#StudentLoanDebt: Let’s Talk Cancelled Debt
Hey there! 👋 So you’re curious about how student loan debt can actually be “cancelled”? Let me break it down for you in simple terms!
### Understanding Loan Forgiveness
Loan forgiveness is a process where a borrower no longer has to repay some or all of their student loan debt. It can be granted for various reasons, such as working in public service or through income-driven repayment plans.
### Public Service Loan Forgiveness
One common way to have student loan debt cancelled is through the Public Service Loan Forgiveness (PSLF) program. If you work in a qualifying public service job and make 120 qualifying payments, the remaining balance on your loans can be forgiven. This program has specific requirements, so make sure to check if you qualify!
### Income-Driven Repayment Plans
Another option for getting your student loan debt cancelled is through income-driven repayment plans. These plans calculate your monthly payments based on your income and family size, and any remaining balance after a certain number of years (usually 20-25) can be forgiven.
### Other Options
There are other programs and options available for loan forgiveness, such as teacher loan forgiveness for educators, Perkins loan cancellation for certain professions, and discharge due to disability or death. Each program has its own requirements and benefits, so it’s important to research and see what works best for you.
### Taking Action
If you’re looking to have your student loan debt cancelled, start by contacting your loan servicer to explore your options. Make sure to gather all necessary documents and information to support your case, and stay informed about any changes in legislation that may impact loan forgiveness programs.
### Conclusion
In a nutshell, student loan debt can be “cancelled” through various programs and initiatives like PSLF and income-driven repayment plans. By understanding the requirements and taking proactive steps, you can work towards financial freedom and relief from your student loans.
Remember, every situation is unique, so it’s important to consider your individual circumstances and seek guidance from financial advisors or loan counselors if needed. Good luck on your journey to debt relief! 🌟
The federal government lent a whole bunch of low interest money to people to go to school through a variety of different programs all connected to FAFSA.
The government owns the debt, so it can just say “What this debt? Nah, you dont have to pay it back, its all good bro.”
They’re simply written off–if it’s a government-backed loan (as nearly all are) it’s the government eating the cost.
There’s also some settlements/lawsuits where the university in question is eating the cost, or some variation thereof.
For some reason there’s this idea going around that since student loans are held by the government, the debt “doesn’t exist” but that’s not *really* how it works. It *is* a little different than it just being part of the budget but that debt is absolutely in existence and it affects actual economic things.
Debt is owned by an organization like a bank.
Banks could decide if they wanted to just write the debt off and say “you don’t owe us anything anymore” but they won’t because that’s how they make money. That debt in turn is removed from their books and the bank takes a loss.
Most student loan debt in the US is actually owned by the Federal Government. Since the Government isn’t a profit generating entity it’s perfectly reasonable for them to write-off such debt because having less indebted people in the US is good for the economy and therefore generates more tax revenue. The government actually makes more money from the loan forgiveness in the long run that by charging interest on it.
Another option is to just forgive the interest.
Interest is money that never existed in the first place. If you loaned a person $100,000 and charged 5% interest you are making money. But if you forgive that interest that $100,000 is all that’s owed back. No money was created or destroyed in this scenario.
In the economy charging interest is fake money that’s created by loans. This interest has to be paid ultimately from something, so the Government has to pump more money into the system driving inflation.
the federal government holds the loans they made out under federal loan programs, so when something like IDR plans grant forgiveness, it’s just written off the balance sheet.
all these comments leaving it at “it’s the government…“ as If the government isn’t funded by taxpayers.
Nothing is free. The government is writing this off which means it’s goes into the overall national debt or out of the national budget.
They aren’t canceled. You’re paying them with tax dollars. Maybe not directly, but you are.
I think the first part we need to cover is what student debt actually is.
When you go to college you can apply for federal aid in the form of a loan as a borrower. This loan is guaranteed by the government w/ an authorized institution (typically a bank) known as a lender. Sallie Mae, Sofi, and Navient are some examples of lenders that have had contracts with the government to offer student loans off the top of my head. There’s a whole bunch of rules the lenders must follow to be in accordance of the contract to provide student loans. The interest rates must be reasonable, they can’t deny loans based on a lot of requirements. On the other hand these loans are nearly impossible to get rid of w/out dying or paying them off.
So that brings us to when the government says they are cancelling the debt that means they (the government) will pay the lender instead of the borrower.
You need $50 for food. You don’t have it. I give you $50 and tell you to pay me back. You agree. You buy food, but can never pay me back. You ask if I can forgive the debt. I do. Now I’m out $50, but that’s okay, because you survived on my $50.
