I have been trying t figure out why the democrats want Biden to wave his magic wand of forgiveness while democrat leaders have not proposed legislation.
So my theory is, no one expects anything to get done but they want to look like they are trying. One of the problems with loan forgiveness in general is when even a portion is forgiven, that amount is considered taxable income. While it is doubtful that Biden could pass forgiveness by decree I’m really not sure he could structure it in such a way to avoid the money being taxable. I think that is the job of congress.
Congress on the other hand could throw in making the forgiven amount non-taxable. This however would be like rubbing salt in a wound, there would be many unhappy people if simple forgiveness is granted, then make it non-taxable, that is the kind of thing that starts revolutions.
If a borrower has $50k forgiven income tax would be imposed in one lump sum that tax year. The good news to those way in debt would be “your loan is forgiven”. The bad news is “you owe $1000s in taxes this year”. Owing money to the department of education is one thing, owing money to the IRS is all together different.
So i think no forgiveness for a large sum, maybe a small token amount, keep the issue alive for future election fodder.
You nailed it.
That seems like the worst of both worlds.
The way to ding all guilty parties is make it dischargeable in bankruptcy.