You’ve said this multiple times. You don’t need to keep repeating that you would benefit from the loan forgiveness.
In most cases, it’s the result of young people getting college degrees that will help them earn lots more over a lifetime than their non college degreed counterparts. Forgiving student loan debt is literally the most regressive handout that our country has ever seen.
At least for the federal loans, do we have aggregated data on these loans? Like average outstanding loan amount for various tranches of annual income, or anything like that? If that data exists (which I would hope it would), I would think it could be FOIA’d?
But do they need a handout vs. those without a college degree. The lifetime extra earnings of a college degree are in the millions. A bachelor degree earns 30% more than associate degree and 80% more than a high-school grad (according to college payoff study from Georgetown University). Ignoring the university’s conflict of interest (university would have interest in proving that their degrees are worth it), the payoff is already worth it as is. Why give those graduates an extra handout over those who went directly to work out of high-school?
It’d be a different matter if the loan forgiveness was limited to only students who did not get a degree and are struggling financially. Maybe if the forgiveness process included a verification that you did not graduate and income caps for the past few years, it’d keep the handout to people who really need it but I doubt the government will be able to come up with a smart enough scheme that could not be abused.
And the main issue with that loan forgiveness is that it solves nothing going forward. You could wipe the slate clean at extreme costs right now and 10 years from now the problem would be right back to where we are now.
I don’t think that data exists in any sort of government system. I’m not sure how it could. The only group in which I think it could exist is for people with federal loans that are using the income based repayment plan. Since that isn’t everyone, it wouldn’t be useful.
I’m sure you don’t doubt that people with college degrees make more than their non degreed counterparts (not immediately after graduation, but shortly after, they pass them and continue widening the gap their whole lives). Are you just curious about the extent to which this is the most regressive handout we’ve ever seen?
Of course they don’t need a handout. I was just pointing out that the majority of people with degrees do better, so any discussion about helping “poor downtrodden college graduates saddled with so much debt” needs to acknowledge that they got something very useful for that debt and for most of them, it was an extremely worthwhile investment.
Is it really in the best interest of the society to tell people that are borderline intellectually able to attend college that they might as well give it a shot because if they don’t finish, we’ll just foot the bill for them? I don’t think so.
I don’t think it’s the main issue, but it is indeed an issue.
That’s a valid point going forward but that loan forgiveness is only a measure looking back to rescue those who already messed up (assuming it could be practically limited to those in financial trouble). It does send the message that the government rewards incompetence and stupidity but it’d hardly be the first one. The 2008 mortgage crisis was another reminder that you can spend frivolously, live beyond your means, invest recklessly in vehicles you don’t understand, and the government will bail you out when you inevitably fail.
Forgiving loans does nothing to prevent re-occurrence by itself. At least the mortgage crisis help push changes in lending practices so that abuses are much less prevalent now than they used to be. For college spending, you’d also need to implement laws that will put back financial accountability on all stakeholders (from universities to lenders to borrowers), otherwise it’s just going to be another mistargetted regressive handout at the cost of yet more public debt.
people keep repeating the merits of whether to do it or not. It’s going to happen folks. I’m just curious what to do in prep. I guess this is the wrong forum, maybe Finance on SD 
Your guess is as good as ours. Based on what was passed 12ish years ago and what happened 10 years later, you should refinance into a direct loan. But you already knew that.
Is your loan a federal loan or private loan? I read that UHEAA used to service both types but moved to service only private loans recently. Does your loan show up on NSLDS or Studentaid.gov with balances and such? All federal loans should appear there. Should also appear on your billing statements where you’ll see either the federal loan program or the lender.
If it’s a private loan, then I’m not sure how to prep for forgiveness since the plans I’ve seen seem to mostly tackle federal loans and then throw in bankruptcy reform to address indirectly the private loans.
And although Biden’s WH is pushing Congress to do it as part of COVID relief, notice that none of this is on the proposed $1.9T bill. I doubt Republican will add it to it so whether it’ll happen or not is still pretty much up for debate I think.
Still doesn’t hurt prepping for it if you can, I totally agree. Same reason I’m watching this topic with two of my kids in college next year. No loans needed but I wouldn’t say no to free money if that’s an option.
I would’ve thought it would exist either with the IRS or with the student loan servicers, or both.
I do think we can “take notice” of the fact that individuals with a college degree out-earn those without.
But I’m interested in seeing the numbers so that we can all have an educated discussion. My guess would be that, of those that don’t actually need this assistance, we’re probably looking at income in the range of $80k - $250k (just guessing here). People making less than $80k may actually need the assistance. And while people making more than $250k may not (i.e., do not) need the assistance I doubt that there is a whole lot of these people that are still carrying student loans, so this handout is only really (perhaps unfairly) benefitting the people in this middle range.
Again, this is all conjecture, but I’d like to see the numbers to figure out where this group lies.
