Just talking to my wife about this now
I guess more facts will come out soon but overall I am glad for those it helps. It is never going to be enough…
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I don’t agree. The numbers show that the $10k-$20k will cover 100% of the debt for 1/3 ($10k) to 1/2 ($20k for Pell recipients) of all borrowers. My kids are in those groups and will have their loans totally paid; one had paid about $5000 of hers so only had $10k left to pay, and the other had paid her Perkins loan but will have her remaining Stafford loan forgiven (very close to $20k owed).
I scrimped and saved, paid what I could, but they had to take some student loans (not the full amounts they were eligible for). They chose their colleges for affordability, one picking a low cost public and the other picking a private but with really good scholarships and grants. They did not use their loan money for spring break trips or car payments (neither had a car at school). One paid taxes on her scholarships that paid for some of her room and board.
This is a game changer for them, one who just bought a house (and she’s been doing her part to stimulate the economy with the purchase of floors and carpets and paint and yard stuff) and the other who is still in grad school. When she graduates, it will be debt free (her grad school is fully funded, and for that we are also grateful).
Many who have $100k to $200k have private loans or state loans. The federal government can’t do anything about those. Those who have government loans above the forgiveness level will now benefit from the 5% cap on payments AND the government paying the interest above the payment amount so the balance will not grow every month, with forgiveness in 10 or 20 years. That may be more helpful to those with HUGE balances, as long as they are government loans, as their payments may fall and their balances won’t grow.
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I stand corrected about the word bill. Thx for pointing that out.
No, it is not taxable. It was excluded in the Covid package and I think that’s permanent. The PSLF was always non-taxable .
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To be clear FEMA loans are low interest but must be repaid.
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ok, how about farm subsidies?
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The $10k/$20k will be an executive order. I think the 5% ongoing will be part of the department of education ongoing ‘programs’ and budgets. Executive orders have no funding so can only establish things that can be self funding (like DACA).
Agreed farm subsidies should be refined or eliminated based on the top 1% (by wealth) of farm owners historically receive 25% of the subsidies. I would allow market forces to play out, similarly I would expect people who took out loans to be responsible for paying them out.
It appears your justification for loan relief is that there is other similar government waste or inequality. Yes there is waste, however the solution that best suits America isn’t additional waste and the rewarding of a moral hazard. Stated differently it appears you are pushing the two wrongs do in fact make a right form of government.
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I actually think this action will help a lot of people who really need the help (full disclosure: it won’t help me, or my kids).
On the topic of wasteful government spending, in my opinion, this particular example isn’t the hill on which to die. There are so many other areas to be truly outraged (tax deductions for interest paid on yacht mortgages, as one example).
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I’m having trouble trying to find if this covers law or medical school direct loans. A medical resident makes about half of the top threshold for qualifying. This would be a nice thing for these folks.
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As reported in the WSJ: “This forgiveness applies to federal loans for both undergraduate and graduate programs, as well as to Parent Plus loans, White House officials said.”
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One small loophole for older students to be aware of - this only refers to loans “held” by the DOE. That means to me direct loans made after the Obamacare shift to direct lending. If you had loans that you consolidated in say 2005-2010 into a new loan with 25-30 year amortization that were funded by a private sector lender, my guess is you are out of luck even if you qualify. Uncle Sam will not be writing checks to the bond trustee of a Sallie Mae or NelNet asset backed securitization deal to clear those loan balances.
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At the expense of inflation, tax payers, and the fulfillment of the moral obligation of people to repay debts they deliberately incurred.
I am all for helping people but not without regard for the broader consequences and implications.
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This article has some good information with helpful FAQs (including answers to questions asked on this thread):
“In addition to the loan forgiveness, the president will also be extending the pandemic-era student-loan pause on payments and interest through the end of the year. The measure began in March 2020 and has been repeatedly extended since. The Federal Reserve Bank of New York estimates the pause spared borrowers nearly $200 billion in payments during this period.”
I just can not wrap my head around this! What is the justification? How is this legal? Between the pause and forgiveness without tax consequences I am praying a lawsuit is filed challenging all this in the next few days. I may even look into it myself.
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I have seen multiple articles stating legal challenges are likely. Here’s an article from WSJ, with short excerpt:
Mr. Biden’s plan will test the legal limits of the federal government’s authority to cancel student debt. Its success could depend on how courts would interpret the education secretary’s powers under the 1965 Higher Education Act, which allows the secretary to “consent to modification” of loans, and “compromise, waive, or release” unspecified amounts of student debt.
https://www.wsj.com/articles/biden-to-announce-student-loan-forgiveness-plan-11661331600
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The Biden team has been researching this for 2 years. They seem secure in their ability to use executive order to do this.
I also saw an article that said while challenges are likely, many groups, states, private citizens will have no standing to challenge an executive order in court and the challenges will be dismissed without ever getting to the merits.
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So my D , who graduated in dec 2020 has less then 10K in loans (and yes she had started to pay the unsubsidized one back), and tax year 2021 filed independently, and makes “non profit salary”. Assuming Will get her loans forgiven.
My S, graduated a year early (this may), but will get his diplomna now (needed final Coop to get degree). He was still a dependent for 2021 but will be filing independently for 2022 . We have not even gotten anything from the loan company yet. I think they assumed he is graduating in May 2023? Will he have to pay off his loans still, or will they be forgiven?
I have no position on this, just shared what I’ve been reading. WSJ reported here that Biden’s advisers are mixed on the legality issue:
The issue has also divided some of Mr. Biden’s political advisers, according to people familiar with the matter. Some have argued that forgiving debt would energize young voters. Others have urged caution and encouraged him to defer to Congress, while raising concerns about whether the administration has the legal authority to act on its own.
Regardless the possible legal challenges, I am more concerned that this issue will negate the impact that we may have seen in November elections due to overturning of Roe v Wade.
To me, that’s the key. Another band-aid isn’t going to solve the problem. In fact, it may worsen the problem. Wouldn’t more students, and their families, be more willing to take on more educational debt in the hope of another forgiveness program in the future?
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