It appears President Biden will waive $10K in student debt (with an income test)

Historically speaking, college degrees are worth north of $500,000 more in lifetime earnings. Average student loan debt is about $35,000. Absent the for profit schools, worthless training certificates, etc (for which relief makes sense along with shutting those places down which to a certain extent has happened), we should look at why the ROI on a college degree is no longer worth what it has been in the past. And in the process, potentially re-think the “you gotta go to college” approach so many now have.

And there absolutely will be families/kids taking out loans who wouldn’t have without forgiveness on the table.

And given the real issue is the cost of college, further subsidies will make the problems worse rather than better. But it will make people feel good. Also won’t help with inflation but given about 13% of people have student loans, the effect will be small.

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Thanks for the link but I’m not interested in overly attenuated libertarian apology pieces blaming everyone for the financial crisis except those most immediately responsible. It was a bailout (and a very expensive one), whether the money was ultimately paid back or not (that’s debatable, see the link I provided.) Without the bailout they’d have been out of business. It was a bailout even if it made sense to bail them out. Likewise, it may make sense to bailout some college borrowers on occasion as well.

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I agree there could be occasions when forgiving student loan debt might be warranted. But setting the income limit at $150,000/single or $300,000/couple does not seem targeted to help those struggling the most with repayment.

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I wonder how they came up with the proposed income caps.

Voting demographics?

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Yes, you are right

In which case will any loan forgiveness be taxable income to the recipient, as happens when regular loans are forgiven?

Some thoughts:

  1. I agree that the income limits are ridiculous. I would literally cut them in half.
  2. I am also a fan of cutting interest rates rather than loan forgiveness. But, I would say loan forgiveness keeps the money in graduate’s pocket right away. So, it does have a more immediate affect. Of course, you could do both. But I am hung up on forgiving a loan. It is the wrong message. I would feel much better about it if the income limits were lower.
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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.

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I assume if this does happen, that it will not affect loans going forward. My daughter is about to start college in the Fall. We were only offered an unsubsidized Federal loan. We passed on it. I can’t imagine if I don’t pass on it, it will be immediately forgiven. But you never know.

Sorry. It’s bs. I feel for your daughter. But mass forgiveness is bs. Covid payments were bs.

Too many kids pay to go to college when they can only afford a JC or need to live home.

The tax payers shouldn’t be on the hook.

Of course your daughter will take advantage if it happens. I get that.

But even having the chance is wrong. This is not a tax break. This is a flat out handout and insult to those who paid

Why not give $10k to every family that went to college, whether on borrowed money or not ? Why discriminate against people with no loans ?

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Unfair to the taxpayers who will be footing the bill for decades for all these windfalls…which is what all these COVID payments and loan forgiveness is (don’t get me started on no tax liability).

As far as loan servicers, unless the only loans they service are student loans why would they be out of business? People have been paying their mortgages, car loans, credit card bills and so forth. No pause on those payments. If those federal servicers are defunct, the government has had plenty of time to get them back up and running or to assign the loans to other loan servicers.

If loan servicers are available to handle loan forgiveness verification they’re available to handle loan payments.

Telling people their loan payments will resume September 1 is also a way to get people to contact their lenders and get back into repayment mode.

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I paid, and I am not insulted. Please speak only for yourself and not the others.

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Most of the federal loan servicers only handle student loans - Great Lakes,Naviant, Heartland. Private lenders do service their own or have a servicer that might do their other loan payments (but not credit card payments). Federal mortgage servicers do mortgage loans but not student loans.

I didn’t say they would go out of business, but that they DID shut down. Why? I guess they wanted to do another business (the servicers are private businesses). Maybe they didn’t like their federal contracts.

Tax breaks and bail outs for banks, corporations, and rich people are effectively are handouts too. No one cares unless poor people/borrowers get a break. Go figure?

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I agree. I don’t see why anyone gets special privileges. Yes this is how our society works. Governments give incentives to spur investment etc I wish none of it happened. Economically that’s likely not realistic but imagine if we all as individuals and corporations were treated similarly. We’d avoid the wealthy paying little, and companies spending their way out of paying taxes etc.

Anyway….my point was I don’t like handouts…relative to the topic which is loan forgiveness (or extensions).

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Most government policies that seem like they benefit just one cohort actually do benefit society as a whole. It’s not a gift. It’s a correction and an economic benefit to the country. So maybe you paid all your student loans, but you’re benefitting from some other government policy or windfall. Over a long life, sometimes you’re the direct beneficiary, sometimes someone else is and you missed the boat. And the ones that don’t benefit you directly are benefitting the country as a whole. It’s just plain bad for the economy for all these young people to be in debt. No other western country has its 25-year-olds in massive debt. It was bad policy to begin with.

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One would think that people writing here don’t have to be reminded such basic facts.

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Great for you. But that is tilting at windmills, isn’t changing, and therefor is a waste of time to even address. I am more concerned that the system we have doesn’t only help those who least need help.

Also, you seem to be especially upset with the idea that some borrowers get a break, but you don’t. IMO, it doesn’t make fiscal sense from a societal perspective to view everything through the lens of “if didn’t I get mine, no one else should either,” but we probably differ on that point as well.

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That’s incorrect. Typical student debt in the UK is higher than in the US, in a country with lower average earnings. But it’s less controversial because everyone is in an income-based repayment plan so effectively it acts like any other progressive tax (very few families save up in advance for college). And no one ends up with loans of $200K because there aren’t the same extreme differences in cost or overly expensive graduate degrees.

A good start would be to limit the ability to borrow for graduate degrees (eg only private loans which can be written off in bankruptcy and so won’t be made to poor credit risks) which is where many of the most extreme problems occur.

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