Canceling student loans

[KDIGGZ]

13 minutes ago, Doc said:

 

Well he doesn't need to worry about it now since the mid-terms are over.  But they lost the House, which is good.

It's probably a good thing it was announced afterwards because they would have said see you can't give any power to Republicans because they will take away your freedom! Someone has to be the adult in the room 

[Motorin']

On 10/23/2022 at 9:37 AM, Chef Jim said:

If the Administration really wanted to provide relief to those that are swimming in debt they’d promote the forgiveness programs already in place.  Those provide relief for the WHOLE debt not just $10k which for many is a small percentage of their overall loan balance.  Those programs are based on income and put the payment amount in line with what the borrower can afford. 
 

This should open the eyes of those that think this is a great thing and let them see it’s nothing other than political pandering. 
 

Yeah but but but PPP in 3…..2……1. 

 

People don't understand how those programs work. For those who are already utilizing the IBR programs, the 10 or 20k forgiveness won't effect their monthly payment. 

 

And it might even be the case for some people that it's better to just keep paying the small monthly payment through retirement than taking the total forgiveness tax bomb. 

[Doc]

55 minutes ago, KDIGGZ said:

It's probably a good thing it was announced afterwards because they would have said see you can't give any power to Republicans because they will take away your freedom! Someone has to be the adult in the room 

 

Except Rs weren't in power and it was an EO.  But you're right, they probably still would have bought it.  Because they're so smart.

[SoCal Deek]

58 minutes ago, Motorin' said:

 

People don't understand how those programs work. For those who are already utilizing the IBR programs, the 10 or 20k forgiveness won't effect their monthly payment. 

 

And it might even be the case for some people that it's better to just keep paying the small monthly payment through retirement than taking the total forgiveness tax bomb. 

You appear to be well informed. I’m curious though. If it wouldn’t impact your monthly premium then I suppose the proposal (which appears to be dead) was instead reducing the number of payments on the back end? Effectively shortening the term of the loan? 

[Motorin']

1 minute ago, SoCal Deek said:

You appear to be well informed. I’m curious though. If it wouldn’t impact your monthly premium then I suppose the proposal (which appears to be dead) was instead reducing the number of payments on the back end? Effectively shortening the term of the loan? 

 

Nope. The length remains the same. 10 years for public service (not-for-profits, gov employees) 20 or 25 years depending on the program. 

 

What is effected will be the tax amount owed at the time of forgiveness. Basically reducing the total amount forgiven by 10 or 20k, which will most likely be a taxable event. 

 

So someone that has 100k forgiven after 10 or 20 years of payments will then owe roughly 30k in taxes, which you can make a plan to pay off to the IRS over 6 years. 

 

So if they had 20k forgiven, the taxable amount would be 80k, or a roughly 24k tax bill. 

 

 

[T master]

11 hours ago, Big Blitz said:

 

 

 

 

I'm glad someone has some common sense maybe there is some hope !

[PetermansRedemption]

I’ve always thought the best solution is to set the interest rate to 0% permanently. I believe this would be entirely within the presidents power. I also don’t see how a lawsuit could be brought against it, since the government isn’t actually giving out any money in that case. It ensures borrowers pay back what they borrowed, but actually makes it possible by forgoing to absurd interest that is paid each month. 

[Chef Jim]

14 minutes ago, Motorin' said:

 

Nope. The length remains the same. 10 years for public service (not-for-profits, gov employees) 20 or 25 years depending on the program. 

 

What is effected will be the tax amount owed at the time of forgiveness. Basically reducing the total amount forgiven by 10 or 20k, which will most likely be a taxable event. 

 

So someone that has 100k forgiven after 10 or 20 years of payments will then owe roughly 30k in taxes, which you can make a plan to pay off to the IRS over 6 years. 

 

So if they had 20k forgiven, the taxable amount would be 80k, or a roughly 24k tax bill. 

 

 

Or they can make a plan to start setting aside money now to cover the eventual taxation.  

