IMPORTANT QUESTION -- Are there any LAWYERS/BUSINESS TYPES ON BOARD

[nobs]

I will keep this as short as possible and not give the whole story as I could get very long.

Long story short, I went to college and took out student loans of about 40 to 45 K. When I graduated it took a while to find a job and when I did it was a shit job. There was no way I could pay the $600 a month they wanted. Time I finally got promoted into a decent pay level, the dept of education was saying I owed them $115,000 which comes out to $872 a month in interest alone at almost 9%.

So I still cant pay. I am grossing about 43K a year, after taxes I net 30K, so just covering the interest would take 1/3 of my disposable and would not do anything to get this thing paid off.

I researched on the internet and found out that all they can do is take 15% ofmy disposable with the first $700 a month or so exempt. So the most they can do is take $270 a month from my check. ( $2500 - $700 = $1800 * .15 = $270 ), so I figured FK it let them do that. Its been a few years and they havent taken a penny.

Now my question, I want to sign up for 401K at my work because now that I have been there 5 years I am eligible for a really great deal. Its 100% limited match vesting 20% a year fully vested in 5 years. Also, the tax benefits of course. Just a great deal that I want to get in on.

Question is, when I go to retire and cash out in 25 years will the gov't just take it all since I will still owe, or are they limited to the same 15%, or can they take nothing ? Does anyone know ?

I have researched this online and you get so many conflicting answers that you are more lost than you were at the start. It seems pretty clear that they will either take 15% or 100%. They will take something as I have learned that 401 K's are out of reach or creditors --- EXCEPT the GOVERNMENT. Lol, must be nice to pass the laws and make special exceptions for yourself.

Anyway, I would have no problem paying the 15% as I do owe something, but If I spent 25 years building up a $500,000 401K only to have the gov't take it because I wanted to go to school, I dont know but I think I would be along the lines of Joe Stack.

I know I can ask the guy that administers my company's 401K but I dont know if I get an unbiased answer there. The guy really likes signing people up, as he makes money that way. So anyways I am just wondering does anyone know what the govt will take in this scenario.

TIA

[nobs]

Yeah Yeah, I know I am a POS for not paying what I owe ( Well actually 3 times what I owe )

[landers781]

Not a lawyer but I would assume there is a statue of limitations on that. Pretty sure all liens etc have some sort of statue of limitations. Maybe if a lawyer doesnt answer you can start there on google

[nobs]

Yeah google is giving me lots of different answers. I suppose that I will have to go to a lawyer to be 100% for sure, but not trying to spend money.

StillI think the gov't exempts itself from the statute of limitations thing. I did hear of an old man having 15% of his social security check garnished from student loans 40 years prior. It went to the supreme court and he lost.

[Boner_18]

I'm not sure about the % take out from the 401k but I suspect it is limited (i.e. 15%). There is no statute of limitation on collections for education loans and they cannot be discharged in bankruptcy, only type of loan that gets this treatment.

[landers781]

Good infor boner, did not know that

[Boner_18]

What you should do ASAP is get those loans into repayment. If the interest rate isn't fixed you should file for a consolidation loan with http://www.loanconsolidation.ed.gov/ and determine what the rate is (it depends when you took the loan and when you consolidate). If the rate is greater than you intend to earn in the 401K (between 5-10% annualized return) you would be kicking yourself in the ass by putting money toward the 401k while not paying anything to the loans (not to mention that interest payed to education loans is deductible). If the rate on the loan is around 3-5% only pay the minimum, you can get a better rate of return in the 401k.

If you can pay more than each installment to the loan, do it but make sure you stipulate that excess should be applied to principal (write, call, email but confirm this, very important).

Of course you should do both, the 401k and the loan, if you have the means. Seriously, if you have to cut back on something (smoking, drinking, gambling, women, etc.) to pay this loan you should. It is the right thing to do and will set up your children to inherit something other than a huge debt.

BTW I am not talking down to you here, i am currently unemployed with a 200k education debt in deferral.

[nobs]

Thanks boner and landers. Yeah the gov't gets its money, you cant get out of what you owe them. I guess I am going to have to talk to the 401k administrator, dont mind paying 15% when I cash out but obviously I dont want to pay into this for years if I will never be able to collect anything.

Not trying to sound ungrateful, the loand di raise me into the middle class and I do owe something, but I already pay 1/3 of my income in various taxes, I just cant afford another $800 + a month in interest alone. I contacted them asking about the Obama income based repayment plan but they told me I am not eligible since my account has been in default already.

