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Comment by zaroth | Hacker News Reader

A supposedly college educated American can't make $5 a month payments in order to clear their credit report and set themselves up for $0 per month payments from that point forward? And it's the loan servicing companies are to blame?

What am I missing here? Is it too hard to Google "income based student loan repayment" and read for a few minutes to know what to ask for? Or these people would rather have creditors calling them all day and a credit score of 300?

It's a completely separate matter that the Obama administration setup a system where we pay $1800 to debt collectors to collect $45 just so that the payer can default again. What is the point of collecting $5/month? I understand maybe trying to get at least a regular payment setup -- that's probably worth paying the debt collector $50 if they can manage it. But $1,800? Wow...

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It's not that simple

– parent loans are based on the parents' income, which makes income-based repayment useless

– loan servicers don't want you on income-based repayment, so if you ask them about it they're not helpful whatsoever

– they fuck up the paperwork CONSTANTLY, almost every year I have to apply for income based repayment 2-3 times because they lose the paperwork or make some asinine error

– no one is actively educating grads about the program because there's nothing to be gained from it

– if you get married your spousal income is factored into the payment, even if your spouse also has loans

It's not a one time simple thing and you're done situation. It's a pain in the ass and almost no one will help you figure it out.

This is an industry that thrives on the illiteracy the average American has in personal finance. I know multiple people who ruined their credit because they didn't know the unemployed get temporary loan deferments.

PAYE does not take into account spousal income if you file taxes separately. Your other statements are correct. One really has to research things and it appears many do not.

EDIT: The PAYE plan does not take into account spousal income if you file taxes separately. People should be aware of this.

Married filing separately is a filing status of last resort. You really only want to do that if you'll save a ton of money through PAYE. Financially you'd be better off not getting married in these cases.

Yes it is better not to get married in such a situation. At least financially speaking. But it is still false to say spousal income is always taken into consideration.

Apparently you can file separately in order to not take spousal income into account, then file an amended return to make it joint instead without recalculating the debt relief. Seems a bit shady to me, but apparently not uncommon.

I went on deferred payments when I lost my job 2 years ago, after missing the first payment they called me and set me up on a 0 payment deferment plan. After I got my job and made my first payment they called me again and set me up on an income based repayment plan.

Both times they called me, emailed me the forms, and helped me set everything up. I think they people who are defaulting are the ones trying to ignore everything and ducking calls.

Parent loans leave the parent on the hook, not the student so I don't know why youre bringing that into the fold.

Things aren't that complicated, you have multiple (usually 8, one for each semester) loans at different interest rates and you need to repay them. Not that hard.

>Parent loans leave the parent on the hook, not the student so I don't know why youre bringing that into the fold.

Because the family arrangement might still be for the student to help repay them -- or be forced to later by changing family economics -- when he graduates.

The parent is on the hook if you want to completely destroy your relationship with your parent, sure.

> the illiteracy the average American has in personal finance

These are supposed to be college educated Americans.

Is your degree in personal finance?

Much of a college education is "learning how to learn", not necessarily stuffing one's mind with facts.

There are innumerable books on personal finance. I expect a college educated person would have no trouble picking one up and reading and understanding it.

It's not quantum electrodynamics.

> Much of a college education is "learning how to learn", not necessarily stuffing one's mind with facts.

I think most degrees are just rote memorization. You must be referring to comparative literature or math or philosophy or something.

It's about learning how to learn. I got much better at learning during college, and many have told me the same thing.

If you picked a college that consisted of rote memorization, you were rooked. Due to google, rote memorization is rather pointless.

I think college tends towards learning a lot about a little with a bunch of handholding. Autodidacts are more likely to have learned how to learn.

I see this a lot with junior devs at work. People are intimidated by what they don't know and ask for help or get frustrated or despondent - approaching things with a bit of bravery and analytical method is unusual. Those people are exactly the ones you want to keep, of course.

