Another SL payment is coming

[scgal]

Sept 3, 2022 0:18:23 GMT -5 The Walk of the Penguin Mich said:

Sept 2, 2022 15:29:40 GMT -5 scgal said:

Nope....What I'm saying the high cost of college education cannot be blamed mainly on budget cuts. That is just a easy talking point.

You might want to do some googling as to how much state governments have cut their contribution to secondary education before you dig yourself in any deeper.  Last stats I read, Arizona state is contributing 50% of what it contributed in 2008.  Other states are as bad…..or worse.  

Do you live on 50% of your income you received in 2008?  I doubt it.

Not quite but close. 2008 I was making 72k and using only approx 40k. Today my salary is 140k and I use 60k. 

[minnesotapaintlady]

Sept 4, 2022 19:43:58 GMT -5 scgal said:

Sept 3, 2022 0:18:23 GMT -5 The Walk of the Penguin Mich said:

You might want to do some googling as to how much state governments have cut their contribution to secondary education before you dig yourself in any deeper.  Last stats I read, Arizona state is contributing 50% of what it contributed in 2008.  Other states are as bad…..or worse.  

Do you live on 50% of your income you received in 2008?  I doubt it.

Not quite but close. 2008 I was making 72k and using only approx 40k. Today my salary is 140k and I use 60k. 

I'll admit it's been a while since I took a math class, but how is 140K close to half of 72K?

[scgal]

Sept 4, 2022 21:21:52 GMT -5 minnesotapaintlady said:

Sept 4, 2022 19:43:58 GMT -5 scgal said:

Not quite but close. 2008 I was making 72k and using only approx 40k. Today my salary is 140k and I use 60k. 

I'll admit it's been a while since I took a math class, but how is 140K close to half of 72K?

The question was could I live on have of what I was making in 2008. I make 140k now but only live on 40 K which it may not be half of what I was making in 2008 but its close

[pulmonarymd]

We’re you 23 and a recent graduate just starting out and trying. To get started? I think not. Not the same thing

[teen persuasion]

Sept 5, 2022 7:08:19 GMT -5 scgal said:

Sept 4, 2022 21:21:52 GMT -5 minnesotapaintlady said:

I'll admit it's been a while since I took a math class, but how is 140K close to half of 72K?

The question was could I live on have of what I was making in 2008. I make 140k now but only live on 40 K which it may not be half of what I was making in 2008 but its close

Now you spend $60k.
2008 you made $72k.
Half of $72k is $36k.
$60k is 167% of $36k.

No, you could not live now on half of 2008 income.

[minnesotapaintlady]

Also, as mentioned, time of life needs to be factored in.  Could you live on half of what you made in 2008, with the same EXPENSES that you had in 2008?  A university pretty much has the same expenses year in and year out, it's not like they become empty nesters with a paid off house and don't need as much as they did in the past.  In 2008 I had childcare and a big mortgage, both of those are gone now, but if I had to pay for childcare today it would be a lot more than I had to pay back then.

[TheOtherMe]

Like today's students, I couldn't buy a house until my student loans were paid off.  My student loans had a term of 5 years.  So I didn't have to wait long to buy a house even on a salary of someone starting out in a career.  

As an aside, the year I graduated high school, Iowa started some kind of grant for students going to college based on high school grade point.  I received a letter stating that I had one a grant but the state legislature had no funded it.  Therefore, my grant was 0 dollars.  I remember being unhappy at the time but now I find it funny.  

[scgal]

Sept 5, 2022 9:23:39 GMT -5 teen persuasion said:

Sept 5, 2022 7:08:19 GMT -5 scgal said:

The question was could I live on have of what I was making in 2008. I make 140k now but only live on 40 K which it may not be half of what I was making in 2008 but its close

Now you spend $60k.
2008 you made $72k.
Half of $72k is $36k.
$60k is 167% of $36k.

No, you could not live now on half of 2008 income.

I don't know where you got 60 from I spend 40 from my salary which is only 4k difference from 36 so pretty damn close. It can be done 

[scgal]

Sept 5, 2022 9:51:31 GMT -5 minnesotapaintlady said:

Also, as mentioned, time of life needs to be factored in.  Could you live on half of what you made in 2008, with the same EXPENSES that you had in 2008?  A university pretty much has the same expenses year in and year out, it's not like they become empty nesters with a paid off house and don't need as much as they did in the past.  In 2008 I had childcare and a big mortgage, both of those are gone now, but if I had to pay for childcare today it would be a lot more than I had to pay back then.