Specifically the stories that are going around currently that revolve around “another $7 billion in debt cancelled” tend to revolve around the government looking to enforce laws around protecting students from bad actors in the banking or college industry.
For years there have been rules on the books that if you offer a college education there are minimum standards you have to deliver against. The caveat has been is that no one bothered trying to enforce the rules … because who really cares about a bunch of college dropouts.
Ever since the government’s plans for cancelling debt for everyone got rejected by the courts the new approach is dusting off all the old rules no one bothered to enforce and using them for student debt relief.
It’s not cancelled, simply transferred to everyone else so we ALL get to pay it instead (through taxes). Including those who didn’t go to college a don’t get to benefit from YOUR degree like you do.
The government doesn’t OWN anything, they just manage our tax dollars for us (and usually pretty f***ing poorly). The government doesn’t have their own money, they have OUR money (taxes). So “canceling” a debt, owed by YOU, is a pretty dick thing to do to everyone else around you. Like life isn’t already expensive as it is?
Don’t like paying a lot in taxes? Be a big boy/girl and pay your student loan (and all other debts) off completely like a responsible adult and member of society (instead of making your poor choice of degree/career – that resulted in low income that prevents you from paying it off in the first place – everyone else’s problem).
It’s not. They’ll come back like “zombie” mortgages. If you don’t pay, you still owe. Plain and simple. Someone will buy that debt.
Let’s say you borrowed $5 from me. I ‘own’ your loan. After a while I choose to tell you not to bother paying me back and now you owe me $0. The government owns a lot of student loans. It’s within their prerogative to cancel them if they so choose. Biden is cancelling them because there were a lot of predatory tactics used to get students to get over their heads in debt.
It’s not actually canceled. It’s just passed on to honest hard working tax payers to pay. So the basket weaving douche bags who majored in a trash subject can scam the system and continue their victim fetish.
Last week tonight did a great synopsis
Imagine your younger sibling asks to borrow $10 to buy some new Pokebloxcraft something or other.
You say *”Okay, but you have to pay me back at least $1 each week until it’s paid back or you owe me a whole ‘nother dollar! Plus I’m charging you 10% interest compounded every week!”* and they agree and sign an X in crayon or whatever.
The next week rolls around and they pay you $1; so they’d owe you $9 but adding on that week’s interest bumps it up to $9.90.
One week later, they pay you another $1. Now they would owe you $8.90, but the new interest makes it $9.79.
Second week rolls around, they pay $9.79 down by $1.00 and owe $9.67 after interest.
Third week, pay $9.67 down $1, still owe $9.54.
Blah blah blah.
On week ten, they pay you $1 (never having missed a payment) and their balance after interest is… still $8.16 after interest despite having already paid out $10 on a $10 loan.
Then week eleven rolls around, and they don’t come to you with another dollar so you go find them and hound them with *”If you don’t pay me $1 right now then you’re defaulting and owe me $9.16 plus interest makes $10.08!”* to which they say *”I already paid you back $10!”* to which you say *”But the contract you signed says you still owe me $10.08!”* to which they storm out the room yelling *”Mooooooooooooooooommmmmmmmmmmm!!!!”*.
Then Mom shows up demanding to know what the hell is going on. You say *”They borrowed $10 and still owe me $10.08!”* to which they say *”Nah uh! I already paid you back $10!”* to which you say *”You paid $10 in total, sure, but you forgot about interest, and so you still owe $10.08!”* to which Mom says *”Absolutely not! This contract is done; the debt is cancelled. Do you understand me?”*.
That’s basically what is happening with the current Biden loan cancellation stuff.
Lots of folks took out student loans (some graduated, some flunked, but all the same nobody could discharge the debts through bankruptcy despite similar amounts of money being discharge-able for credit-card debt, home-loan debts, business debts, etc.) and most if not all of them have been paying for “weeks and weeks” to the extent of having paid back dollar-for-dollar more than they borrowed… but “the books” still say they owe some astronomically comical number.
Biden’s loan cancellation stuff is basically the government stepping in and saying *”Absolutely not! This contract is done; the debt is cancelled. Do you understand me?”* for some large swath of debts like these.
The taxpayers aren’t “shouldering the cost” because the government isn’t “settling the debt” (i.e. Mom isn’t paying you that $10.08 left on the books.) they are simply “cancelling the debt” by ruling that the debt collector no longer has a right to collect on that debt.