FAFSA Loophole? Never have to pay off your loans?

I was having a dinner discussion with some fellow students, many of whom have piles of student debt.

I brought them a scenario that the could not answer, so I thought I would pose it here.

In relation to FAFSA, if you are a graduate student and enrolled full/half time you are eligible for federal student loans.

While you are enrolled in school (at least half time) your school loans are deferred.

Your loans cannot be forgiven (some small exceptions) unless you die.

If you die, your loans are forgiven and not passed on.

In order to be eligible for half time at the graduate level you must take at least 1 course per semester. In order to be eligible for full time at the graduate level you must take at least 2 courses per semester.

Here is my question.

Is it possible to go to graduate school half/full time and qualify for FAFSA loans, and continue to take graduate courses (1 or 2 per semester) for the rest of your life?

Scenario - APUS has many (45+) graduate certificates and graduate degrees that are FAFSA eligible. Each 3 credit class is around $1000. Is it possible to take the maximum FAFSA loan ($12,000-$15,000) per semester while taking 2 classes at a time for the rest of your life and therefore always defer your student loans?

While some of the information above might not be spot on, the general gist should be correct. I'm curious if this is possible.

Thanks!

 

Ok,

So I have heard a similar scenario like a billion times. And the answer technically is yes...with some things to consider. The total amount of federal loans you can receive is about $135,000.00 in a lifetime, unless you are going to school for a Medical Doctorate. I don't know that I would keep going to school, increase my loans through FAFSA just to try and not pay off those loans (as the scenario suggests). You will not be eligible for the maximum FAFSA student loans because the school is the one that determines the need to pay the tuition, and since it part-time, only the course fee's would be covered by the loans (no kick back like some schools do).

Secondly, let me clear another thing, which might be helpful. If the goal is simply not to pay the loans back, and the current degree's that were already obtained are sufficient, I would suggest that the person enroll in a low cost community college course (2 courses for part-time) and just take whatever classes spark their interest. This is a low cost option, probably around $150-200 a semester. Then they would need to contact their loan provider/lender and advise them they are in school. The lender would send a packet to the school or student to give to the school to complete and certify that the student is actually enrolled at least part-time. Then the loan is deferred and no FAFSA needed. And yes.....this student could do this every semester until the end of time and not pay a dime....THAT IS UNTIL SOME REGULATION IS PAST TO LIMIT THIS.

By the way, a colleague of mine did this, but her purpose was to have the loans deferred so she could pay $300.00 a month on her own accord which was more comfortable than $800.00. She eventually paid off the loan this way.

Stev -

 

This is true generally.

Actually, if you make on-time income-based payments for 20 years (240 months/payments), you can now qualify for loan forgiveness. If you work in public service, it's only 120 months.

This really depends on the school. Most schools that I have seen consider 9 hours to be full-time at the graduate level. 3 hours would not cut it.

1) Yes, you can defer your payments indefinitely, even until your death.

2) No, you cannot continue to borrow indefinitely like that because you will hit the loan aggregate limit ($138,000). Beyond that, you MAY be eligible to borrow Grad PLUS loans indefinitely, as long as you do not have a poor credit history. Grad PLUS loans have no aggregate limit, and you are only capped on a yearly basis by the university's cost of attendance.

In general, you are correct, exception for the issue of borrowing amounts.

I have also heard of individuals using very cheap community college certificate programs/credits as a means to defer loans. Sometimes tuition for six hours at a community college is cheap enough not to use loans.

 

Note that this discussion is based on current student loan policies.
But such policies -- like any government policies -- are subject to change.
They aren't written in stone.

If the plan is to "continue to take graduate courses (1 or 2 per semester) for the rest of your life", you could be looking 50 years into the future.
But student loan policies in 2063 might be different from those in 2013 -- just as today's 2013 policies are different from those in 1963.
It might not be safe to gamble that a regulatory loophole will stay untouched for the rest of your life.

 

Just borrow the money, stay in school for life, and never pay it back. The government has plenty of money!

 

I have two ideas that might spoil such a plan. Most grad programs have minimum/maximum time frames for completion. If you're too slow (one course per semester) you probably won't make the cut. Secondly, jumping from school to school over the course of 50-60 years just will not happen. Either some school won't admit you or you'll just burn out. It's a funny hypothetical but would never happen in real life.

 

I cannot find any information about the 240 month loan forgiveness, the only thing I can find is the 120 month for public school etc.

APUS considers full time graduate to be 6 credits or more and half time graduate to be 3 credits.

APUS has 40 graduate certificates available (average of 18 credits per certificate) and average 2 years maximum requirement to complete.

 

Pay As You Earn Plan | Federal Student Aid

If you go to the "advantages" section, you can find the information about the 20 year plan.

 

During the Vietnam war, there was a peacenik whose draft board informed me, uh, him that as soon as the doctorate was completed, they'd be offering a free non-optional trip to Vietnam. The folks at Michigan State, where the doctoral work was underway, said that they would permit as many independent study courses as necessary (with an "incomplete" grade) for as long as necessary. For how long, they were asked. "Remember the 100 Years War" they replied. It worked fine, and a few years later, after we, um-won that war, real graduate work continued. I believe that then, as now, decisions of this kind are often made at the departmental or college level, rather than as university policy.

 

Wow John, Very Interesting!

 

Dr. Bear's example IS interesting and points to a time in our country's history where people were sharply divided on moral grounds. I doubt however that that same university (or any university) would be interested in assisting a student who had deliberately accumulated educational debt with the expressed intention of screwing the American taxpayer. I'm just saying that maybe it's not even an apples and oranges thing, it's an apples and dog poop thing.

 

I've also met people who seem to think it's OK to rob other's of their belongings, steal their cars, break into their homes, etc. The fact that some people think something does not then make it automatically a valid position to adopt. The origin of this thread is that this might be a "loophole" meaning that it runs contrary to the spirit of the law. If you somehow found a loophole in the law that prohibited murder would you then maintain that murder was OK?

 

@ Steve: And they're right. :saevil: