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Title: How Joe Biden's student loan forgiveness could blow up your tax bill
Source: MoneyWise via Yahoo
URL Source: https://www.yahoo.com/finance/news/ ... oan-forgiveness-130000754.html
Published: Jan 9, 2021
Author: Ethan Rotberg
Post Date: 2021-01-09 18:08:13 by Dakmar
Keywords: None
Views: 73
Comments: 10

Even if your student debt is on pause right now as part of COVID relief, you’re probably dreading its imminent return. What if someone could just snap their fingers and make all of it go away?

Well, that’s not exactly the plan proposed by President-elect Joe Biden, but the incoming commander-in-chief and a vocal group of backers have floated the idea of canceling thousands of dollars in student debt per person.

Now, after Tuesday’s U.S. Senate runoff elections in Georgia delivered Biden a Democratic majority in the Senate — same as in the U.S. House — the chances for student loan relief seem stronger.

However, even if the current plans do come to fruition, they won’t eliminate everyone’s debt — and they may come with a gargantuan “tax bomb” for you. Here’s what you need to know. How much debt could be forgiven? word DEBT written in chalk on a blackboard being rubbed out by an eraser focal point / Shutterstock

Americans currently hold more than $1.7 trillion in student debt, according to the Federal Reserve. Yet the government's current pause on payments and interest is scheduled to run out at the end of January, even as COVID-19 cases pile up across the country.

Biden has already said he supports legislation that would “immediately” forgive $10,000 in federal student debt per person.

Borrowers are in “real trouble,” Biden said in November. “They’re having to make choices between paying their student loans and paying their rent, those kinds of decisions.”

But is $10,000 enough? A group of prominent Democrats, led by Sen. Elizabeth Warren and incoming Senate Majority Leader Chuck Schumer, say no.

They want the Biden administration to cancel up to $50,000 in debt as a form of economic stimulus, allowing people to start buying homes and investing for retirement. What might actually happen? Washington DC Capitol with waving flag on cloudy day Andrea Izzotti / Shutterstock

On top of that immediate aid, several other measures are in the works to reduce Americans’ student debt, including improvements to the government’s income-based repayment program and Public Service Loan Forgiveness Program.

The big problem is that all of these measures would be extremely expensive. Biden may fail to pass them if he encounters objections from conservative Democratic senators, because the Senate's new Democratic majority is razor-thin.

Some backers argue the incoming president can use an executive order to cancel debt under the 1965 Higher Education Act, but that could lead to the first major legal battle for the new administration.

Biden could also try to pass a watered-down, bilateral solution. A new deal may only target borrowers who are in serious economic distress — and it may not be tax-free. Tax bomb incoming Explosion Cpl. Timothy R. Childers/U.S. Marine Corps

Normally, you need to pay income taxes on the balance of canceled debt, as if you “earned” it in cash. That means Americans benefiting from tens of thousands in loan forgiveness could face an enormous bill at tax time.

Goldman Sachs suggests borrowers may be on the hook for as much as 20% of the amount forgiven, Forbes reports.

In his platform, Biden vowed to amend the tax code to make forgiveness through the income-based repayment program tax free, saying “Americans shouldn’t have to take out a loan to pay their taxes when they finally are free from their student loans.”

While Schumer is calling for those amendments to extend to all student loan forgiveness, you’ll definitely want to start saving up, just in case. If you can’t afford your tax bill right away, the IRS will begin charging you interest and fees. What are your other options? Close up portrait of a young african american woman looking out window when working on laptop mimagephotography / Shutterstock

It’s crucial to recognize that these forgiveness proposals only apply to federal student loans, not the private loans obtained from banks and other nongovernment lenders.

So if you have a private loan — or if you don’t think Biden and his supporters will get their way — you’ll have to pursue other options.

Thankfully, interest rates on private student loans have dropped big-time during the pandemic. Borrowers with either federal or private loans should consider refinancing — that is, trading your old loan for a new one that offers a much lower interest rate.

It’s true that switching from a federal student loan to a private one would make you ineligible for any government relief in the coming months. That could be a tough call to make.

However, there's no downside if you already have a private loan. Refinancing now while rates are cheap could significantly reduce your monthly payment, saving you thousands and allowing you to pay off the balance years sooner.


Poster Comment:

Hell yes, coal miners in Wyoming should be paying $80K/yr for NYC kikespawnwns to attend Columbia U. That's progress! What are you, some sort of white supremacist hillbilly trailer trash who disagrees?

