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Her situation is real unfortunate. However a single line from the story sums it up:
""They didn't tell me it was taxable income," she says. "I had no idea.""
What kind of person goes into a loan without knowing these details? Who lives in the US without knowing the tax code? She shouldn't have been surprised.
That's why you don't take out heavy loans to go to school unless you can be reasonably sure they won't take years and years to pay off. This is almost never the case for undergrad. Grad school varies greatly.
That is really interesting. It does sound like the government needs to do something - it does not make sense for one part of the government to cancel a student loan, but then another part of the government to then consider that loan taxable income.
5 seconds on Google would have told her what she needed to know--student loans are not dischargable in bankruptcy and any that are forgiven are considered income, why would they not be?
The government doesn't need to do anything, people need to be smarter. It makes zero financial sense to take out $100,000+ for undergraduate student loans. There is no job that pays $100,000+ right out of UG and it is just not fiscally responsible to do that. Getting a degree at a $57,000/year school does not give you a leg up on grad schools, jobs, etc. Students need to apply to schools that not only have a range of academic challenges but also financial range of schools and go into the process with the mindset that their favorite school just might not be affordable for them. Once people do this, like they used to 15-20+ years ago, the student loan "crisis" will go away.
The federal government already caps federal loans at $27,000 for UG, it's all the private loans people are taking out that is causing this issue. Stop with the private loans and your life will be a lot better...
Well, I suppose owing $26,000 is better than owing $91,000 although it's still a burden.
Yes, it is still debt, but manageable debt and that is the difference. Average salary across the nation for someone coming out of school with a bachelor's degree is about $50,000. At that salary, if someone is responsible, they can have that debt paid off in just a couple years. At $100,000 on a $50,000 salary, you are looking at 10+ years to pay that off. The $27,000 isn't really any different than a car payment, where the payments on the $100,000 is more like a good sized mortgage payment.
I'm just wondering how they expect her to pay it back when she is on permanent disability. Can they garnish her disability checks? According to the article, loans forgiven for other things, such as working certain teaching jobs aren't taxable, but ones forgiven for disability are. It just seems backwards to me, since at least the teachers can still work. But yeah, 91k in undergrad debt is crazy anyway.
I'm just wondering how they expect her to pay it back when she is on permanent disability. Can they garnish her disability checks? According to the article, loans forgiven for other things, such as working certain teaching jobs aren't taxable, but ones forgiven for disability are. It just seems backwards to me, since at least the teachers can still work. But yeah, 91k in undergrad debt is crazy anyway.
They have forgiven the loans, but she will have to pay taxes on that $90K+ income she gained from having the loans. If she was properly prepared for a disability, she shouldn't have seen much decrease in her monthly take home pay and should be able to come up with the tax money, however, it's obvious she did not have adequate disability coverage, like most people. She has one year where her earned income will be that $91K, after that, it goes back down to what it would be on her disability pay--which, if her employer subsidizes any of the premiums, is taxable income. If she has a private plan, that is not taxable income.
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