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There's a big problem with the government's offer to 'forgive' your mountain of student-loan debt
Business Insider ^ | 08/11/2015 | JONATHAN GARBER AND ANDY KIERSZ

Posted on 08/11/2015 7:53:27 AM PDT by SeekAndFind

Student-loan debt is a big problem.

The latest Federal Reserve data shows there is nearly $1.3 trillion in outstanding student-loan debt in the US.

In late 2009 and early 2010, student-loan debt passed auto loans, credit cards, and home-equity lines of credit as the biggest debt burden Americans face.

According to Debt.org, "The latest studies say that 70% of college graduates leave school with student-loan debt that in 2014 averaged $33,000."

Realizing graduates were struggling to repay their heavy debt burdens, the government announced a few plans that would allow student debt to be forgiven over time.

The loan-forgiveness repayment plans are helpful, but it's not that simple.

Two of the more popular ones are Public Service Loan Forgiveness and Income-Based Repayment.

Public Service Loan Forgiveness allows those working in the public sector to apply to have their loans forgiven after 10 years of service, which equates to 120 payments.

For those who don't work in the public sector, the government created a few income-driven plans. These allow borrowers to pay 10% to 20% of their discretionary income toward their student loans, which will then be forgiven in 20 to 25 years.

But there is one big problem. The loan balance at the time of forgiveness for income-driven plans is treated as income and taxed as such. Depending on the interest rate of the loan (some Federal loans have interest of more than 7%), the income-based payments might not cover the interest that is accumulating on the debt, which would cause the payoff amount of the loan to balloon over those 25 years.

Also, if someone is making income-based payments, chances are they are doing so because they cannot afford to make their regular loan payments.

(Excerpt) Read more at businessinsider.com ...


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: college; debt; education; tuition
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1 posted on 08/11/2015 7:53:27 AM PDT by SeekAndFind
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To: SeekAndFind

2 posted on 08/11/2015 7:54:11 AM PDT by SeekAndFind (qu)
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To: SeekAndFind

What they really want is to wipe it all away with a good credit record intact, no liabilities and no hardship. Screw them. Life ain’t like that.


3 posted on 08/11/2015 7:55:53 AM PDT by Gaffer
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To: SeekAndFind

Why not force public institutions to lower tuition?

Severely limit foreign students.

Private universities will adjust based on the market.


4 posted on 08/11/2015 7:55:54 AM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: SeekAndFind

The problem is, we scrimped and sacrificed to pay our kids’ tuition and I’ll be if we’re going to be on the hook for everyone else’s kid’s tutition, too.


5 posted on 08/11/2015 7:58:41 AM PDT by bgill ( CDC site, "we still do not know exactly how people are infected with Ebola")
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To: SeekAndFind

I am sure that any Democrat proposal intended to drive hoards of Millenials to the polls will make the forgiveness tax exempt.


6 posted on 08/11/2015 7:59:18 AM PDT by Buckeye McFrog
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To: SeekAndFind

That, and when forgiven, the bank eats the loss.


7 posted on 08/11/2015 8:00:34 AM PDT by Ingtar (Capitulation is the enemy of Liberty, or so the recent past has shown.)
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To: SeekAndFind

Obama likes it... crush the middle class even more, slow the economy more, and make people believe that poor choices will never have any negative consequences (because Uncle Sugar will always bail you out with other people’s money)


8 posted on 08/11/2015 8:00:51 AM PDT by Teacher317 (We have now sunk to a depth at which restatement of the obvious is the first duty of intelligent men)
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To: SeekAndFind
The loan balance at the time of forgiveness for income-driven plans is treated as income and taxed as such. Depending on the interest rate of the loan (some Federal loans have interest of more than 7%), the income-based payments might not cover the interest that is accumulating on the debt, which would cause the payoff amount of the loan to balloon over those 25 years.