[Boner_18]

Good infor boner, did not know that

No problem. Obama was thinking about making them dischargeable in chapter 7 bankruptcy but decided not to... While I would have personally liked it, it woulda been a shit show if he had, no one would be able to go to school cause every student would just go bankrupt the day after graduation.

[nobs]

Boner,

They told me I am in default so I owe it all right now, plus they referred my account to an outside company ( probably a company they own ) and they said that company's 15% fee is also due and payable so thats how I owe $115,000 now when it was only 40-45 K at graduation. I am pretty sure I am paying almost 9% thats how just paying the interest alone is $872 or in that neighborhood a month.

Truly, I am buying gold/plat/silver coins with my money because I cant even put very much in a bank account for fear they will take it.

[nosniboR11]

there is no statue of limitations on student loans, the govt will eventually get to you and take it from your check, as for your 401k they will not touch that with this, they will just take it from your check, and trust me they will get to it, it takes years sometimes, so be ready for a lump sum, and they can come and clean out your checking and savings accounts , so good luck and you need to call the company that has your loan and work with them , they will fix it

[Chi_archie]

Boner, needs to set up his own little corner of SBR for legal/tax help. he could charge a set fee of points per 2 mins of consultation

[nobs]

Boner, they are going to have to do something because right now with the crap economy a lot of people are going back to school and getting these loans. When they graduate are there going to be enough jobs for all these people to live + pay back ? I doubt it. I think the defaulted loans are going to explode in the next 10 years especially if the economy doesnt improve a lot.

I dont mean to sound like I am crapping on the gov't, they helped me when I needed it, lifted me into the middle class, and enable me to have a great life, compare to most of the 6 billion people on earth. I am not trying to complain. I am going to go to Burger King here soon and probably eat 2000 calories while a lot of the world doesnt even get enough to eat.

I know we are all lucky, not trying to complain, just cant pay $872 a month + principle. I would have to pay $1200-$1500 a month to even make a dent in this. and I cant afford it. I am single with no dependents making 43K a year, they tax it down to 30K, I clear 2500 a month.

[Housemoney]

Look at the new income based student loan repayment plans. The maximum payment for someone making $45,000 per year would be $359 if you are single, $289 if married, and less if you have kids.

The government will get their money, plus you will never get a loan if you just ignor it.

http://studentaid.ed.gov/students/publications/factsheets/factsheet_IncomeBasedRepayment.pdf

Income Based Repayment (IBR) – Effective July 1, 2009
Income Based Repayment is a new repayment plan for the major types of federal loans made to students. Under IBR, the required monthly payment is capped at an amount that is intended to be affordable based on income and family size. You are eligible for IBR if the monthly repayment amount under IBR will be less than the monthly amount calculated under a 10-year standard repayment plan. If you repay under the IBR plan for 25 years and meet other requirements you may have any remaining balance of your loan(s) cancelled. Additionally, if you work in public service and have reduced loan payments through IBR, the remaining balance after ten years in a public service job could be cancelled.

Find out if you qualify. To calculate your estimated loan payment amount under IBR, go to the IBR calculator.

[Boner_18]

Yeah man. If you didn't pay or put it in deferment or forbearance that is what happens. You need to contact that company and negotiate a repayment plan, one that reduces principal and has a respectable interest rate (honestly 9% isn't that bad). If you cannot make an agreement that is acceptable, contact an attorney. Remember you did get something from this loan, and 900*12 = 10800 a year, that isn't terrible. Make it happen and look to the long term though because this will screw you up.

Every dollar you spend on evading will just be payed back later with interest on it. Either by you or your heirs. Sell the coins and pay some money back. The trick is to stick with it and before long it wont even be a big deal. It sucks, but letting it go even longer can make it suck really hard.

[nobs]

there is no statue of limitations on student loans, the govt will eventually get to you and take it from your check, as for your 401k they will not touch that with this, they will just take it from your check, and trust me they will get to it, it takes years sometimes, so be ready for a lump sum, and they can come and clean out your checking and savings accounts , so good luck and you need to call the company that has your loan and work with them , they will fix it

I know they will, but they can only take 15% of after tax income, and the first few hundred doesnt even count, its exempt. So I am clearing 2500 a month, all they can take is like 270 a month I forget exactly how much is exempt, but even with no exempt its $375 a month ( 2500 * .15). I actually could handle that, if it would make progress on what I owe.

But If I pay them $500 a month every month for 10 years after 10 years I will owe more. So whats the point ?

Maybe I havent talked to the right person, but what little contact I have had with them, they have been totally unwilling to bend. All I am getting from them is that I agreed to pay and I need to pay.

