Have you never taken a tax break when you would have made the same decision anyway? Electric car, solar panels, taking the child credit for the first time when your child was already born and close to 12 years old? Did you take the Covid subsidies? Tax laws and government programs change all the time. I have friends who got $1800/mo for having 6 children from the covid relief bill, plus a bigger child credit on their 2021 tax bill. They didn’t lose one penny in salary or benefits due to covid (he’s in the army, she’s a stay at home parent). A windfall? Sure. Unfair? To whom?
My daughter became immediately unemployed (she was substitute teaching) in March 2020, but didn’t have enough time in for unemployment. She’ll take this benefit.
Biden has always said it was only for Federal Direct student loans - not PLUS loans, not private loans. Although Perkins loans were not covered by the ‘pause’, I think they can be considered for forgiveness, and a few other federal loan programs, but not Parent Plus.
I would like to see that too, with a rate of 3-4%. I paid 9% in my day.
This is not an IRS program. The requirements could easily be that the STUDENT fills out an application for forgiveness, sends the application and proof of income to the loan servicer, and it is handled almost like a payment would be handled. MANY borrowers would still have a hefty loan balance. This is not a tax credit.
During Covid and as part of one of the Covid relief bills, student loan forgiveness was made (for a short time) non-taxable. I assume they are aware of that and if the Covid bill doesn’t extend to this executive order, the order will include that as part of the forgiveness.
This will not apply to private lenders, only to Federal Direct loans. An executive order has no money behind it. Biden can sign an order that waives collecting money INTO the treasury but he has no money to send money OUT of the treasury. He has no money to PAY private lenders for payments that are owed to them.
Honestly, much of this money was never coming back INTO the treasury anyway. Students have debt consolidation, IBR plans, loan forgiveness for public service, etc. Money went out but is never going to be repaid. I’d argue that if the balance is cut in thirds, the IBR plan is more likely to get to the principal repayment. For my own kids, one child has paid about 1/3 of her loans and this would wipe out the rest. For the other child, this would cancel about 1/2 of what she owes and she could put more money toward the principal with each payment and she’d be able to make payments while she’s still in grad school instead of letting the balance grow and grow.
This will be a one time executive order. That’s all Biden has the power to do; he can’t pass laws and has no money to fund laws. That’s congress’ job.
IMO, they don’t know how to get the majority of student loans off ‘pause.’ A couple of the major federal loan servicers shut down during covid. Those loans had to be transferred to other servicers. People have moved. My daughter’s loan documentation lists my address on the account and I’ve received no mail or notices from the servicer. She was about to go over to the FA office to figure out how to put her loans into deferral for the May 1 ‘restart’ date when they announce another extension (she wasn’t going to start making payments, just put the account into deferral). Giving a $10k forgiveness is a way to get people to contact their lenders and get back into the repayment mode.