Sure. But they are also folks that dropped out for whatever reason. Additionally, most folks take out the loan when they are still in high school. A lot of these folks only had a short class in personal finance, if any. Mine was when I was in 8th grade (out of 12). This lasted for 6 weeks, but only once a week. During that time, the "special teacher" - a car salesman - gave us extra credit if our parents looked at a car.

I didn't understand that our tax brackets in the US are marginal (i.e. we don't pay 35% of our entire income if we are in that bracket), until a quarter way into my PhD program.

It never ceases to amaze me some of the basic stuff in life I still don't know.

Luckily I researched how to pay off my undergraduate student loans in the best manner as soon as it was time to start ponying up.

Live in the UK, we get taught that sort of stuff in high school. Every term we'd have one morning for PSHE (personal, social, health and economic education) where we'd learn things like how to fill in taxes, how to create a CV and also some more varied ones like how to play poker.

Although occasionally they were hit and miss (pornography is as bad as cocaine was a memorable one), I really valued them as useful life skills. The Wikipedia article gives an excellent definition [0]:

> Personal, social, health and economic (PSHE) education has in various forms been part of the National Curriculum for schools in UK since 2000 ... PSHE education is defined by the schools inspectorate Ofsted as a planned programme to help children and young people develop fully as individuals and as members of families and social and economic communities. Its goal is to equip young people with the knowledge, understanding, attitudes and practical skills to live healthily, safely, productively and responsibly.

[0] https://en.wikipedia.org/wiki/Personal,_Social_and_Health_Ed...

How old are you? I was never taught anything useful like that in secondary school. I'm 32.

Not the chap you're replying to, but we had that in middle school. I'm 27. I think it was a reasonably new thing here. I don't remember them teaching us much about economics, all I remember is a lot of drug paranoia, and how to make a CV that wasn't awful (which to its credit I felt was worthwhile)

I feel like there would be a relatively short list of high value topics: basic financial knowledge (interest on savings & loans, personal accounting), mortgages, how to choose a job specialization (including objective numbers on salary / hiring in various fields), how to apply for employment, how to find better employment, how to avail yourself of the various government-funded services (library, medical, etc) or interact with their private equivalents, basic legal knowledge.

Summary versions that could easily be knocked out in a single year-long grade school course.

The biggest point of teaching these to everyone would be to address income inequality. Because if you're from an affluent family, these topics are usually information you have ready access to via your parents. If not... you really don't, and that has an impact on your chances of success in life.

> I didn't understand that our tax brackets in the US are marginal (i.e. we don't pay 35% of our entire income if we are in that bracket), until a quarter way into my PhD program.

Is this common? How do we educate people about this? How can we have a serious conversation on tax reform when people don't know what system we have now? Personally, I want an end to most deductions and credits (but honestly because there are so many that I'm not using and never will use). However, if wager that the only people who know about them are the people who use them.

For example, the Masters exemption for Airbnb hosts makes no sense.

Misunderstanding how marginal taxation works not only seems common in the US, but I suspect it's something that is encouraged, as a way to get poor people to support cuts in taxes on the highest brackets.

It also causes folks in one tax bracket to keep their income down for fear of paying way more. I've had conversations with multiple people who were deadly afraid of earning another dollar because they thought their entire income would be taxed at that rate. They were only disabused of the notion after bringing up the IRS tax tables and calculating it all.

Also the United States tax code is amazingly complex.

Yes and simplifying it involves in pissing off a lot of people. Closing loopholes makes people made. People who have money. People who will spend money to keep things the way they are. And (sometimes) we are those people.

I don't know how we can ever actually simplify the tax code.

I also didn't understand the marginal aspect of tax brackets myself until about the same point as OP. We only ever talk about tax brackets as a percentage, I feel, so that aspect just never comes up. It's an easy assumption to make.

(And even if you feel like that assumption is nonsense, since it results in absurd situations like an income increase resulting in a net loss: I would say most Americans don't expect the laws or tax code their government makes to behave sensibly, so this just isn't a red flag.)

