[atombath]

I understand that feeling... I'm nearing the end of my loans and dropped $3k on one of them yesterday. I would have rather had a vacation if it's just going to vanish!

...but don't get salty because the debt won't vanish. I have no doubt that if an education loan is forgiven, it WILL affect that persons credit rating. Much like when a debt is forgiven/charged-off. Also, charge-offs are typically treated as a form of taxable income... so these people will pay one way or the other, and likely take a long-time credit rating hit.

[dv_dt]

A vacation, or buying a house, or just about any other use of the money would also benefit the economy more than paying it back into loan accounts at some bank or gov't ledger.

[morgante]

> Also, charge-offs are typically treated as a form of taxable income

That's not much consolation. I wouldn't be happy if the government decided to simply pay people for making poor financial decisions, even if we recovered x% of those payments through taxes.

I'd still be paying for it with my massively higher taxes.

Just get the government out of the student loan industry. Let the market signal which degrees are valuable and allow students to discharge through bankruptcy (but ruin their credit).

[zo1]

>"I wouldn't be happy if the government decided to simply pay people for making poor financial decisions"

Government already does that in a myriad of ways, some more morally accepted than others. It's almost part of the base definition of what we expect the government to do, if you really think about it. Paying for the poor that made bad life decisions and lost their job, the sick that didn't save for medical expenditure, the parent that had one-too-many kids and can't pay for their food/schooling, etc.

I would argue they are all very similar, buffering and protecting those that are incapable of providing for themselves, either by inability or conscious inaction/abuse. It's just that some people think this should be done by private efforts, instead of by government which uses it's power to force people to obey and pay.

[jrs235]

And will the forgiveness be tax free or will the IRS come after students for income taxes?

[atombath]

I assume if forgiveness ever occurred, it would need to be respected as income for the debtor(so then IRS gets involved) simply to prevent fraud. Much in the same way that charge-offs are currently taxable income(1099-C).

There's simply no way that you will want to forgive the student debt... so pay them off if you can! The punishments of 'forgiveness' simply have to outweigh the benefits or the system will be gamed until broken.

[massysett]

You can pay back $100 or pay 40% tax on $100 of forgiveness, which is $40. The choice is clear here. The only wrinkle is that the $40 might be due all at once. But if that's a concern, saving up ahead of time to pay back the $40 is still better than paying off the $100.

[jrs235]

I believe there was a short exemption window for income taxes on some mortgage defaults/forgiveness that Congress explicitly allowed. Otherwise debt forgiveness usually gets taxed as income and the amount would be due the tax year it is forgiven. The IRS does allow payment plans and I'm not certain how they would handle such a case as this. I would hope they don't tack on fees and interest but I could certainly seeing them do that. Granted your wages can be garnished to pay for student loans, I don't know who/what entity is chasing that money. Is it the IRS? With huge amounts of taxes due from a forgiveness, the IRS will be on your tail and now you have to choose, what's worse: owing more student loan debt or owing back taxes to the IRS (which if unpaid can lead to criminal proceedings)?

[atombath]

Of course a tax percentage of a value is going to be less than the value. The main penalty would be the tanking of your credit rating. The effect it would have on an interest rate for future loans would be very significant.

[clifanatic]

I refuse to not be salty if somebody else has something I don't have.

[microDude]

Just finished paying my student loans this month. 8 years at $500/month. Yeah, I overpaid to get rid of them faster, but if I could have gotten a reduction in year 2016+X I would have paid the minimum.