Biden cuts student loans

Gallipoli

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Given its magnitude, this deserves its own thread. All told, this will result in almost $600B in student loan reduction.

"The government will cancel $10,000 for borrowers making less than $125,000 a year and $20,000 for those who received Pell grants. The Administration estimates that about 27 million will be eligible for up to $20,000 in forgiveness, and some 20 million will see their balances erased....

The Penn Wharton Budget Model estimates that canceling $10,000 for borrowers earning up to $125,000 will cost about $300 billion. The Pell grant addition could increase this by as much as $270 billion. The four-month freeze on payments will cost $20 billion on top of the roughly $115 billion it already has."

 

Gallipoli

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This puts it succinctly.

"Those who will pay for this write-off are the tens of millions of Americans who didn’t go to college, or repaid their debt, or skimped and saved to pay for college, or chose lower-cost schools to avoid a debt trap. This is a college graduate bailout paid for by plumbers and FedEx drivers.

Colleges will also capitalize by raising tuition to capture the write-off windfall. A White House fact sheet hilariously says that colleges will “have an obligation to keep prices reasonable and ensure borrowers get value for their investments, not debt they cannot afford.” Only a fool could believe colleges will do this."

 

Gallipoli

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This amounts to a massive power grab by Joe Biden.

"There has never been an executive action of this costly magnitude in peacetime. Not Mr. Obama’s immigration amnesties, not his Clean Power Plan, not Mr. Trump’s border-wall fund diversion. Nothing comes close to this half-trillion-dollar or more executive coup."

 

3genspider

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When the tax man comes calling, will these same borrowers be able to pay the lump sum tax obligation that comes with debt forgiveness? Or has this been deemed a non-taxable event?
 

spiderman

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what's the point of Congress if you can Executive Order anything you want?
might as well have a monarchy.
 

spider fan

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Who knew the President of the United States had such power? Not a good example for teaching responsibility........................
 

Gallipoli

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It gets better,

"Pouring roughly half [a] trillion dollars of gasoline on the inflationary fire that is already burning is reckless,” Jason Furman, the Obama administration’s top economist, tweeted. Americans already doubted Mr. Biden’s new climate and health law would do much to lower prices, but they’ll draw a direct line from the loan bailout to further price hikes. A CNBC poll says nearly 60% of Americans fear this handout will make inflation worse."

 

KE Spider

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Equity? Is this the new definition? Personally sign a loan contract, then when the going gets tough you expect someone else to pay it off?

What about the folks who signed the exact same contract, but lived up to their obligation, sacrificed, and paid off the loan? Is that "Equity"?
 
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spider fan

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When the people find that they can vote themselves money, that will herald the end of the republic.“ — Benjamin Franklin. There is no evidence that Franklin ever actually said or wrote this, but it's remarkably similar a quote often attributed, without proper sourcing, to Alexis de Tocqueville and Alexander Fraser Tytler: :A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.

https://quotepark.com/quotes/177709...he-people-find-that-they-can-vote-themselves/
 

spider fan

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Nice responses with the expected emotional twang. I am still looking for numbers showing original principal and accrued balance totals on the outstanding student loan balances. The interest, of course, would be income to the government. However if we use accepted normal accounting principals, there is no loss on unrealized or unrecognized gain. I continue to search.

Over the last several years I have written letters to my representatives in Congress and to heads of governmental agencies offering suggestions on student loans. I also am in the corner to hold the colleges accountable for their part in the student loan debacle.

" My major concern is regarding capitalized interest, the nuclear powered shovel that digs, deeper and deeper, the financial holes for the student loan borrowers.

I follow the proposals being considered for some form of a blanket forgiveness. I know any form of blanket forgiveness is controversial and the opposition is sound, ie., why reward delinquent loan borrowers to the disadvantage of those who have paid in full. I suggest the repaid loans were paid regularly so no interest was ever capitalized or was only capitalized at a minimum and that interest paid was probably deducted. The people who paid the loans timely should not feel slighted.

My suggestion is to forgive CAPITALIZED INTEREST and level the playing field with calculating the loans based on simple interest. Have all the loans recalculated based on simple interest from the first date interest began to accrue. There would be no forgiveness of principal but the large hole in interest due would be less burdensome. All the loans would be recalculated based on simple interest and all payments then retroactively applied against the running balance based on simple interest.

