Replies

One thing that neither of these economic “superstars” is mentioning (because they probably don’t have Clue #1 about it) is that cancellation of indebtedness without going through bankruptcy is taxable income. So someone who gets $100,000 of student loan debt cancelled is now going to have an additional $100,000 of income - all in one year. That’ll push up the marginal tax rate on ALL of their other income, for both federal and state income tax purposes. Note that if they cannot pay their current payments (of maybe 0.5% - 0.75% of the loan per month), they sure aren’t going to be able to come up with 30% of the entire balance in one shot. They will then be in the unenviable position of underpaying their income tax, and being subject to underpayment penalties and interest. All of the penalties and interest will continue to accumulate...just like interest on a student loan.

Oh, and their credit will be utterly ruined - first by the debt cancellation and, second, by having a huge tax debt owed to the IRS and their state. Further, tax authorities will not hesitate to garnish wages - and that looks just wonderful to employers, credit reporting agencies and banks.

So, once again, a Socialist idea that sounds wonderful (for some people) on the surface will actually result the contrary result - it’ll ruin all of these people, just faster than they’re being ruined now.

The best thing that the government can do regarding higher education is to start getting out of it now, with the goal of being completely out by 10-15 years from now. After all, it is government grants and loan guarantees that has allowed the universities to collude with each other for the last 45 or so years in jacking up tuition and fees at roughly twice the annual inflation rate. Oh, and the second best thing that the government can do is to prosecute the university boards of directors, officers and deans for the single most massive criminal conspiracy to defraud the American public in all of history. Send them to jail; heck, dig up the dead ones who started the whole multi-trillion dollar rip-off and send their rotting carcasses to jail, too.

So someone who gets $100,000 of student loan debt cancelled is now going to have an additional $100,000 of income - all in one year.

Pish-Posh.

If you're a politician who can wave a magic wand and make student loan disappear, surely, you can make it so the forgiveness doesn't have to be included as income.

It's possible that Sanders hasn't thought about this little obstacle yet, but it might be fun to bring up with any young millennial if they demand you pay for their loans.