Ms. Murphy pays just $330 a month—less than the interest on her $256,000 balance—under a federal income-based repayment program that has become one of the nation’s fastest-growing entitlements.
– In 2012 the average medical-school grad owed about $162,000 in student loan debt. But many of these newly minted doctors can, thanks to one government program, pay just a few hundred dollars a month on their loans—in some cases, far less than the interest that's being tacked on each month. And after 10 years, when the balance has swelled above $200,000, they can have whatever they owe wiped clean. The Wall Street Journal takes a look at this expanding class of borrower: graduate or professional-school students with a six-figure loan who don't expect or intend to pay it back. That attitude isn't a flouting of the rules. As the Journal reports, one 2012 program allows borrowers to pay a max of 10% of their discretionary income (that's any adjusted gross income beyond 1.5 times the poverty line.) And while undergrads are prevented from taking on more than $57,500 in federal loans, as of 2006 grad students stopped being restricted in a similar manner: Once they've borrowed $138,500 in government Stafford loans (that figure includes undergrad debt), the roughly 10-year-old Grad PLUS loans step in, in many cases eliminating the need to fill the gap using private loans. Grad PLUS was actually supposed to help taxpayers, because the interest rates on these loans were higher. But a 2007 measure allows those working full-time for a federal agency or nonprofit to have their balance wiped away if they make 10 years of payments (which, yes, can be capped at the aforementioned 10%) on time—at the taxpayers' expense. The Journal notes that 73% of America's hospitals are nonprofits or government owned, meaning doctors working there qualify.