I am unable to find why student loans carry CAPITALIZED INTEREST. Why is the government allowed to make this money off of the most fledgling new members of the work force, recent college graduates?

Another suggestion is to cap the federal loans made to colleges and hold them accountable by supporting their recent graduates in obtaining gainful employment. Set a formula for each college to determine the maximum amount of outstanding student loans on the books to have owed by their students. If the colleges exceed their cap, they would need to immediately pay down the balance. As the students pay down the loans, the paydown amounts would then be deducted from that school’s cap to allow them to offer that amount to incoming students.

I am also enclosing a copy of letter sent last April regarding leakage of student loan data to predators."
 

Gallipoli

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Nice responses with the expected emotional twang. I am still looking for numbers showing original principal and accrued balance totals on the outstanding student loan balances. The interest, of course, would be income to the government. However if we use accepted normal accounting principals, there is no loss on unrealized or unrecognized gain. I continue to search.

Over the last several years I have written letters to my representatives in Congress and to heads of governmental agencies offering suggestions on student loans. I also am in the corner to hold the colleges accountable for their part in the student loan debacle.

" My major concern is regarding capitalized interest, the nuclear powered shovel that digs, deeper and deeper, the financial holes for the student loan borrowers.

I follow the proposals being considered for some form of a blanket forgiveness. I know any form of blanket forgiveness is controversial and the opposition is sound, ie., why reward delinquent loan borrowers to the disadvantage of those who have paid in full. I suggest the repaid loans were paid regularly so no interest was ever capitalized or was only capitalized at a minimum and that interest paid was probably deducted. The people who paid the loans timely should not feel slighted.

My suggestion is to forgive CAPITALIZED INTEREST and level the playing field with calculating the loans based on simple interest. Have all the loans recalculated based on simple interest from the first date interest began to accrue. There would be no forgiveness of principal but the large hole in interest due would be less burdensome. All the loans would be recalculated based on simple interest and all payments then retroactively applied against the running balance based on simple interest.

I am unable to find why student loans carry CAPITALIZED INTEREST. Why is the government allowed to make this money off of the most fledgling new members of the work force, recent college graduates?

Another suggestion is to cap the federal loans made to colleges and hold them accountable by supporting their recent graduates in obtaining gainful employment. Set a formula for each college to determine the maximum amount of outstanding student loans on the books to have owed by their students. If the colleges exceed their cap, they would need to immediately pay down the balance. As the students pay down the loans, the paydown amounts would then be deducted from that school’s cap to allow them to offer that amount to incoming students.

I am also enclosing a copy of letter sent last April regarding leakage of student loan data to predators."
I want to point out that I quoted Jason Furman, an economist in the Biden Administration. He made the most compelling points. We need to eliminate the incentive of schools to increase costs. Biden should have sought legislative solutions.

However, you made fair points. It appears that you have thought a great deal about this.

I am in favor of allowing students to discharge student loans or capitalized interest in bankruptcy.

I am not in favor of providing student loan relief to a guy who has run up 80,000 in student loans and has decided to deal drugs, instead of actually working.
 
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spiderman

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everyone likes free money. I get that. but I don't understand why this is tied to student loans at all.
they show charts saying "most of this goes to people making less than $75,000" as if that's the goal. so then do it and be honest about it. gift money to people making less than $75,000.
but don't just give it to people who took loans.
what about my nephew who chose not to go to college? his father had passed and he didn't want to burden his mother. and he's not afraid of a hard days work. he's got it just as tough as the kid who went to college. I'd argue tougher. and certainly tougher than the couple earning up to $250,000 who are getting this credit.
 

Gallipoli

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The congressional poster child for this is AOC. She pulls down $174K as a congressman, has no kids, drives a virtue signaling Tesla, lives in a high end building in DC and....still owes $17K student loan. This could be paid off in a few months off the congressional salary. Maybe in lieu of a few months car payments/lease payments in a great public transit city like DC or NYC maybe? Or a few more months bar tending at night as a second job? There are many ways to pay off this debt instead of stealing from the taxpayers.
 

Gallipoli

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In some states, it will not be tax deductible. Meaning taxpayers are positioned to challenge this unconstitutional power grab.

"The Biden Administration has to know it lacks the authority to unilaterally cancel a half-trillion dollars in student debt...

An Indiana borrower on Tuesday filed a federal lawsuit to block the President’s student loan write-off. He makes a strong case that he is harmed by the loan cancellation and that it’s illegal."

 

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