We're from the government, and we are here to help

9 posted on 08/11/2015 8:02:09 AM PDT by Teacher317 (We have now sunk to a depth at which restatement of the obvious is the first duty of intelligent men)
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To: SeekAndFind

Assuming the income-based option will grow the principal via capitalized interest, the balloon hit of debt cancellation income is already forgiven under the insolvency rule via form 986.


10 posted on 08/11/2015 8:02:54 AM PDT by NonValueAdded (In a Time of Universal Deceit, Telling the Truth Is a Revolutionary Act)
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To: SeekAndFind

Most of the student debt that I see is deferred. I’m not sure how it works & how many times you can apply for deferments but I wouldn’t be surprised if interest accumulates the entire time the loans are in deferment.
So, these student loans are already buried in interest before they even start making payments. No wonder the govt took over, nice racket they’ve got.


11 posted on 08/11/2015 8:03:07 AM PDT by rainee (Her)
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To: SeekAndFind

It makes me mad because I paid all that tuition instead of borrowing.


12 posted on 08/11/2015 8:03:16 AM PDT by The Ghost of FReepers Past (Woe unto them that call evil good, and good evil; that put darkness for light..... Isaiah 5:20)
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To: SeekAndFind

Bravo Zulu


13 posted on 08/11/2015 8:09:11 AM PDT by NonValueAdded (In a Time of Universal Deceit, Telling the Truth Is a Revolutionary Act)
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To: bgill
"The problem is, we scrimped and sacrificed to pay our kids’ tuition and I’ll be if we’re going to be on the hook for everyone else’s kid’s tuition, too."

Then you had better to be prepared to march on Washington, drag the politicians out and tar and feather them as a minimum; because that is what it will take to stop them from handing out ever more of your money to buy votes.

14 posted on 08/11/2015 8:09:58 AM PDT by Truth29
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To: SeekAndFind
Freeloading kids going in and the same will come out. Never wanted to pay their own way but expect to come out millionaires. America is building a Country of the most mixed up minds in the world.
15 posted on 08/11/2015 8:12:18 AM PDT by Logical me
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To: Gaffer

Life ain’t like that.

That is right too bad.

Big freaking cry babies.....my neice and nephew are both PHds and still in their 20s. Everything handed to them by mom and dad.

We were raised differently just one generation ago.......its the Baby boomers children.


16 posted on 08/11/2015 8:13:55 AM PDT by Uversabound (Our Military past and present: Our Highest example of Brotherhood of Man & Doing God's Will)
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To: SeekAndFind
Gotta have that liberal arts degree in classical 7th. century Tibetan poetry.

Secondly, the IRS looks at bankruptcy as a monetary gain and is taxed as such. You file bankruptcy because you don't have the money and the IRS wants money you don't have.

17 posted on 08/11/2015 8:20:32 AM PDT by SkyDancer ("Nobody Said I Was Perfect But Yet Here I Am")
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To: SeekAndFind

Why student loans? why not car loans and mortgages too? or credit card debts?

The government has no right to forgive student loans.


18 posted on 08/11/2015 8:20:44 AM PDT by I want the USA back (Media: completely irresponsible. Complicit in the destruction of this country)
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To: Uversabound

My three boys lived on peanuts, worked, served in the reserves and did without cars and new clothes to graduate without debt. They watched their friends party and drive nice cars while taking out loans. Now they want us to pay someone else’s debt? FUHC


19 posted on 08/11/2015 8:26:47 AM PDT by Oldexpat
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To: SeekAndFind

People my age who want this are fools. You borrow something, you give it back. If you don’t want to be stuck with debt, go become a crack addict in the ghetto. Then I always hear people whining about how other countries have tuition-free colleges. I can’t even imagine what kind of propaganda they spew. Although, I guess the only difference here is that we pay for the propaganda.


20 posted on 08/11/2015 8:29:08 AM PDT by Politicalkiddo ("Fools are my theme, let satire be my song."- Lord Byron)
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