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#1. To: Dakmar (#0)

Wait til Biden piles on the "reparations payment" OWED to Africans living in the US.

Cynicom  posted on  2021-01-09   18:17:30 ET  Reply   Trace   Private Reply  


#2. To: Cynicom (#1)

100 Trillion here, 100 Trillion there, pretty soon you're talking real money.

“I am not one of those weak-spirited, sappy Americans who want to be liked by all the people around them. I don’t care if people hate my guts; I assume most of them do. The important question is whether they are in a position to do anything about it. My affections, being concentrated over a few people, are not spread all over Hell in a vile attempt to placate sulky, worthless shits.” - William S Burroughs

Dakmar  posted on  2021-01-09   18:21:07 ET  Reply   Trace   Private Reply  


#3. To: Dakmar (#0)

trailer trash

Last time I seen the girl across the street in Chicago she had two dirty-faced kids, each by a different father.

Now the older one is in Joliet State Pen and she is living in a trailer park in NW suburban Des Plaines. No idea what she is doing. But she might have applied for a job at that new casino they have out there. ;)

"When bad men combine, the good must associate; else they will fall, one by one." Edmund Burke

BTP Holdings  posted on  2021-01-09   18:21:29 ET  Reply   Trace   Private Reply  


#4. To: Dakmar (#2)

Have relative with over 50K student debt. Waiting for taxpayers to pay it.

Cynicom  posted on  2021-01-09   18:27:26 ET  Reply   Trace   Private Reply  


#5. To: BTP Holdings (#3)

As gruff as I come off sometimes, I would be thrilled to see tax money used to educate young citizens. Can't remember the last time that worked in favor of taxpayers.

“I am not one of those weak-spirited, sappy Americans who want to be liked by all the people around them. I don’t care if people hate my guts; I assume most of them do. The important question is whether they are in a position to do anything about it. My affections, being concentrated over a few people, are not spread all over Hell in a vile attempt to placate sulky, worthless shits.” - William S Burroughs

Dakmar  posted on  2021-01-09   18:31:57 ET  Reply   Trace   Private Reply  


#6. To: Dakmar (#0)

No matter what the new ass wipe does, it will be paid for with borrowed money and "We the People" will be on the hook

Darkwing  posted on  2021-01-09   18:38:34 ET  Reply   Trace   Private Reply  


#7. To: Darkwing (#6)

The whole system is so out of whack no amount of currency could rectify it. I expect to be picking beets somewhere near Haifa next year, while my house is occupied by six families from Shanghai.

“I am not one of those weak-spirited, sappy Americans who want to be liked by all the people around them. I don’t care if people hate my guts; I assume most of them do. The important question is whether they are in a position to do anything about it. My affections, being concentrated over a few people, are not spread all over Hell in a vile attempt to placate sulky, worthless shits.” - William S Burroughs

Dakmar  posted on  2021-01-09   18:45:03 ET  Reply   Trace   Private Reply  


#8. To: Dakmar (#0)

They bailed out the savings and loans, banks, and other financial institutions so why not bail out the students?

DWornock  posted on  2021-01-09   23:40:09 ET  Reply   Trace   Private Reply  


#9. To: Dakmar (#0)

One of the unfortunate effects of a student loan bailout will be that the the enemies of liberty will benefit the most from it. They're stupid leftists who borrowed obscene money to study something worthless for years at a Marxist indoctrination center. The bailout will lift them up, while we and our children are held down paying for their stupidity and profligacy.

StraitGate  posted on  2021-01-10   0:01:13 ET  Reply   Trace   Private Reply  


#10. To: Darkwing (#6) (Edited)

paid for with borrowed money

The FED pays for the cost of printing the Notes. Then they are loaned to the U.S. Government at face values plus interest.

That is quite the profitable scam they have going.

Imagine for a moment how many pallets of $100s that were sent to Iran after Iranian assets were frozen in the U.S. after the hostages were seized in Tehran 1979.

According to what I have seen, pallets of Euros and other currencies were sent to Iran. These currencies were obtained from Swiss banks and other alternative sources. ;)

"When bad men combine, the good must associate; else they will fall, one by one." Edmund Burke

BTP Holdings  posted on  2021-01-10   14:37:37 ET  Reply   Trace   Private Reply  


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