> How can we have a serious conversation on tax reform when people don't know what system we have now?

We have this issue in a number of areas, not just taxes; e.g., tech issues (encryption, net neutrality) in politics.

(And I find this happens a lot, not just in politics. For example, I feel that I've run across a number of people who think that because C++ lacks garbage collection, that C++ code must therefore be littered with manually new/delete calls; thus, GC is "better", because folks don't realize that an alternative, RAII, exists.)

I have encountered American university students who did not understand how percentages work.

Most people don't understand how percentages work.

Ask people these questions:

1) I'm going to sell you a TV. It's priced at $300. I'm going to give you a 10% discount. What will it cost after the discount?

2) I'm selling you a washing machine. You're paying me $500. It's already had a 10% discount. How much did it cost before the discount?

Most people can get an answer for (1), but they do it by mashing buttons on their smartphone calculator app. They don't know the method; they would not be able to talk through the method on paper. Most people can't give you an answer for (2) even after some time mashing buttons on their calculator.

People can't spot misuse of percentages (eg, the "politician's bridge" (also called the Mexican Bridge from How to Lie With Statistics))

This isn't just the general population. We find some scary lack of understanding of percentages in doctors.

https://en.wikipedia.org/wiki/Confusion_of_the_inverse

> In one study, physicians were asked to give the chances of malignancy with a 1% prior probability of occurring. A test can detect 80% of malignancies and has a 10% false positive rate. What is the probability of malignancy given a positive test result?[3] Approximately 95 out of 100 physicians responded the probability of malignancy would be about 75%, apparently because the physicians believed that the chances of malignancy given a positive test result were approximately the same as the chances of a positive test result given malignancy.[4]

> The correct probability of malignancy given a positive test result as stated above is 7.5%

Gerd Gigerenzer's book Reckoning with Risk has many examples of this.

Of course, these are well-known examples. Recently it was claimed in a Dutch newspaper that a soccer player paid over 100% in taxes (but still received money).

The particular students I met did not understand the idea behind percentages and could not calculate 10% of a given price.

I agree that innumeracy of various degrees is a widespread problem, but I do think the last example is because the term "false positive rate" sounds to many people like it should mean the false discovery rate. I'm sure there are some people who do have trouble reasoning from the correct definitions, but mis-identifying/remembering the semantics of the values provided leaves no chance for succesful calculation.

That's not a lack of understanding of percentages, but of Bayes' rule, which arguably is in a completely different realm of conceptual sophistication.

Gigerenzer's point is that the same people who don't understand the example when given using percentages find it trivially easy to answer if you give natural numbers such as "1 in 1000 people".

I took a brief course in accounting. The instructor was a former used car salesman. So we were talking about that business, and he said that the dealership didn't make money off of the cars, they made money off of the financing. And they made that money because the customers simply could not understand interest rates and payments. He said he'd repeatedly patiently explain the options to them, how the higher payment plan would save them money in aggregate. They'd eye him suspiciously, tell him they weren't going to be taken in by shenanigans, and always pick the lowest monthly payment plan, which was always the costliest to them.

This is what happens when you dog learning arithmetic in school, wondering what use it possibly can be. Not understanding arithmetic will cost you real money, a lot of it, throughout your life.

And "college educated Americans" are supposed to be "financially literate" (to the point of knowing the various intricacies of loans) because?

Tons of them can't even place France on the map...

I don't care what they're supposed to be — there's little to no personal income management in american curriculum from elementary to college. Adults in the US don't even understand how taxes work. Entire industries thrive on this fact.

From the article:

> All that's needed to enroll is some paperwork that enables contracted loan servicers to confirm borrowers' annual earnings, but experts inside and outside the government say they don't know why this step isn't completed, and distressed borrowers are left stuck in debt collectors' sights.

