5 ms·

It doesn't just _look_ like income. It is income. If I give you $100 as a loan then change my mind and say 'you can have it', you just made $100.

TheRealPomax 8y ago
What if we turn it into something a little more analogous, and I loan you $100, and you use that $100, and I never asked for it back, but 12 years later go "actually you know what, never mind about paying me back", that's not $100 you now have. That's $100 you had 12 years ago. But we also need to make sure to keep the analogy in the same ball park, not the same county, so when we're talking $100, the tax on that isn't going to bankrupt you and it's a bad analogy. Let's up that by a factor of 500 instead: when we're talking a full student loan, if I say "actually, keep it", I literally just bankrupted you for kicks, and you should have had some kind of legal protection that prevented me from ruining your life on a whim.
- thedufer 8y ago
  That can't be right. You're saying that going from $50k in debt to a student loan lender to $12k or so in debt to the IRS is a bad thing? Why do you care so much about who owns your debt that cutting it by 3/4 is a loss? Not only that, but now your debt can be eliminated in bankruptcy (a unique feature of student loans is that they are immune to bankruptcy). This looks like an altogether enormous win.
  - gigatexal 8y ago
    I don’t care about who owns it. But paying income taxes on 50k of forgiven debt would be hard for me.
    - thedufer 8y ago
      Sure, it might be hard. But my point is that it can't be harder than paying the debt itself. Debt forgiveness does not leave you in a worse position unless your marginal tax rate is more than 100%, which is vanishingly rare.
      - gigatexal 8y ago
        What? If I make 80k a year having the IRS think I made an extra 50k puts me in a new tax bracket
        kalleboo 8y ago
        But it's only a new marginal rate, so it still only applies to those extra 50k
        gigatexal 8y ago
        The average American doesn’t have the savings to pay that extra amount is what I’m getting at. And I’m average.
        darkarmani 8y ago
        Would you rather owe the entire amount of the loan?
        gigatexal 8y ago
        No I wouldn’t want to owe the entire amount of the loan but if I can’t pay off the loan or the forgiven amount I’m screwed either way. Just in the latter situation I’m relatively less screwed.
        mercutio2 8y ago
        You appear to be pretty attached to the idea that IRS liabilities are worse somehow than student loan liabilities. Other people seem to be trying in good faith to understand why you think this. IRS liabilities can easily be repaid over long time scales, usually at much lower interest rates than you can get on unsecured loans such as a student loan. A $50k non-dischargeable loan, at a relatively high interest rate, with a flexible repayment timeline does not appear, to me, to compare favorably with a $15k IRS liability, dischargeable in bankruptcy, at relatively low interest rates with a similarly flexible repayment timeline.
  - TheRealPomax 8y ago
    And how long, exactly, does the IRS allow you to pay off that $12k? Because if it's "a few months", and really even just "a year", you're proper fucked. Not everyone gets a nice $60k/yr job after their $50k loan investment, and having a $50k loan over 15+ years is manageable, whereas $12k in one will ruin you.
    - thedufer 8y ago
      6 years is standard, plus the time between the forgiveness event and filing, which gives you another 3-15 months or so. Down to 3 years if your balance is <$10k. And as I mentioned before, if it was too short you could declare bankruptcy, which is an option you don't have with student loans. My point that even in the worst case you're in a better position than before still looks valid.

TheRealPomax 8y ago

What if we turn it into something a little more analogous, and I loan you $100, and you use that $100, and I never asked for it back, but 12 years later go "actually you know what, never mind about paying me back", that's not $100 you now have. That's $100 you had 12 years ago. But we also need to make sure to keep the analogy in the same ball park, not the same county, so when we're talking $100, the tax on that isn't going to bankrupt you and it's a bad analogy. Let's up that by a factor of 500 instead: when we're talking a full student loan, if I say "actually, keep it", I literally just bankrupted you for kicks, and you should have had some kind of legal protection that prevented me from ruining your life on a whim.

thedufer 8y ago
That can't be right. You're saying that going from $50k in debt to a student loan lender to $12k or so in debt to the IRS is a bad thing? Why do you care so much about who owns your debt that cutting it by 3/4 is a loss? Not only that, but now your debt can be eliminated in bankruptcy (a unique feature of student loans is that they are immune to bankruptcy). This looks like an altogether enormous win.
- gigatexal 8y ago
  I don’t care about who owns it. But paying income taxes on 50k of forgiven debt would be hard for me.
  - thedufer 8y ago
    Sure, it might be hard. But my point is that it can't be harder than paying the debt itself. Debt forgiveness does not leave you in a worse position unless your marginal tax rate is more than 100%, which is vanishingly rare.
    - gigatexal 8y ago
      What? If I make 80k a year having the IRS think I made an extra 50k puts me in a new tax bracket
      - kalleboo 8y ago
        But it's only a new marginal rate, so it still only applies to those extra 50k
        gigatexal 8y ago
        The average American doesn’t have the savings to pay that extra amount is what I’m getting at. And I’m average.
        darkarmani 8y ago
        Would you rather owe the entire amount of the loan?
        gigatexal 8y ago
        No I wouldn’t want to owe the entire amount of the loan but if I can’t pay off the loan or the forgiven amount I’m screwed either way. Just in the latter situation I’m relatively less screwed.
        mercutio2 8y ago
        You appear to be pretty attached to the idea that IRS liabilities are worse somehow than student loan liabilities. Other people seem to be trying in good faith to understand why you think this. IRS liabilities can easily be repaid over long time scales, usually at much lower interest rates than you can get on unsecured loans such as a student loan. A $50k non-dischargeable loan, at a relatively high interest rate, with a flexible repayment timeline does not appear, to me, to compare favorably with a $15k IRS liability, dischargeable in bankruptcy, at relatively low interest rates with a similarly flexible repayment timeline.
- TheRealPomax 8y ago
  And how long, exactly, does the IRS allow you to pay off that $12k? Because if it's "a few months", and really even just "a year", you're proper fucked. Not everyone gets a nice $60k/yr job after their $50k loan investment, and having a $50k loan over 15+ years is manageable, whereas $12k in one will ruin you.
  - thedufer 8y ago
    6 years is standard, plus the time between the forgiveness event and filing, which gives you another 3-15 months or so. Down to 3 years if your balance is <$10k. And as I mentioned before, if it was too short you could declare bankruptcy, which is an option you don't have with student loans. My point that even in the worst case you're in a better position than before still looks valid.