Student loan forgiveness

[spanel]

So do you think they will be 1099c issued for all the student loan forgiveness??

Chris

[rbynaker]

Not likely. It's non-taxable through the end of 2025. See section 108(f)(5).

Rick

[TAX4US]

So how do we know if your client has been given this opportunity?

[Uncle Sam]

One concern I have that wasn't mentioned by Biden is - does the $ 10,000 forgiveness get granted (assuming otherwise qualified) by STUDENT or by FAMILY?
So if parents have more than one student in college simultaneously how is the forgiveness calculated?

[Bucky]

I think this whole thing is more of a vote buy scheme by the democrats. Just by the timing with the midterm elections soon. Gives them something to run on and say if you don't vote for the democrat candidate you will lose this. They know it will end up in court because of constitutional issues and separation of power arguments and not settled until after midterms. If it does get through i have a small equity loan that identifies as a student loan.

[RWG1950]

The amount of student loan debt that has been incurred in this country is incredible. Many people are just not aware of the consequences this will have
on the lives of the indebted students.
It's a shame that many degrees earned are in fields that do not provide enough earnings to be able to support a person and retire their student debt.
Something has to be done for these people or we'll eventually be seeing mobs in the streets with pitchforks (AR-15's these days).
I'm an old codger. When I attended the local state university in the 1960's, my tuition was about $250 per semester.
Inflation has had a good deal to do with all this, but for sure, people of my generation seem to have won the birthdate lottery & subsequent generations
seem increasingly to be getting the shaft.
A fortunate (and grateful) boomer.

[Uncle Sam]

I think this whole thing is more of a vote buy scheme by the democrats. Just by the timing with the midterm elections soon. Gives them something to run on and say if you don't vote for the democrat candidate you will lose this. They know it will end up in court because of constitutional issues and separation of power arguments and not settled until after midterms. If it does get through i have a small equity loan that identifies as a student loan.

I thought that our comments on this board are supposed to be non-controversial and are to avoid offending others with different views.
Yes - discuss the TAX merits or non-merits of government decisions, but don't make political statements that are known to cause debate on this forum.
It's completely irrelevant what my personal political views are on the subject.

[TaxGuyBill]

The amount of student loan debt that has been incurred in this country is incredible. Many people are just not aware of the consequences this will have
on the lives of the indebted students.

It's a shame that many degrees earned are in fields that do not provide enough earnings to be able to support a person and retire their student debt.

.

I have a slightly different view about that. In my opinion, WAY too many students are 'pushed' into going to college without a specific plan for why they are going and without weighing out the negative consequences of time and money (including paying off the debt). In my opinion, many of these students had no need to go to college in the first place.

While this definitely doesn't apply to everybody, I also think that way too many are up to their ears in debt because they are placing recreation above everything else. The amount of money people spend for cell phones (the phone itself, plus month service) and countless streaming services is crazy. Too many people feel they "need" these high-end things, and place that above paying off their debts.

[Beersheba]

Agree with Uncle Sam on discussions centered around partisan politics. We cannot, however, totally ignore Congress, they are the driving force behind the IRS, and often the only people IRS will listen to.

Press releases also release incomplete information, often to becloud the impression of the listener. For example, nowhere on the news have I heard that the REAL ceiling for this student loan indebtedness is $250,000 unless the taxpayer is single. Including this information would only further enrage those who oppose the proclamation.

[Gretel]

This is a complex issue with a lot of different faces. On the other hand it's very simple. What is the priority in our country? And no, it's not education, starting at teacher's pay. In my view, in one of the wealthiest countries, education should be affordable. In the end it benefits everybody. In my home country (Germany) education is and was always free. When I was younger, they even paid a per diem for living expenses but I believe this is gone. I am not saying it just can/should be done the same way in this country. Rarely did you have a student in Germany who didn't do his utmost best to graduate with good grades and fast. And no, not everybody went to college, there were a lot of other options more suited for a considerable number of teenagers.

[Rapid Robert]

"amount of money people spend for cell phones (the phone itself, plus month service) and countless streaming services is crazy."

I was forced to get my first smartphone about 2.5 years ago, it only cost $110 (a popular Motorola model), and my monthly service including 10GB of data is only $35 including tax. But like you I have to confess I question what some folks pay for their phone service -- like when residents of Detroit were having their water shut off for non-payment a few years ago, more than once I muttered that I bet they are still paying their smartphone bill every month! (There are also those for whom the smartphone is their only internet access, so they aren't paying separately for internet.)