Exactly as my life got simpler and cheaper I didn't let lifestyle creep up. The more I made the more I invested. 

[minnesotapaintlady]

Sept 5, 2022 12:16:52 GMT -5 scgal said:

Sept 5, 2022 9:23:39 GMT -5 teen persuasion said:

Now you spend $60k.
2008 you made $72k.
Half of $72k is $36k.
$60k is 167% of $36k.

No, you could not live now on half of 2008 income.

I don't know where you got 60 from I spend 40 from my salary which is only 4k difference from 36 so pretty damn close. It can be done 

From your post? 

Not quite but close. 2008 I was making 72k and using only approx 40k. Today my salary is 140k and I use 60k.

The question was "Do you live on 50% of the income your received in 2008?"  You said you use 60K now.

And everyone else that read that question knew her to mean, "Do you TODAY live off of half what you made in 2008"?  Not did you live off of half your income IN 2008. 

[scgal]

Sept 5, 2022 12:29:22 GMT -5 minnesotapaintlady said:

Sept 5, 2022 12:16:52 GMT -5 scgal said:

I don't know where you got 60 from I spend 40 from my salary which is only 4k difference from 36 so pretty damn close. It can be done 

From your post? 

Not quite but close. 2008 I was making 72k and using only approx 40k. Today my salary is 140k and I use 60k.

The question was "Do you live on 50% of the income your received in 2008?"  You said you use 60K now.

My apologies my time line (i'm also working on next years budget so i'm numbers fried) yes in 2008 I was spending 40 k out of 72. Now I spend 60k so yes it is a far cry from half of 72. 

[Deleted]

Sept 5, 2022 15:23:31 GMT -5 obelisk said:

Sept 3, 2022 10:14:58 GMT -5 Ava said:

Before the pause, I was paying $350 a month just to avoid interest from accruing. I paid that amount for years, and my balance remains the same. If I had been paying what my IBR indicated, my debt would be over $100k right now.
I cannot afford to pay more, and I guess once the pause ends, with no significant changes to the system, I go back to the same situation as before. Well, it was good to get a break from that for a while.
How dare I dream of being an accountant instead of continuing as a cashier at a cafeteria for the rest of my working life? Obviously, I need to be financially punished for that.

If you are working as an accountant, you must be able to pay more than 350usd per month for your student loans. As an accountant what is holding you back from your full potential as an accountant. Are you working as an accountant?? If not you have a income issue which does not meet your full potential. 

First of all, I'm glad Ava understands compound interest.  I think most people who took out student loans don't, which is why they're in so much trouble.  (And yes, it's partly due to the fact that interest rates are crazy-high for a loan that cannot be discharged in bankruptcy.)

We don't know the rest of Ava's finances (and it's not our business) but she does own a condo in a very high COL area (Boston).  I can personally testify how much a modest home in a VHCOL area (Bergen County, NJ in my case) can suck up a huge amount of your disposable income.

[The Walk of the Penguin Mich]

Sept 6, 2022 13:18:56 GMT -5 @athena53 said:

Sept 5, 2022 15:23:31 GMT -5 obelisk said:

If you are working as an accountant, you must be able to pay more than 350usd per month for your student loans. As an accountant what is holding you back from your full potential as an accountant. Are you working as an accountant?? If not you have a income issue which does not meet your full potential. 

First of all, I'm glad Ava understands compound interest.  I think most people who took out student loans don't, which is why they're in so much trouble.  (And yes, it's partly due to the fact that interest rates are crazy-high for a loan that cannot be discharged in bankruptcy.)

We don't know the rest of Ava's finances (and it's not our business) but she does own a condo in a very high COL area (Boston).  I can personally testify how much a modest home in a VHCOL area (Bergen County, NJ in my case) can suck up a huge amount of your disposable income.

Not Boston, it sounds like a small town in CT.  Her condo mortgage is not onerous.

[nidena]

It appears that some states are taxing loan forgiveness.  Am I incorrect in feeling like this is double-taxing?  Like, they already paid taxes within their paychecks and now folx will be taxed on not having to pay a portion of one particular bill even though they're most likely going to redirect the funds to paying towards something else.  It doesn't make sense.

My state is one of them and not only will folx have to pay state tax but, if they live in Marion County, they'll have to pay county tax as well.  So, if I had the full $10k to forgive, I'd have to pay more than $500 in taxes.

[daisylu]

Sept 7, 2022 12:46:33 GMT -5 nidena said:

It appears that some states are taxing loan forgiveness.  Am I incorrect in feeling like this is double-taxing?  Like, they already paid taxes within their paychecks and now folx will be taxed on not having to pay a portion of one particular bill even though they're most likely going to redirect the funds to paying towards something else.  It doesn't make sense.

