Andy Hough

Increase the Gas Tax

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This doesn’t have much chance of happening but it should. The federal gas tax has been at 18.4 cents since 1993 when the price of gas was about $1 a gallon. Now that gas is over $3 a gallon the gas tax is a much smaller percentage of the price. The gas tax needs to be raised to help improve the nation’s transportation infrastructure.

That isn’t why I think the gas tax should be increased though. I think it should be increased to help change people’s gas consumption habits. Many people complain about the high cost of gas now but not that many make changes to deal with high gas prices. If gas prices go back down most people will return to their old habits and sales of gas-guzzlers will rise once again. An increase in the gas tax might help people to adopt or continue with gas-saving practices. The price of gas in the United States has long been extremely low compared to the price in Europe. The United States uses over 5 times as much gas and diesel per capita compared to Europe. Higher gas taxes would reduce consumption and help lead to greener alternatives such as walking,bicycling, and use of public transportation. I don’t expect there to be a significant increase in the gas tax any time soon but it needs to happen eventually.

Forced Frugality

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Back when I was getting over a problem with gambling I used a technique I call ‘forced frugality’ to help deal with it. Basically whenever I received money I would immediately spend it on a bill. This way I never had any extra money that I was tempted to gamble away. If I didn’t have any bills due I would just pay them ahead of time. I often paid my next month’s rent at the beginning of the month. I was giving up a little interest that I could have earned on the money but one gambling binge would wipe out all that interest and more. A major drawback to the technique was I could never actually save money just pay ahead on bills.

Now I don’t have a problem with gambling and can save money. The past couple of months though I’ve been spending my money unwisely and not paying down my debt or saving money like I should. I’m going to implement my forced frugality technique again. Any time I receive money it will immediately go to a bill,savings, or to pay off debt. I don’t have a problem with spending money once it is in my savings. If the money is just sitting in my checking account and I don’t need it to pay a bill I’ve been giving in to temptation lately and spending it frivolously. Until I feel that I have my spending back under control I’ll be using the forced frugality technique.

March Expenses

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Here is a breakdown of my expenses for March:

Household

$378

Utilities

$107.11

Transportation

$151.90

Entertainment

$335.85

Food

$121.96

Student loans

$100

Health Insurance/Medical

$170.22

Total

$1365.04

 

My expenses are too high mainly because of my entertainment expense.  I really need to cut that one back.  My health insurance is paid for three months so I shouldn’t have any medical expense this month. Other categories should be roughly the same. My goal is to get my expenses under $1000 a month not counting what I pay towards my student loans.

March Income

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Here is a breakdown of my income for March.

Online Income

$115.69

Survey

$5

Interest

$69.43

Tax Refund

$133.93

Total

$324.05

 

My online income came down a lot but I’m still happy with it.  I’m on track to make a lot more than last year.  My interest income is high because I’m including ING Direct referral bonuses.  April will be another low income month but in May I’ll return to work and start making some decent money.

The CCRAA and Law School Loan Forgiveness

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The College Cost Reduction and Access Act offers a loan forgiveness program for those who work in public service.  As I am strongly considering a career in public service when I graduate from law school I decided to do more research on the loan forgiveness program.

The details of how the program works are somewhat complicated but this fact sheet from Brooklyn Law School and this one from NASFAA give a good overview of the program.  First, you need to consolidate your loans(private loans aren’t eligible) with a Federal Direct Consolidation Loan.  Next you need to make payments for 10 years(120 payments) while employed in a public service job.  The remaining debt then will be forgiven.

In order for this to work you need to be on the income-based repayment plan.  Otherwise,under the standard repayment plan after 10 years the loan would be paid in full and there wouldn’t be any balance remaining to be forgiven.  The income-based repayment plan limits your annual debt repayment to 15% of your discretionary income-adjusted gross income minus 150% of the poverty level.  By my calculations this would result in $37,035.00 in payments for someone making $40,000 a year.  Since I expect to have around $70,000 total in loans I would have about half my debt forgiven.  Over the 10 years one’s income would most like rise though which would also increase the total of payments.

There are some drawbacks.  If you don’t stay in public service for 10 years than you won’t receive any loan forgiveness and any interest that remains unpaid because of IBR payments is capitalized when the borrower leaves the program. You don’t have to be in public service to use the IBR program though and it forgives any remaining debt after 25 years.  Another potential pitfall is that the amount of forgiven debt is treated as income in the year it is forgiven.  This could result in a huge tax bill.  They may address this issue but I’m not aware of any solutions yet.

All in all it is a good deal though and I’m worrying a little less about my huge student loan debt.  Make sure you get all the relevant information if you wish to take advantage of this program.