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General discussion

USA Student Debt. Cancel?

Jun 24, 2019 3:14PM PDT

While canceling it to me brings up issues of fairness, it has also a nasty side effect in the current US tax law where it counts as a windfall income.

I'll go ahead and put my position as to move the interest rate to zero. That is at least a start without the tax windfall and fairness to all in my opinion.

Discussion is locked

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I have my suspicions about this
Jun 24, 2019 3:37PM PDT

Firstly, someone will pay and there will be a ripple/trickle down effect that will affect most all of us. Secondly, I have to wonder if this isn't some clever strategy. I recall tobacco companies being accused of targeting youth to ensure growth and protection of their business. Could it be that a political party would target youth for the same purpose? Already it's well known that persons whose income is dependent on government or government spending will vote for candidates that aren't afraid to raise taxes in order to give more to their "dependants".

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Cancel student debt
Jun 24, 2019 5:02PM PDT

Let's try this a different way.

If your current on your loan payments you can apply to the IRS for a 5K payment to your loan provider.

Your loan amount goes down and it is not a taxable event.

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Correct me if you think I'm wrong
Jun 24, 2019 5:22PM PDT

but I'm fairly certain that the IRS collects but does not disburse funds. There would need to be a major reconstruction of the department of the treasury to change this.

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Whatever dept is tasked
Jun 24, 2019 5:44PM PDT

With sending out payments is fine with me.

The entire thing would need to be approved by congress.

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The thing that caught folk unaware was.
Jun 24, 2019 8:12PM PDT

The loan amount that was forgiven or reduced is a taxable event. The IRS sees a forgiven or reduced loan as income to you and loss to the other party.

The more you think about this, the cra**iness increases.

-> So the only way to avoid that is to drop the interest to zero so the debt stops growing and we avoid getting too deep into "that's unfair."

I did have a student that asked how to not have it a taxable event. The college said they could rescind the course credits as well.

-> On top of all that and I'm sure this will insult someone are the parents that cosigned on those loans and what happens next is in the news.

Most won't pay these off till very old or never.

Post was last edited on June 24, 2019 8:28 PM PDT

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Yup
Jun 25, 2019 2:00AM PDT

The way the rules are setup now it is a taxable event.

I doubt that congress will vote to pay off a 150K loan and make it non-taxable.

Might be able to get a 5K chunk per year non-taxable through congress.

If the person is current on their loan payments.

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Sounds like a lawyer's paradise
Jun 25, 2019 2:45AM PDT

There will be those not caught up due to reasons outside of their control. Dealing with the exception cases is always more costly than dealing with those fitting the normal profile. The potential scenarios are many.

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The rules are simple
Jun 25, 2019 4:43AM PDT

Current on your loan?

If yes then you can file for the 5K payment.

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Your first ¶ sounds sensible.
Jun 26, 2019 3:43AM PDT

But putting interest to zero cuts off the private lenders who took over the collections. They're entitled to something, both to pay their expenses and to cover inflation since the loans were granted, at the very least.

My wife's is an outfit called Mohela, and we've been satisfied with their service and communication. They or the US put us in a two-tiered plan some years ago. The second, higher monthly payback amount kicked in last year. Both were payments that we could handle, with a mortgage and fixed incomes.
Not denying the real problems faced by many, but we have no complaints.

In any case a complex problem, of many the government faces.

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Any change will be met with
Jun 26, 2019 7:54AM PDT

Both good and bad results. Forgiving the loan has issues with:
1. Fairness. Opens the door to folk wanting a refund on having paid theirs off.
2. Current tax law also means taxes due on the forgiven amount. Yet another bill that may not be put off as long as the current loan.

This is where dropping the interest rate to zero seeks to find that middle ground where no one is happy but can get the system to work itself out.

Right now the interest on the loan is keeping the yoke or noose around their necks as they may never get it paid off.

As to the "entitled to something" they have been making money to date on this so the plan I've read of is where it goes to zero and they get to continue with this plus their other loans that have interest.

Companies and government bear the burden of unraveling the mess.

My thought is if companies don't shoulder part of the burden then remove their right to issue more loans.

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I was about to ask why the Beloved Software
Jun 26, 2019 3:45AM PDT

censored "crazyness".
Silly me!

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The really fair thing to do is to
Jun 25, 2019 4:41AM PDT

1. Get the government out of the student loan business, send it back to the banks, and stop GUARANTEEING the funds to the colleges. When the government guarantees the payment, the colleges know they can increase costs every year with no end in sight.

2. IF the loans are to be canceled, make the COLLEGES pay them off since most of them today aren't actually teaching courses that result in jobs after graduation anymore. Becoming a 'community organizer' isn't hailed as a 'career' but a good number of our students today have become activists more than doctors or lawyers etc. Colleges today have turned into political wheels with students as the spokes and yet are charging students millions of dollars that taxpayers are ultimately going to be held responsible for paying that tab.

There are huge complications involved with erasing student debt and which students are actually 'eligible' for it. It will become a massive attorney windfall, and who pays for the attorney fees? Do the students have their loans canceled just to replace that debt with bills from the attorneys? Do previously paid off loans be reimbursed? What about loans that ARE being paid but have massive balances still due?

The whole idea of canceling student loan debt is ridiculous.....what's next? Canceling their auto loans? How about home mortgages or credit cards? Free off-campus living expenses?

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I'd need to agree...at least in principle
Jun 26, 2019 2:31AM PDT

that the government is often better at mucking things up than in fixing them. Why we continue to look to government to solve all of our real or imagined social or economic ills is perplexing to me...and why we think money is always a solution is even more puzzling. We throw too much at the feet of politicians thinking they own the pot of gold that will solve all problems....real or imagined. Today, government has turned into more of a social engineer than a body designed to adhere to its original principles.

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Mt 6:9.10.
Jun 26, 2019 3:48AM PDT

But, you saw that coming.
Happy