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Pros and cons to the government forgiving $108 billion in student debt

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    You've heard it right, folks. The Fed is actually going to help some people with their student debt. This Wall Street Journal article, laid it all out pretty well. Which such a growing problem in loan debt, it is a relief to see something like this happening in the next few years. It may actually have a positive impact on the economy, less debt would have to equal more consumption, right? At the same time, I'm afraid that those who don't necessarily deserve it will take advantage of the program. The article said it best:

    Growing evidence suggests many of the most hard-pressed borrowers—college dropouts who owe less than $10,000—aren’t taking advantage of the programs, while workers with graduate degrees, such as doctors and lawyers who don’t necessarily need help, are.

    What pros and cons have I not thought of?

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    I look at this as more of reigning in the crazy amounts of loan interest debt, by forgiving some of it. So seems like the primary 'forgiveness' plan is to pay based on your income, by %. Somewhere in the ballpark of 10-15% of your earnings. Over 20 years. Then the remaining balance after 20 years will be forgiven... I would say that would be plenty to pay back an overpriced education.
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    It's sad that there is such a monopoly on higher education, that people spend most of their lives paying off their loans. My uncle went back to school in his early 30's and didn't pay off his debt until his mid 50's.
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    This is unfortunately a tiny drop in the bucket and I don't see it having that much of an effect on the people who need it the most. The most recent estimates show that there's currently $1.2 trillion (with a T!) in student debt and a $108 billion forgiveness program isn't going to have any substantial impact in bringing getting that number under control.

    I'm personally of the belief that the Department of Education needs to completely reevaluate what institutions they give this money to. If a for profit online university has less than a ten percent graduation rate then why are they still eligible to operate and receive Federally guaranteed student loans?

    Just about any businesses would be shut down if it had a 90% fail rate. Why are predatory universities the exception to this rule?

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    Forgiveness can be positive if done right. Make it count as INCOME. The income tax on the forgiveness is figured AFTER all the taxes and credits are completed. The forgiveness amount is added as income. That will make the AGI higher.

    That year, the person(s) will only be able to claim "1" person in their deductions. Might sound mean, but TAXES will be paid on per that deduction.

    Person(s) will also loose ALL tax credits that year.

    2018 - 1040 form

    Line 7 - This is where the Student Loan Forgiveness is added

    Line 10 - Taxable Income. This is the more tricky adjustments to the tax.

    Tax will be 2 tier - Taxable income and the other tax is figured on the Student Loan forgiven ("1" person used to determine tax)

    Line 14 - This is where the Student Loan forgiveness tax is entered.

    Line 15 - Total tax

    So, a person with an AGI, before student loan is entered, of $60,000 and student loan of $40,000 will have a total of $100,000 of income that year

    Tax on $140,000 - $27,889

    Tax on student loan forgiven of $40,000 - $4,745

    Total of $32,634 in taxes owed that year.

    Might make some people think TWICE