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Old 06-07-2010, 12:35 PM   #101
Give me a museum and I'll fill it. (Picasso)
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Join Date: Nov 2007
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Originally Posted by Westernskies View Post
WTF? Why would you limit repayment to a percentage of what was borrowed? Do you have a link to this entitlement plan? I could use 200K with a repayment cap of, say 50K... I'll use it to repay my tuition in the school of hard knocks, aka my 401K plan.
This brings up a good point. It looks like the cap on federal student loan borrowing is $138,500 per person total, and you can borrow $20,500 per year for a grad/professional degree.

Between a husband and a wife, it looks like they could borrow roughly $275,000 over the course of 7 years. Grad tuition is running $4,600 a year right now at State U (for half time course loads that qualify you for the max student loans). You could still net close to $210,000 of borrowing roughly over 7 years after paying for tuition.

Then, based on the income repayment chart at the link Martha posted earlier, a family of 2 with an AGI of $35,000 a year, each debtor would repay $164/month or $49,200 over the course of 25 years at which point any remaining debt would be forgiven. $98,400 for the married couple jointly. But you have that $210,000 for the seven years of schooling (well, an increasing portion of the total each year of schooling), plus the remaining 25 years of repayment. All the while the $210,000 can be earning interest or invested in equities. It would only take a ~2% dividend yield to service the income based repayments on the student loans. In the meantime your principal could grow for 32 years.

A strategic divorce that would split your AGI in half would make the income based repayments almost $0/month. Add to that the above the line tax deductibility of the student loan interest you pay, and the forgiveness of student loan debt in the event of death, and this looks like a wildly profitable endeavor. As long as you don't mind sitting through seven years of half time grad school.

One would need to do some due diligence to verify there is no imputed income when you are not working, or that there is a good faith requirement to work and earn money. And that they do not look at ability to repay in terms of other assets like home equity, savings, investments, 401k/IRA's etc.

I have to say this sounds tempting. I always have had an interest in history and some other subjects. Maybe a semester abroad studying the tidal flows of the French Riviera or Roman architecture could be interesting. Or spend a year abroad in some Latin American Country brushing up on my Spanish, and then maybe a year in some Asian country learning the Asian tongue du jour. After seven years of racking up debt, a couple would have $200,000 in the bank for their "efforts".

Edit to add - Yippee! Local State U has distance Ed classes available for $2900 a year (even cheaper). And if you enroll as a regular student, I forgot to mention a few other appealing things a student gets: free stuff like sporting event tickets, student center productions like plays, movies etc for free or reduced prices, university library privileges, gym access, etc. And any amounts spent on tuition are potentially tax deductible or generate tax credits. This little scheme seems more and more appealing the more I analyze it. Thanks gubmint - a dole check I can finally cash!!

Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (6, 11, and 13).
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