Are Taxes Paying for Student Loan Forgiveness?
Student loan forgiveness is a hot topic, with stories of people having thousands of dollars in loans fade away and the possibility of more students being freed from the burden of student loan debt. But are taxes footing part of the bill for this loan relief?
What is Student Loan Forgiveness?
Student loan forgiveness is when a borrower has all or part of their student loan removed or reduced. This can be done through a variety of programs from the federal government or private lenders.
The most common loan forgiveness programs are for students who have worked in public service for a set amount of time after college, those who have joined military service, those who are teachers, and those who are on public assistance.
How Taxes Come into Play
So how do taxes pay for student loan forgiveness? Here’s how it works:
- Taxpayers who have loan forgiveness – will report the forgiven amount as taxable income. This means their overall tax liability may increase.
- Taxpayers without loan forgiveness – will continue to pay taxes on any income they receive. The government still collects those taxes justlike income received from any other source.
The money for student loan forgiveness comes from a variety of sources, most notably from the government’s budget. It’s likely that a portion of the funds that are used to forgive student loans come from taxes, but it is not the only source.
Should Taxpayers Be Concerned?
The possibility of taxes paying for student loan forgiveness can make taxpayers uneasy. In the end, it’s important to remember that the government is investing in the future. Student loan forgiveness helps students move from the burden of a college loan to get a college degree to becoming successful, productive citizens. Studies have also shown that student loan forgiveness promotes social and economic mobility, providing opportunities that weren’t available without loan forgiveness.
The bottom line is that taxes often pay for public services and programs. Student loan forgiveness is just one of those. It’s important to take a closer look at the benefits before making any judgment. At the very least, taxpayers should understand how student loan forgiveness works and how it affects their taxes.
What types of loans are eligible for student loan forgiveness?
The types of loans eligible for student loan forgiveness include Federal Direct Subsidized and Unsubsidized Loans, Perkins Loans, Federal Direct PLUS Loans taken out by parents for their dependent children, and some Federal Consolidation Loans. Additionally, some private student loans are eligible for loan forgiveness in certain circumstances.
What programs exist for student loan forgiveness?
1. Public Service Loan Forgiveness Program
2. Teacher Loan Forgiveness Program
3. Perkins Loan Cancellation and Discharge Office
4. National Health Service Corps Program
5. Armed Forces Loan Repayment Programs
6. Income-Driven Repayment Plans
7. The John R. Justice Student Loan Repayment Program
8. Volunteer for AmeriCorps
9. Navy College Loan Repayment Program
10. Bankruptcy
11. Forbearance
12. Student Loan Repayment Assistance Programs (LRAPs)