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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 muc

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.
        gigatexal 8y ago
        Back to the point: Lambda school and schools like it are the for profit schools we needed. And I hope the model scales to other industries and that education is flipped on its head because of it.
        thedufer 8y ago
        Why would you have to pay it all immediately? The IRS is very helpful with payment plans (this is obviously better for them than demanding full payment and then watching you wipe away the debt in bankruptcy). Here are some details [1] - fees to move your owed taxes to a long-term payment plan (essentially a loan) range from $31 to $225. And if they aren't, personal loans are possible. Or even bankruptcy! The common thread between these options is that they're better than being $50k in non-dischargeable debt. [1] https://www.irs.gov/payments/payment-plans-installment-agreements https://www.irs.gov/payments/payment-plans-installment-agree...
    - thedufer 8y ago
      The difference in your tax bill between $80k of income and $130k of income is $15k. This is much, much less than $50k. In this case the loan forgiveness has increased your net worth by $35k. That's a lot of free money that you're insisting is actually a curse.
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.

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.
        gigatexal 8y ago
        Back to the point: Lambda school and schools like it are the for profit schools we needed. And I hope the model scales to other industries and that education is flipped on its head because of it.
      - thedufer 8y ago
        Why would you have to pay it all immediately? The IRS is very helpful with payment plans (this is obviously better for them than demanding full payment and then watching you wipe away the debt in bankruptcy). Here are some details [1] - fees to move your owed taxes to a long-term payment plan (essentially a loan) range from $31 to $225. And if they aren't, personal loans are possible. Or even bankruptcy! The common thread between these options is that they're better than being $50k in non-dischargeable debt. [1] https://www.irs.gov/payments/payment-plans-installment-agreements https://www.irs.gov/payments/payment-plans-installment-agree...
  - thedufer 8y ago
    The difference in your tax bill between $80k of income and $130k of income is $15k. This is much, much less than $50k. In this case the loan forgiveness has increased your net worth by $35k. That's a lot of free money that you're insisting is actually a curse.

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.