My state is one of them and not only will folx have to pay state tax but, if they live in Marion County, they'll have to pay county tax as well.  So, if I had the full $10k to forgive, I'd have to pay more than $500 in taxes.

Why wouldn't it be taxed?  It is basically a large monetary gift for specific people from the government. I already pay taxes, but if I win big at the casino my state is going to want their share. And yes, to me this forgiveness equates to winning the lottery.

[nidena]

Sept 7, 2022 13:12:04 GMT -5 daisylu said:

Sept 7, 2022 12:46:33 GMT -5 nidena said:

It appears that some states are taxing loan forgiveness.  Am I incorrect in feeling like this is double-taxing?  Like, they already paid taxes within their paychecks and now folx will be taxed on not having to pay a portion of one particular bill even though they're most likely going to redirect the funds to paying towards something else.  It doesn't make sense.

My state is one of them and not only will folx have to pay state tax but, if they live in Marion County, they'll have to pay county tax as well.  So, if I had the full $10k to forgive, I'd have to pay more than $500 in taxes.

Why wouldn't it be taxed?  It is basically a large monetary gift for specific people from the government. I already pay taxes, but if I win big at the casino my state is going to want their share. And yes, to me this forgiveness equates to winning the lottery.

I don't see not having to pay this particular bill as the same as receiving money.  Especially considering the fact that the money WILL be spent and, most likely, within the state.  I guess it just really pisses me off because my state already has a $6.1 BILLION surplus yet we have shitty roads and inadequately funded public schools.

[minnesotapaintlady]

Sept 7, 2022 13:12:04 GMT -5 daisylu said:

Sept 7, 2022 12:46:33 GMT -5 nidena said:

It appears that some states are taxing loan forgiveness.  Am I incorrect in feeling like this is double-taxing?  Like, they already paid taxes within their paychecks and now folx will be taxed on not having to pay a portion of one particular bill even though they're most likely going to redirect the funds to paying towards something else.  It doesn't make sense.

My state is one of them and not only will folx have to pay state tax but, if they live in Marion County, they'll have to pay county tax as well.  So, if I had the full $10k to forgive, I'd have to pay more than $500 in taxes.

Why wouldn't it be taxed?  It is basically a large monetary gift for specific people from the government. I already pay taxes, but if I win big at the casino my state is going to want their share. And yes, to me this forgiveness equates to winning the lottery.

Well, I mean, it does seem a little silly to tax it if it's meant to give a leg up? They didn't tax any of the Cares Act disbursements and they don't tax financial aid like Pell Grants and scholarships, where you actually HAVE the money you could withhold taxes from if you wanted to.  In the case of loan forgiveness, where would the money come from if it was a large sum? I guess one could try and get a personal loan if they had the credit to do so, otherwise I don't know?  IRS takes payments maybe?

But, seeing as the forgiveness amount is small and it's not taxed federally, it's doubtful most will have much of a burden with just the state taxes. 

[haapai]

Sept 7, 2022 12:46:33 GMT -5 nidena said:

It appears that some states are taxing loan forgiveness.  Am I incorrect in feeling like this is double-taxing?  Like, they already paid taxes within their paychecks and now folx will be taxed on not having to pay a portion of one particular bill even though they're most likely going to redirect the funds to paying towards something else.  It doesn't make sense.

My state is one of them and not only will folx have to pay state tax but, if they live in Marion County, they'll have to pay county tax as well.  So, if I had the full $10k to forgive, I'd have to pay more than $500 in taxes.

Thank you for getting the word out that state, county and city taxes may apply to forgiven loan amounts.  I'm sure that there are folks out there who will be surprised by this news and will appreciate the heads-up.  Borrowers who are currently in school or in deferment or forbearance and those who have recently had their loans brought out of default are particularly likely to be surprised by the non-federal taxation of the cancellation and have some difficulty paying it.  Getting the word out to these folks as soon as possible is a good thing. 

[TheOtherMe]

Forgiveness of debt has long been taxable.  It really got some people back in 2008 when they worked with their credit card companies to reduce their debt to avoid bankruptcy.

While I agree with the forgiveness, I have thought the amount of forgiveness should be taxable like any other debt forgiveness. 

[haapai]

Borrowers who were in default prior to the pause and do not have current income information on file with the relevant authorities particularly need this heads-up.  They need to get that income information to the correct authorities as soon as possible or they will not get forgiveness/cancellation and they may go right back into default for not being able to make payments on a loan that will be entirely erased when they get that information to the right folks.  