But being smart about spending has never been easy or common --- a millennial relative is only just now, with the coming birth of child no. 3, realizing that paying usurious credit card rates is not so smart. One big thing people overspend on these days is food delivery instead of making their own meals at home. But I understand it is really just trading time for money.

Regarding the student loan forgiveness, two of a number of comments I feel like making:

1) Some people think it is unfair to those who paid off their loans that others get relief. To them, I would ask: do you feel the same way about all the taxpayers who will get IRS FTF penalty relief for the last several years worth of late filed returns? Is that fair to all the people who filed on time?

2) I'm not the first to see some similarities to PPP and EIDL loan forgiveness, but who was squawking about that when it was going on? And what about fraud? I just read today about over a quarter BILLION of EIDL fraudulent loans that have been recovered by law enforcement, out of several billion more fraudulent handouts including PPP loans. And that is just those who got caught. Now for student loans, where is the chance for fraud? The funds weren't disbursed directly to the student. This is also why the ACA Premium Tax Credit has worked to the extent that it has (whatever you think that is), because there is little opportunity for fraud (proceeds go directly to insurance provider). When the government does end up providing welfare, at least they can be smart about it.

[Lion]

Students can take out just about any amount of money they choose. Yes, the money goes to the colleges, but the colleges REFUND TO THE STUDENT, NOT TO THE LENDER, any excess over what the student owes the college. My son's friends went skiing in Aspen and sunning in the Bahamas and to lots and lots of rock concerts all over the country and had luxury apartments (without roommates!!) and meals out/delivered and a LOT of booze and the latest clothing fads and sports equipment and NEW cars and... No deadlines, so still paying off in their 40s with low interest rates and deducting student loan interest with no need to itemize. If the females/Mr. Moms took a decade out of the working world to raise kids or grown kids quit their boring jobs to live with/off their parents, their monthly payments dropped or paused. Of course, many living that lifestyle had parents who paid off their kids' loans at student-loan-interest rates lower than what the well-to-do parents would've qualified for. Actually, much lower rates than the now graduated lawyers and doctors and investment bankers and tech wizards and...would qualify for IF borrowing AFTER graduation.

I don't feel sorry for adults still paying off their student loans. They don't have to have graduated or gotten a job in their field or be in lower paying fields, such as nursing or teaching, or "essential" jobs or even be law-abiding people. I guess you can be living in Bermuda and still get the pay-off. All this does is encourage kids to go to college and party for a few years. It DISCOURAGES kids from going to trade school or straight into the working world after high school.

What about those that waited until they graduated/got a job to buy a new car? Who pays off $10,000/$20,000 of that loan?

What about the electricians and plumbers and barbers and other tradesmen who paid to attend trade schools and apprenticeships to learn trades that we rely on? Who pays off their loans?!

By doing only one small thing, all other things become more expensive to pay for it. The cost of college doesn't go away or go down. In fact, the colleges have absolutely no incentive to lower costs with government-guaranteed loans to their students. The cost shifts to the rest of us.

[kathyc2]

First 2 comments were tax related, rest were political opinions that belongs on Facebook, not here.

[TaxGuyBill]

First 2 comments were tax related, rest were political opinions that belongs on Facebook, not here.

While I agree most of the comments are not directly tax related, I think some of them (including mine) are not political. In my opinion, I don't see anything wrong with having non-political comments that are related to tax-related things such as this. Our clients will likely be having similar comments and questions.

[Lion]

Yes, some college students work student loans to their advantage, just like some PPP borrowers worked that system to their advantage. I don't see anything political about that. (My opinion is that it's selfish.) But when it crosses the legal line, it's definitely my business to prepare accurate tax returns, advise, etc.) Most of what I said are facts, not opinions, and definitely not political. And, very definitely not partisan. I don't know what parties my clients, neighbors, and colleagues belong to, but I hear and see how they act. The fact, not opinion, that student loan borrowers can lower their monthly payments based on their income is widely publicized and recommended, and we tax preparers are reminded to compare MFJ vs MFS. It's also a fact that the tax system is used for welfare and to reward certain behaviors (home ownership, for instance) while still being the largest welfare agency when it's our country's collection agency. We all watched the IRS break under the extra projects over the last three tax seasons. The government has other departments to handle welfare. Student loan forgiveness doesn't bring in tax monies, doesn't encourage colleges to lower costs or react to supply & demand, is just a stand-alone event that doesn't coordinate with anything else happening. It doesn't help young people go into the trades. Push on one thing, and other unintended things will pop up.