Also, since you repeated your statement again, I can tell you from personal knowledge that the TCJA was a much bigger handout to much more wealthy people (millions+ in annual income). I dispute that this handout, subject to my conjecture above, is more regressive than a variety of tax cuts we’ve seen, and certainly not on the level of the TCJA.
Federal loan (FFEL )
My FFEL ($80K) are fixed @ 2.6%. I’m not sure about pros/ cons unless I can have an educated guess about Direct qualifying and FFEL not?
I don’t consider taking less of someone’s earnings a handout. I’m generalizing here, but I think you’ll get my point - There is a big difference between giving comfortable upper middle class white collar office workers a chunk of gov’t money while giving squat to blue collar laborers and the TCJA which allowed everyone to keep more of the money they earned. Giving money to people that went to college while giving nothing to people that didn’t is the definition of regressive. Our tax code is progressive and it still is even after the TCJA. Is it less progressive? Considering the fact that prior to the TCJA, the bottom 50% of earners paid 3% of the nation’s tax burden, there was really only one direction to go, so yeah, I guess it is. But by how much? What does the bottom pay now? 5%? 7%? Whoa, hold on, we’re getting super regressive now 
Keep in mind, that the TCJA was projected to boost GDP in addition to allowing people to keep more of the money they earned. Up until the pandemic, that prediction had been borne out in the short term. How is the student loan bailout supposed to boost GDP?
How would the IRS know about your student loan balance? How would student loan servicers know your salary unless you are on an income based repayment plan (which not everyone is)?
Why do you say they need the assistance? They can sign up for the income based repayment plan and never have to worry about their student loan payment being too much of their monthly expenses.
The avg salary of a 25-34 year old with a college degree is in the low to mid 50s. It’s in the mid to high 30s with only a high school diploma. Let’s be conservative and say $15k difference. The avg debt of a 2019 graduate that took out loans was about $30k. So… in only 2 years, the college graduate has made enough extra income than the HS grad to cover the loan he has that will make him $15k more (at the bottom end) than the HS grad in perpetuity (in reality the difference grows). What do you think the numbers will show that will make this sound like anything other than a handout to upper middle class young adults that are doing fine with a promising future while doing nothing for lower income folks?
This is just a guess and I could be way off, but I hear this all the time so I’m just throwing this out there. Do you feel bad because it was relatively easy for you to buy a house but the kids today are finding it impossible? You’d get much less of an argument out of me if you advocated the government take this student loan bailout money and throw it at real estate developers under the condition that they can only build 3 bedroom 1500 sq ft houses and sell them for $220k.
To start, I’m not on the other side here. I don’t think this is a prudent measure. All I’m asking for is the data so that we can know what we’re talking about.
That said, I do disagree with some of your points.
It’s a distinction without a difference. If, instead of forgiving $10k of a student loan they offered an up to $10k tax credit for those with student loan balances, I’d argue it’s exactly the same net effect. In one case, you’re reducing liabilities by $10k, in the other case you’re increasing assets by $10k.
As I said, it’s only this middle group that’s getting a benefit that people have a problem with. But, I don’t think the fact that this specific item can be looked at in isolation. In other words, if they come out with a bill that gives a credit to those making $25k, and they also separately implement a $10k student loan reduction, is that any different than if they were in the same bill? I’m not saying there’s this other tax credit plan, but it’s inappropriate to take the TCJA as a whole, and compare that to one other action, even though that action nominally stands alone. What’s the overall cost of a $10k student loan reduction? That’s what matters, not whether any individual item is included in an overall package or not.
First, I think you’re referring to federal income taxes. We could look at only income taxes, but I don’t know why that’s the number we would use. A more accurate representation of the tax cost to any particular individual is total tax cost. And we know that, when we add in payroll taxes, that bottom 50% number goes up since 100% of those individual’s employment income is subject to FICA, whereas, as you move up the chain, the effective payroll tax rate goes down.
For the record, I don’t think this “share of income taxes percentage” method (even assuming we use share of total taxes) is the end all be all of the discussion. If the AGI of the bottom 50% goes down while the AGI of the top 1% shoots through the roof, then you would expect their percentage of total taxes paid to go up. I do think it’s a useful number, but it should be used in conjunction with other metrics.
I don’t think that conclusion is supported by the facts. Post hoc ergo propter hoc. But regardless, this is a discussion in the abstract about what it would mean for something to be “more regressive.” If you take group 1, group 2, and group 3 (for illustration lets assume it’s split into each third of earners) and you give a benefit to group 1 and group 3, but no benefit to group 2, is that more regressive than giving a benefit to group 2 but none to group 1 and group 3? I don’t think there’s an obvious answer, and I don’t think we really care about the answer to which is more regressive. We care about the result.
I looked at my 1098-E - I would have thought it included the total loan balance, like the mortgage statement, but you’re correct, it doesn’t (yes, I know why the mortgage balance matters to the IRS while student loan balance doesn’t).
