More!
This program sounds great, right? So why are we not jumping for joy? Tomorrow, we'll look at PAYE's shortcomings and unanswered questions.
- New U.S. student loan program leaves many out in the cold (Reuters)
- For Student Borrowers, Relief Now May Mean a Big Tax Bill Later (New York Times)
- Want to Discharge Student Loan Debt? Fail Bar, Wait 10 Years (FindLaw's Greedy Associates Blog)