It may be a good idea for previously defaulted folks whose loans will be entirely erased to jump through hoops and apply to an IDR program today just to get that information on file tomorrow.  They don't want to receive letters telling them that they need to pay $150 a month to stay current on their rehabilitated loans at the same time that they need to save up money to pay the taxes on the forgiveness on the same loans. 

[Deleted]

Sept 7, 2022 14:50:34 GMT -5 TheOtherMe said:

Forgiveness of debt has long been taxable.  It really got some people back in 2008 when they worked with their credit card companies to reduce their debt to avoid bankruptcy.

DS' first mortgage, taken out during the housing crisis, was meant to get first-time buyers into houses that they'd occupy.  It included $12K up front that was forgivable over a period of years (4 or 5) to be used for improvements to the house.  He was the perfect candidate- just out of college, decent job, minimal but OK credit history.  He used the money to replace some of the windows- house was built in the 1920s.

I asked him if the forgiven amounts were taxable- he didn't think so,  He was NOT happy to find that they were.

As for state taxation- states are greedy.  My SS is taxable by the Feds and the money is (purportedly) put back into the SS funds to keep them solvent.  My state, MO and the neighboring state, KS, just take the Federal taxable income and, with a few adjustments, tax that.  The adjustments do NOT include the taxable portion of SS.   

[teen persuasion]

Sept 7, 2022 13:44:51 GMT -5 minnesotapaintlady said:

Sept 7, 2022 13:12:04 GMT -5 daisylu said:

Why wouldn't it be taxed?  It is basically a large monetary gift for specific people from the government. I already pay taxes, but if I win big at the casino my state is going to want their share. And yes, to me this forgiveness equates to winning the lottery.

Well, I mean, it does seem a little silly to tax it if it's meant to give a leg up? They didn't tax any of the Cares Act disbursements and they don't tax financial aid like Pell Grants and scholarships, where you actually HAVE the money you could withhold taxes from if you wanted to.  In the case of loan forgiveness, where would the money come from if it was a large sum? I guess one could try and get a personal loan if they had the credit to do so, otherwise I don't know?  IRS takes payments maybe?

But, seeing as the forgiveness amount is small and it's not taxed federally, it's doubtful most will have much of a burden with just the state taxes. 

Financial aid like PELL and scholarships ARE taxable, if used for anything other than tuition, like room and board.  Only tuition payments from grants are nontaxable - but then you can't count that tuition paid for AOTC purposes.  So we claimed a portion of scholarships as taxable income just so we could claim AOTC.  And paid (state) tax on it.

And then the state tried to claim we weren't eligible for their $200 tuition credit!  I don't think so!

[minnesotapaintlady]

Sept 7, 2022 16:33:38 GMT -5 teen persuasion said:

Sept 7, 2022 13:44:51 GMT -5 minnesotapaintlady said:

Well, I mean, it does seem a little silly to tax it if it's meant to give a leg up? They didn't tax any of the Cares Act disbursements and they don't tax financial aid like Pell Grants and scholarships, where you actually HAVE the money you could withhold taxes from if you wanted to.  In the case of loan forgiveness, where would the money come from if it was a large sum? I guess one could try and get a personal loan if they had the credit to do so, otherwise I don't know?  IRS takes payments maybe?

But, seeing as the forgiveness amount is small and it's not taxed federally, it's doubtful most will have much of a burden with just the state taxes. 

Financial aid like PELL and scholarships ARE taxable, if used for anything other than tuition, like room and board.  Only tuition payments from grants are nontaxable - but then you can't count that tuition paid for AOTC purposes.  So we claimed a portion of scholarships as taxable income just so we could claim AOTC.  And paid (state) tax on it.

And then the state tried to claim we weren't eligible for their $200 tuition credit!  I don't think so!

Yes, I understand all that, I move some of my son's scholarships to taxable every year to get the AOTC.

I guess the point I was making is most students going to a typical priced school can get 15-20K/year in "gifts" in the form of scholarships and grants every year without having to pay taxes on it.

[TheOtherMe]

In the dark ages when I had my required audit to work for the IRS, I was going to college on mostly scholarships.  I had to prove that the scholarship money was only spent for tuition.  It was easy because I didn't live on campus and the money touched my hands.

I had to show them a bank statement to show where I was using savings to pay for living expenses.

Tough audit for someone that young.