2 minutes ago, PetermansRedemption said:

I’ve always thought the best solution is to set the interest rate to 0% permanently. I believe this would be entirely within the presidents power. I also don’t see how a lawsuit could be brought against it, since the government isn’t actually giving out any money in that case. It ensures borrowers pay back what they borrowed, but actually makes it possible by forgoing to absurd interest that is paid each month. 

This would have been ideal.  Or even push the loan out more years to reduce the monthly payment further.  There were so many ways to help people without a massive handout.  

[Motorin']

20 minutes ago, Chef Jim said:

Or they can make a plan to start setting aside money now to cover the eventual taxation.   

 

For sure, and it would probably be better to let that money keep accruing interest over the 6 year period making monthly payments to the IRS. 

[Doc]

29 minutes ago, PetermansRedemption said:

I’ve always thought the best solution is to set the interest rate to 0% permanently. I believe this would be entirely within the presidents power. I also don’t see how a lawsuit could be brought against it, since the government isn’t actually giving out any money in that case. It ensures borrowers pay back what they borrowed, but actually makes it possible by forgoing to absurd interest that is paid each month. 

 

Who would lend at a 0% interest rate?

[Backintheday544]

39 minutes ago, Motorin' said:

 

Nope. The length remains the same. 10 years for public service (not-for-profits, gov employees) 20 or 25 years depending on the program. 

 

What is effected will be the tax amount owed at the time of forgiveness. Basically reducing the total amount forgiven by 10 or 20k, which will most likely be a taxable event. 

 

So someone that has 100k forgiven after 10 or 20 years of payments will then owe roughly 30k in taxes, which you can make a plan to pay off to the IRS over 6 years. 

 

So if they had 20k forgiven, the taxable amount would be 80k, or a roughly 24k tax bill. 

 

 

PSFL isn’t taxable under statute. Federal loan forgiveness is not taxable for everyone else through, I think 2026, as part of one of the Dems reconciliation bills during COVID.

 

The 20/25 year is taxable if it occurs after 2026, but that could be extended. In addition, your analysis doesn’t take into account most people with 100k in student loan debt forgiven will most likely be able to exempt most of the COD income under insolvency.

 

Indiana, Mississippi and North Carolina are the only ones that would tax this program.

 

People in those states can opt out of the forgiveness. But you’re looking at most a $1,000 of additional tax.

11 hours ago, Big Blitz said:

 

 

 

Interesting case. You typically need standing to sue. The other cases have been strict down because of no standing. This Trump appointed judge got around that by…. Not even considering it.

 

The appeal will rely on the lack of standing issue. It does need to go through a conservative appeals court, then the Supreme Court however.

[PetermansRedemption]

7 minutes ago, Doc said:

 

Who would lend at a 0% interest rate?

The government. Why would they be in it to make a profit? If the government wants to hawk college as affordable for everyone, it makes sense. If you have an $80,000 student loan balance at 7% your monthly payment in the beginning is nearly 75% interest. And they wonder why we got into the situation we are currently in. If you lose your job and go into forbearance for a year your balance is $7000 more than when you left.  

Edited November 11, 2022 by PetermansRedemption

[Capco]

36 minutes ago, Motorin' said:

Nope. The length remains the same. 10 years for public service (not-for-profits, gov employees) 20 or 25 years depending on the program. 

 

What is effected will be the tax amount owed at the time of forgiveness. Basically reducing the total amount forgiven by 10 or 20k, which will most likely be a taxable event. 

 

So someone that has 100k forgiven after 10 or 20 years of payments will then owe roughly 30k in taxes, which you can make a plan to pay off to the IRS over 6 years. 

 

So if they had 20k forgiven, the taxable amount would be 80k, or a roughly 24k tax bill. 

It took me a couple reads to understand what you were getting at, but I see now it was specifically about how the Biden forgiveness proposal would affect loans covered by other forgiveness programs (rather than how it would affect all loans period... which is what I thought you meant at first).  In other words:


 

Loan forgiveness that is part of income-based repayment programs works like this:  if you make your monthly payment for the required number of years (e.g., 10 years for those in not-for-profit or government jobs), then your remaining loan balance is entirely forgiven.  

 

The amount forgiven may count as a taxable event in the year the forgiveness occurred; this tax liability can be spread out over 6 tax years.  

