If the Democrats had it their way, student loan debt would be wiped away. One of the biggest proponents of this socialistic act is Senator Elizabeth Warren. Of course, during her run for President, it was estimated that her programs would cost the country 99 trillion dollars - I just can't make this stuff up!
One of her ideas is the elimination of income taxes on student loans forgiven. Through one of their many programs, if the government forgave student loan debt, the student borrower would be burdened with income taxes on the amount forgiven. Thus, the student goes from being indebted with student loans to be indebted with IRS tax debt - not a good situation. Leave it to the government to do a favor for a student loan borrower and then saddle them with thousands of dollars of IRS tax debt.
This program is for any forgiven debt between 12/31/20 to 1/1/26. The thought is that this opens the door for the democrats to urge President Biden to sign an executive order to forgive up to 50,000 if not all of the student loan debt.
I see four problems:
1. The politicians say this will ignite the economy. It is questionable what it will do for the economy.
Student loan debt payments are spread out over a long-time, and many are tied to a minimum payment, which is tied to their income. We are not talking about a large amount of money that moves the needle. Plus, this might allow the student to save more rather than spend.
2. What about the students who paid their debt off? Where is their relief?
Those students who paid off their student loans are getting a raw deal. How can you justify forgiving some and not forgiving others?
3. What about up-and-coming students? Do they get their student loans forgiven as well?
Is this a prelude to free college? When politicians want to pass a big bill such as student loan forgiveness or free college for all, they typically take baby steps before going for it. This movement appears to be those baby steps.
4. We simply cannot afford it.
Twenty-eight trillion dollars in debt, enough said. Thus, socialism does not work!
I think this particular idea of not burdening students with IRS tax debt is a good one. However, it needs to stop here.