[minnesotapaintlady]

Sept 7, 2022 16:40:39 GMT -5 TheOtherMe said:

In the dark ages when I had my required audit to work for the IRS, I was going to college on mostly scholarships.  I had to prove that the scholarship money was only spent for tuition.  It was easy because I didn't live on campus and the money touched my hands.

I had to show them a bank statement to show where I was using savings to pay for living expenses.

Tough audit for someone that young.

It's also pretty easy to prove if the QEE exceed your scholarship amount. 

[TheOtherMe]

I'm sure it is.  

There weren't all the computers then that there is now.  The auditor called the school and got the scholarship and tuition amounts and I had been told to bring my bank statements.

[Rukh O'Rorke]

Sept 7, 2022 15:11:16 GMT -5 haapai said:

Borrowers who were in default prior to the pause and do not have current income information on file with the relevant authorities particularly need this heads-up.  They need to get that income information to the correct authorities as soon as possible or they will not get forgiveness/cancellation and they may go right back into default for not being able to make payments on a loan that will be entirely erased when they get that information to the right folks.  

It may be a good idea for previously defaulted folks whose loans will be entirely erased to jump through hoops and apply to an IDR program today just to get that information on file tomorrow.  They don't want to receive letters telling them that they need to pay $150 a month to stay current on their rehabilitated loans at the same time that they need to save up money to pay the taxes on the forgiveness on the same loans. 

well, this brings up an interesting question....if the 10k forgiveness is taxed as income....why wouldn't someone with no income get negative taxes off it.....EEIC, etc?


They won't..I assume..but why not?

[minnesotapaintlady]

Sept 7, 2022 18:59:21 GMT -5 Rukh O'Rorke said:

Sept 7, 2022 15:11:16 GMT -5 haapai said:

Borrowers who were in default prior to the pause and do not have current income information on file with the relevant authorities particularly need this heads-up.  They need to get that income information to the correct authorities as soon as possible or they will not get forgiveness/cancellation and they may go right back into default for not being able to make payments on a loan that will be entirely erased when they get that information to the right folks.  

It may be a good idea for previously defaulted folks whose loans will be entirely erased to jump through hoops and apply to an IDR program today just to get that information on file tomorrow.  They don't want to receive letters telling them that they need to pay $150 a month to stay current on their rehabilitated loans at the same time that they need to save up money to pay the taxes on the forgiveness on the same loans. 

well, this brings up an interesting question....if the 10k forgiveness is taxed as income....why wouldn't someone with no income get negative taxes off it.....EEIC, etc?


They won't..I assume..but why not?

Because it's unearned income, the same as capital gains, or interest or child support.  Earned income credit is for money earned working a job.

[teen persuasion]

Sept 7, 2022 18:59:21 GMT -5 Rukh O'Rorke said:

Sept 7, 2022 15:11:16 GMT -5 haapai said:

Borrowers who were in default prior to the pause and do not have current income information on file with the relevant authorities particularly need this heads-up.  They need to get that income information to the correct authorities as soon as possible or they will not get forgiveness/cancellation and they may go right back into default for not being able to make payments on a loan that will be entirely erased when they get that information to the right folks.  

It may be a good idea for previously defaulted folks whose loans will be entirely erased to jump through hoops and apply to an IDR program today just to get that information on file tomorrow.  They don't want to receive letters telling them that they need to pay $150 a month to stay current on their rehabilitated loans at the same time that they need to save up money to pay the taxes on the forgiveness on the same loans. 

well, this brings up an interesting question....if the 10k forgiveness is taxed as income....why wouldn't someone with no income get negative taxes off it.....EEIC, etc?


They won't..I assume..but why not?

What MPL said.

It might be easier to think of like claiming a Roth conversion as taxable income - no actual money goes thru your hands, but you still need to add that $$ figure to your income, increasing AGI and ultimately taxable income (unless it fits in the standard deduction - like claiming taxable scholarships did for my kids on federal, but not state - skimpy std deduction).  It's not wages, doesn't go on that line, it's added elsewhere.

[nidena]

It definitely feels like an incentive to NOT pursue forgiveness within those states that are taxing said forgiveness.  Especially for those whose SLs are $10k or less to begin with.  I had considered requesting a refund and then applying for forgiveness since 90% of my payments were made during the pandemic but when I heard about the tax situation, I'm reconsidering.

This was my situation:
Original balance: $6190
March 14, 2020 balance: $6160 (March 13th was the pandemic "pause" start date)

So I paid pretty much no interest for my loans before the pause; and definitely paid no interest during.  If I asked for the refund and then the forgiveness, I'd end up paying approximately $350 in taxes.  So that would net me ~$5800.  I'm still considering the situation.