 

For example, consider a public school teacher with 10 years (aka 120 months) in one of these programs.  After their 120th monthly payment (for a total of $30k in payments), the remaining $100k balance of their loans are forgiven.  Depending on their circumstances, this forgiveness may be a tax liability and can be spread out over the next 6 years.

Alternatively, suppose that same public school teacher also qualifies for $20k of relief from Biden's forgiveness program.  In this case, the additional forgiveness doesn't change the amount of months required before your remaining balance is forgiven, nor does it lower your monthly payment.  You still end up paying the same $30k over the same 120 months.  The only thing the $20k in additional forgiveness will do is decrease the balance forgiven that you may owe taxes on (from $100k to $80k).  

[Chef Jim]

4 hours ago, Motorin' said:

 

For sure, and it would probably be better to let that money keep accruing interest over the 6 year period making monthly payments to the IRS. 

Why accrue interest?  Is this a profit center for the government?  LOL

 

How about letting people have the option to a) Keep the terms of the loans but at zero interest or b) reamortize back out to 10 years at zero interest.  
 

There are so many options but just giving people $10-$40k is just obvious political pandering to me. 

4 hours ago, Doc said:

 

Who would lend at a 0% interest rate?

The government. 

[B-Man]

 

[BillStime]

46 minutes ago, B-Man said:

 

 

Definitely a good way to sway young voters.  Hope you win!  lol

 

[Capco]

5 hours ago, Doc said:

Who would lend at a 0% interest rate?

I see both Peterman and Chef Jim beat me to the obvious answer:
 

5 hours ago, PetermansRedemption said:

The government. Why would they be in it to make a profit? If the government wants to hawk college as affordable for everyone, it makes sense. 

 

1 hour ago, Chef Jim said:

Why accrue interest?  Is this a profit center for the government?  LOL

 

How about letting people have the option to a) Keep the terms of the loans but at zero interest or b) reamortize back out to 10 years at zero interest.  
 

There are so many options but just giving people $10-$40k is just obvious political pandering to me. 

The government. 

Correct me if I'm wrong, but you two seem to be on different sides of the spectrum and yet still came to the same rational conclusion.  If so, that's very reassuring to me (look... it's 2022 and the bar for optimism is low atm lol).  

And to the specific point on the availability of various options, you also have to consider the overhead costs associated with collecting those zero-percent loan payments over years and years.  It's far simpler and more cost-effective to slash student loan balances outright.  At the same time, options are generally a good thing to have and certain situations might be better suited to the suggestions, a) and b), that were provided.  

[BillsFanNC]

Merry election season everyone!

 

 

[Backintheday544]

1 hour ago, BillsFanNC said:

Merry election season everyone!

 

 

Lol, it’s annoying how dumb Republicans are.

 

1. There is no proof anyone in the Biden administration thought the plan was unconstitutional.

 

2. One Trump appointed lower court judge held it unconstitutional because it vioLated the public notice and comment requirements of the Administrative Procedures Act. Several lower courts have upheld it and the Supreme Court in 2 cases have said they won’t hear those Republican challenges.

 

Interesting, this case is brought by Republicans saying they have standing because they’re not getting enough student loans cancelled.

 

If the program fails due to an APA violation, the admin can just open it up to notice and comment and it’s Constitutional again.

 

In summary, it’s incredibly stupid to think the Biden admin did this knowing it’s unconstitutional.

edit - this case will probably actually help student loan borrowers as Biden will probably extend the payment freeze while it goes through the courts and then again if it has to go through notice and comment.

 

Edited November 12, 2022 by Backintheday544

[Motorin']

18 hours ago, Chef Jim said:

Why accrue interest?  Is this a profit center for the government?  LOL

 

How about letting people have the option to a) Keep the terms of the loans but at zero interest or b) reamortize back out to 10 years at zero interest.  
 

There are so many options but just giving people $10-$40k is just obvious political pandering to me. 

The government. 

 

Those seem like great options... I was talking about an individual planning ahead for the potential tax bomb, and instead of paying that all off at once, let your money keep accruing interest as you pay it off

over 6 years. 

 

But as @Backintheday544 that may not be a reality for many people.