Could There Be Disadvantages to Wiping Out Student Loan Debt?
Are you one of the 45 million borrowers in the US stressed about satisfying a student loan debt? If so, that may be one major aspect of the 2020 presidential run that has you paying close attention to debates, and most importantly, promises. No matter what the opinion, most of us perk up when we hear a candidate discussing plans to ‘wipe out’ student loan debt.
Recent news highlights the obvious advantages of saying goodbye to student loan debt; after all, it isn’t hard to understand what a boon it would be to your household budget if you were able to save hundreds of dollars every month. Most borrowers would be downright giddy to say goodbye to what can be an enormous source of stress. In some cases, individuals in the US today are forced to skip over what used to be major milestones in youth: graduating from school, getting married, starting a family, starting a business—and generally going forth to thrive. Today though, far too many students graduate with a diploma in one hand and a monkey on their back in the form of what could be $300-$400 owed on average per month, for borrowers who may only be in their 20s.
But could there be a serious downside to having a loan forgiven, especially since the IRS usually likes to get involved. While it is not always a hard and fast rule, normally you must claim a loan that has been forgiven or charged off, and then it is considered income to be taxed. This could also have negative ramifications on the credit scores of many.
“There are all sorts of ramifications,” said Barbara Weltman, an attorney and author of J.K. Lasser’s Your Income Tax 2020, adding that Congress would have to amend the tax code to help borrowers with their canceled debt.
“The IRS does not have authority to say ‘Poof, it’s gone.’”
If you are currently worried about delinquencies or a potential default, it is important to your financial future to do everything to avoid experiencing collections lawsuits filed by private loan services. They can cause you major headaches, and most especially if a default judgment is filed—then leading to loss of wages, loss of property, and loss of control over your financial accounts.
Have you experienced problems with your loan service provider or student loan program, or are you in danger of defaulting on your student loan? Contact Fitzgerald & Campbell, APLC now so one of our experienced student loan debt attorneys can review your case and discuss all the available options with you.
Our attorneys have decades of experience in serving clients as they navigate through challenging financial situations, to include collection lawsuits, default judgments, and more. Let us review your case and discuss what would work best for you. We are here to help! Click here to schedule a free 30-minute consultation, or call us at (855) 709-5788, or email us at firstname.lastname@example.org.
Posted in: Student Loan Debt