My guess would be that the loan servicers in question aren't bothering to tell anyone about the program, and nobody else can make it available in the first place. Even this article just mentions "some paperwork" instead of mentioning any details.

> Is it too hard to Google "income based student loan repayment" and read for a few minutes to know what to ask for?

If you aren't already aware of this option, how are you supposed to know the exact phrase to Google for? Maybe the issue is that we need more education about the options available for repayment.

Well, adjust the search accordingly. How about, "I can't afford my student loan payments"?

That still presumes that the person who should be searching is aware that there are options to search for in the first place. If you assume that your only options are to either pay the amount you're billed monthly or default, it might not occur to you to try to solve your problem by searching Google.

An educated person ought to have enough perspicacity to know that there might be other options. At least one should have enough wherewithal to attempt a simple search.

>An educated person ought to have enough perspicacity to know that there might be other options.

Probably depends on the degree someone would associate getting a piece of paper for time served in a university as well as coming out heavily in debt is equivalent to an education.

This seems to ignore the fact that people are irrational (I cite the difference between classical Economics and Behavioral Economics). Especially when they are emotional, which is exactly the case when they are under an immense debt load, in default, with little to show for progress.

> An educated person You seem to presume that just because someone has student loans, they are educated. If you look at the DoE and Congress going after the predatory loan practices of for-profit colleges in both misleading recruiting and sub-par {education, graduation, job prospects}, there is a sizable population of people with large student loans and nothing to show for them.

I wonder how people get through college unable to use google.

Knowing how to use Google is different from recognizing when to use it.

They somehow managed for hundreds of years prior to the Internet.

That search is just going to get you people trying to scam you.

Perhaps the burden on the loan holder is more than financial. Credit aside, paying $5 per month on student loans of say $80k isn't much better than paying $0. You still won't pay them off in your lifetime.

Edit: I missed this part:

> The consumer bureau estimates that the vast majority of borrowers who rehabilitate their defaulted debt with $5 monthly payments are eligible for $0 payments after they exit default, under an income-based repayment plan. But about 90 percent of debtors who rehabilitated their debt failed to enroll in these programs, according to the CFPB’s analysis.

In that case $5 * N months is an inexpensive temporary peace of mind even if the looming debt remains.

My friend had this issue when health issues required her to drop out senior year. No degree, but saddling debt. The deals you make are always temporary and often misunderstood. If 90% of borrowers aren't doing something, there's a reason.

The best thing that she was able to do was to declare chapter 13 bankruptcy, which shut down the collections bullshit and trickery and let her pay debt down. In her case, the student loans picked up a prorata share of her payment which put a dent in the balance.

The institutions of higher learning taking this money could force their indebted students to study this process, learn about career and work options, or even nudge them toward likely job trajectories, but they don't and no one forces them to.. They're happy to continue selling a dream and hobble these poor students who haven't had proper guidance with debt. Frankly it's shameful.

Parent loans, not loaning money from parents, will not restructure payments based on income of the student. About half of my undergrad loans are parent loans.

Are you talking about PLUS loans? Because those ARE loaning money from parents; it's just that the parents borrowed the money to loan it and it's the parent's responsibility to pay it off. The government loan isn't to the child in the first place.

Or am I misunderstanding?

I don't know the difference. Only that my parents have loans from my undergrad, and I can choose to just not pay them, but I'm not a piece of shit (aka, my younger two siblings). But those loans can not get adjusted payments based on my income.

Some 'anecdata': 2 people I've known personally basically seem to fall in the category of "my credit score is 300 and bill collectors call but I don't make enough money so screw them I'm not paying." Just because someone attended college doesn't mean they have made wise decisions about taking loans and what to study (if they've even finished a degree). That $5 is towards a pack of cigarettes or gas for their car, why would they 'give that away?'

Then they go into rehabilitation with minimum payments, so they can get more student loans and not pay those back either. And the saga continues

Income based repayment can be way too high. Think two or three hundred when you are already living paycheck to paycheck.

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