Submitted by Mac Zeff (not verified) on December 5, 2008 - 12:52am.
" The new income-based repayment system in the federal loan programs is especially promising . . " Eh, You are kidding me, right?
If a person is already financially in trouble, and they are in default, the income based repayment is not an option, as it has a hidden booby trap at the end. Lets say for instance, your pre-default payment was $300 a month, then after default its now $650 a month. If you are one of these people who are financially in trouble, and you cannot make the $600 a month MINIMUM payment, even on income based payment, the loan continues to grow. Now here is the booby trap at the end. At the end of the 20 year period, any outstanding amount due (which has grown for 20 years) is now taxed as income. If you cannot pay the tax in full the first year, you end up paying interest and penalties to the IRS. In effect, shifting the payment from one government controlled enterprise to another.
You never end up out of this mess. AND THAT is why many folks just give up.Ya pay the government for 20 years then the IRS till you die, never getting out from under the burden. And that is not a solution for anyone.
Income based repayment is NOT an option
" The new income-based repayment system in the federal loan programs is especially promising . . " Eh, You are kidding me, right?
If a person is already financially in trouble, and they are in default, the income based repayment is not an option, as it has a hidden booby trap at the end. Lets say for instance, your pre-default payment was $300 a month, then after default its now $650 a month. If you are one of these people who are financially in trouble, and you cannot make the $600 a month MINIMUM payment, even on income based payment, the loan continues to grow. Now here is the booby trap at the end. At the end of the 20 year period, any outstanding amount due (which has grown for 20 years) is now taxed as income. If you cannot pay the tax in full the first year, you end up paying interest and penalties to the IRS. In effect, shifting the payment from one government controlled enterprise to another.
You never end up out of this mess. AND THAT is why many folks just give up.Ya pay the government for 20 years then the IRS till you die, never getting out from under the burden. And that is not a solution for anyone.