[Boner_18]

Boner, needs to set up his own little corner of SBR for legal/tax help. he could charge a set fee of points per 2 mins of consultation

HAHAH. This is just friendly advice.

By way of disclaimer:

THIS IS NOT LEGAL ADVICE

[nobs]

Look at the new income based student loan repayment plans. The maximum payment for someone making $45,000 per year would be $359 if you are single, $289 if married, and less if you have kids.

The government will get their money, plus you will never get a loan if you just ignor it.

http://studentaid.ed.gov/students/publications/factsheets/factsheet_IncomeBasedRepayment.pdf

Income Based Repayment (IBR) – Effective July 1, 2009
Income Based Repayment is a new repayment plan for the major types of federal loans made to students. Under IBR, the required monthly payment is capped at an amount that is intended to be affordable based on income and family size. You are eligible for IBR if the monthly repayment amount under IBR will be less than the monthly amount calculated under a 10-year standard repayment plan. If you repay under the IBR plan for 25 years and meet other requirements you may have any remaining balance of your loan(s) cancelled. Additionally, if you work in public service and have reduced loan payments through IBR, the remaining balance after ten years in a public service job could be cancelled.

Find out if you qualify. To calculate your estimated loan payment amount under IBR, go to the IBR calculator.

Thanks for this housemoney, when I first heard of this I thought YES THIS IS WHAT I NEED. I asked about it, and they said I dont qualify because I am already in default. It seems to me that people in default are the people who need it most. If they would let me do this, I would sign up today.

[nobs]

From the link, second paragraph



What federal student loans are eligible to be repaid under an IBR plan?Any Stafford, Grad PLUS or Consolidation loan made under either the Direct Loan or FFEL program is eligible for repayment under IBR, EXCEPT loans that are currently in default, parent PLUS Loans, or consolidation loans that repaid a parent PLUS Loan. The loans can be new or old, and for any type of education (undergraduate, graduate, professional, job training


I know, it was my own stupid fault for letting it get to that point.

[Housemoney]

See what the payment would be on a rehab loan to bring it current would be. 12 months to get current, then do the IBR.

[Boner_18]

House - he isn't eligible b/c he is way into default.

The point is, do you ever want to buy a house? Have children who are financially secure? Not have to worry about that 15% being taken out?

You take home $2500 a month. Figure out how much is for rent and car (and please don't have a '10 BMW) and then how much is for food. It should be less than $1500 leaving you $1000 for the loan.

If you ever want to buy a house and leave things to your children you have to pay now, not later. Figure out a way to make it work. Downgrade your car, get a 1 night a week bar-tending gig, ask for a raise, stop gambling, brew your own coffee, take your lunch to work instead of buying, eat out less, get the lesser cable package, etc. There are a million ways to save a couple bucks and each one you save now is 1 + 9% later. It's hard to think long term but you really have to. GL man.

[nobs]

Boner,

I agree I did get something out of it. The gov't also got something out of it though. Before I went to college, I was making $8 an hour and actually not paying any taxes as I got back all my federal taxes plus some under the earned income tax credit program. Now I pay nearly 13 K a year in fed taxes, FICA, Medicare, State taxes, and the one that goes for disability. The fact is that I am now paying at least 10 K per year more in taxes so in fact they get the 40-45 K they loaned me back many times over.

I know thats not how they see it, not how most people see it, maybe thats not how I would see it if it wasnt happening to me. But its funny that the govt is suing credit card companies/payday loan places for trapping people into an unescapable cycle. I wonder what is this if not an unescapable cycle ? Like I said, I earn 43 K a year, I already give the govt 1/3 of that in taxes, if I gave them another 1/3 ( 14 K -- 1200 a month ) that wouldnt even make a dent in what I owe.

[nobs]

Thanks boner and housemoney and everyone. I am going to get them on live help and see what they tell me.

[Boner_18]

that wouldnt even make a dent in what I owe.

Wrong. It would make a dent, that's the whole point. Sure it is a small dent but a dent nonetheless. And the converse is that not paying makes a larger dent in your ability to function as a happy, financially sound individual in the future.

Paying $925/mo. (at 9%) gets you outa this issue in 30 years, 2040. Add another $75 to that every month but you 8 years, 8 fvcking years! This is by paying $1000/mo. instead of $925. Absolutely amazing. It sucks, but the longer you put it off the worse it is going to get.

Suck it up and get busy solving your problem instead of avoiding it which makes it worse.

[BatemanPatrickl]

Nobs what type of degree did you get?

There was a doctor that had $500K in student loans.

[tltaylor89]

Public servicewould have gotten you're loan forgiven