Not sure if you’re focusing on my number, but if you’re asking why a certain group below a certain income level needs assistance, while it may not have to do with the student loan specifically, I think we can all agree that a family of 2 making $40k household income needs some assistance. Again, just talking about overall; sure, they’ll get the assistance in a different form than what is causing the harm, but they still need some assistance.
I’ve already said what I think the numbers will show. They’ll show that there’s this group of people, below a certain income level that will benefit, and a group of people (college graduates) above a certain income level that will not benefit.
And since there are a lot of factors at play, and I don’t know which “average” you’re using above, it’s why I’d like to see the numbers. I’m not sure why this is a contentious point?
How old do you think I am? 
Also, I’m in the process of looking/buying my first house now, and no, I don’t feel bad for myself when lenders are quoting me 2.5% with 0-3% down and no PMI on up to 750k loan amounts. I don’t really understand what you’re getting at with this question, and I think this is pretty far off topic.
I Imagine all of this will be wildly unpopular with people who were responsible with their student loans or didn’t need them, and people without children.
Sure, it’s the same net effect. But a tax credit going to specific people based only on whether they were able to attend college through borrowing isn’t the same thing as a tax credit for something people across all economic classes do, like have kids, or work. That is a distinction with a huge difference.
No, it’s anyone that has a degree, and therefore (generally speaking) will make (a lot) more than people that don’t have a degree, getting a benefit that I have a problem with. And a lot of other people will have a problem with too.
Because that is what the TCJA is. It’s a federal income tax law. You brought it up as a comparison, not me. Now you’re going to complain that is the comparison I am making?
Yes, SS tax is regressive too. But that isn’t what you brought up as a comparison. I would like to eliminate SS as well, partly because it is regressive. That topic hasn’t come up, but I assure you I am consistent on this.
That’s fair.
Is that supposed to be a comparison to the TCJA? There is no group that didn’t benefit from the TCJA.
If you are honest about the TCJA, where all groups benefited by getting to keep a higher percentage of their income, and compare it to this proposal, were the benefit goes mainly to the upper middle class (and people that are headed to that class for the reason they are receiving a benefit), yes, I think it is clear that student loan forgiveness is more regressive. What is the result? People who are going to benefit greatly from their college degree get a huge handout, while people who don’t have a college degree get bupkis.
Who is this in the college loan forgiveness scenario? The girl that got knocked up 9 months before graduation, got ditched by the dad, and now can only make $40k because she splits her time between her white collar job and her kid? I can think of a dozen better ways to help the $40k 2 person household than college loan forgiveness.
I know you’ve already said it. But I’m putting it in more clearer terms. Why do you need to see more numbers to agree that this is an extremely regressive policy that benefits the exact people that most of our social safety net is not concerned with because they are completely fine on their own?
I guessed wrong on your age, clearly. But if you’re buying your first house now, you must be hearing from your peers the same thing I hear from the media - that the housing market has made it extremely difficult for a young person to afford a home now compared to their parents’ generation. So they delay buying one until marriage when they have 2 incomes, and then they end up delaying having kids because they need both incomes to afford the house. I lucked out in a few ways and didn’t end up like that (mostly timing, but also fatwalleting). It looks like your income level (based on what you’ve been approved for) doesn’t put you in league with most first time home buyers either.
I think one issue is the definition of a regressive tax. Definition is a tax that a tax that applies equally to all regardless of income. By extension, a tax credit that is offered to all regardless of income would be regressive.
Where it gets fuzzy is on who would benefit the most from a $10k forgiveness? If you took only the people who still have a $10+k balance, yes it’d be fully regressive. But one argument is that out of all the people who took student loans, who are the ones with high balances left? Wouldn’t you assume that it skews towards those who did not earn high incomes that would have allowed them to repay the loans already and/or those who took out loans recently? For those who took out the loans recently, one argument is that their college costs were much less affordable than in the past, so there is some argument to compensate them, regardless of ability to repay. For those who took out loans long ago and are still paying, maybe a good portion just cannot afford more than minimum payments, possibly because they did not graduate or got poor return on their degree.
Clearly, I’m playing Devil’s advocate here since I agree that a flat student loan forgiveness would not be very progressive at all. But there’d be simple ways to make it more so if there is political will to do so. Just look at the stimulus check. Phase out limit is a way the money does not go towards the wealthiest, even if the bar is set pretty high. Clearly there’d be a way to phase out the loan forgiveness too. That may be a bargaining chip and it could reduce the total cost of this bailout.
But I can see uphill battle to get a bipartisan agreement on this. Like TraverlerMSY said, as is, it’s not gonna be terribly popular with large portions of the population.
Because of jealousy and bitterness?
There are perfectly rational reasons to dislike this idea, but personal inability to benefit from it is not one of them.
Yeah, this group gets “screwed” many other ways too, like property taxes. Society “incentivizes” having children.
Makes sense though, doesn’t it?
No society without future citizens.
Sure, I didn’t mean to imply otherwise. In many ways the incentives in the US are nowhere near as strong as in other developed countries (free childcare, longer and paid parental leave, and even one-time cash payments).