Butler students react to student loan forgiveness program

Students talk about how the federal loan forgiveness program will affect them. Photo courtesy of The Washington Post.

MEGANE LINDSEY | PERSONAL JOURNALIST | [email protected]

True to his campaign promise to take action on student debt, President Biden announced his plan for students loan forgiveness on August 24. However, Indiana is one of seven states that have officially announced their intention to impose income tax on this student loan forgiveness.

The Biden administration has built and shared a Student Loan Forgiveness Fact Sheet, which details the terms and conditions for student loan forgiveness. The deadline for student loan forgiveness applications is December 31, 2023.

This loan forgiveness only applies to an individual if they received a federal loan and earn less than $125,000 per year. Students who have received the federal patent PellGrant will have up to $20,000 forgiven of their student loans. Borrowers who have not received the Pell Grant are limited to $10,000 taken from their student loans.

Lilly Thumm, a political science and international studies major, has federal student loans. She was surprised to learn that the new loan forgiveness program could apply to her too.

“Because of my parents’ salary, these things don’t [typically] apply to me,” Thumm said. “I didn’t realize it was actually more aimed at anyone. [the loan is under]and so because it’s under my name, I apply, which is exciting because I have a lot of school loans.

Mackenzie Winchester, a political science and international studies major, owes just under $20,000 in federal student loans. As a Pell Grant recipient, she is eligible to have all of her student loans forgiven.

“I’m still hesitating and scared,” Winchester said. “I won’t believe it until I see it. I feel like I won’t be able to take a whiff of relief until the Butler Portal spawns completely zero.

President Biden also announced on August 24 that there would be another extended break on student loan repayment until the end of 2022. The original decision to suspend loan repayment came in March 2020 in response to the COVID-19 pandemic, but this will likely be the final extension of the pause.

Another provision of this law is that borrowers who have taken out our private student loans will not be able to apply for loan forgiveness. Even if an individual’s loans were originally public, but later refinanced privately, they are not eligible.

“It’s hard to forgive lending in the private sector,” Winchester said. “With student loans, you can’t declare bankruptcy, which makes them extremely predatory. [The companies] constantly come after you, and people owe more than they started with.

With this act, a third of the Hoosiers with federal student loans could see their debt completely wiped out, and it could significantly ease the financial burden for many more. Before the news of the student loan cancellation, Thumm expected her life to be different after college.

“[I’m more open to considering] maybe take a year off and try some things or travel,” Thumm said. “I think it’s something people generally don’t want to try because they’re worried about whether or not they can afford it. More than that, if I want to start a career after graduating, it also helps me [afford] lodging.”

The US rescue plan law stated that cancellation of student debt could not be charged to income tax. However, Indiana did not adopt this policy in its budget for the fiscal year because it complies with the Internal Revenue Code on a static basis. The state conforms to changes in the IRC, but this only happens on selected dates. It is regularly reviewed and updated.

Some representatives plan to challenge this tax in future sessions of Congress. Gregory Porter is a Democratic representative in the Indiana General Assembly who spoke against it.

“I am drafting legislation to retroactively eliminate and reverse any personal income taxes imposed on Hoosiers who are finally able to receive vital student debt relief,” Porter said in a statement. statement.

Indiana’s state tax rate is 3.23%. This means that citizens will be charged $323 for every $10,000 of canceled debt. Not only do Hoosier borrowers have to pay the state income tax rate, but they also have to pay their local taxes. In Marion County, there is another 2.02% added to the state rate.

Rachel Brown, a sophomore in strategic communications, said she didn’t investigate the loan forgiveness tax because she personally had no student loans.

“I personally don’t think a tax is unreasonable,” Brown said. “But I could also see how it would be, ‘Why call it loan forgiveness? [program] if you are still going to charge us to use it? »

Thumm is from Michigan, but she worries about Indiana’s decision to tax this loan forgiveness.

“It doesn’t seem fair that states can choose whether or not to impose taxes when the federal government is the one giving up the money,” Thumm said. “[The loan forgiveness] is not for the States; it’s for students… I would like to know where this money is going. Is it going back to schools? Will it improve teachers’ salaries? Is this heading towards something that will actually make a difference in the lives of students? »

This student loan forgiveness plan is only eligible for past loans. Loans taken out after June 30, 2022 will not be eligible for relief – first-year Butlers who have not borrowed before that date will not be eligible.

Only time will tell if this will set a precedent for more loan cancellations or other social programs to happen again in the future.

“I knew I was going to go into a lot of debt; I just didn’t understand it would be that much,” Winchester said. “I really hope [student loan forgiveness] is something that will change people’s outlook on human culture and maybe there should be more social services.

The Biden administration’s decision to take action on student loans came as a surprise to Thumm.

“I think [that people view] loan forgiveness as a ‘socialist’ thing,” Thumm said. “…I think that while this may make people want to see higher education more affordable and accessible, it may already be too big a step for some people who don’t like it happening for personal or policies.”

Brown knows a few people who wouldn’t have been able to attend college without withdrawing their loans.

“I don’t think the loan cancellation is unfair to anyone,” Brown said. “I think if you repay your loan, that’s good for you, but for the others who can’t, that’s good for them. I don’t know why anyone wouldn’t take advantage of their student loan forgiveness because there are people who are really struggling with their student loans. They can now continue to go to university.

Individuals who wish to receive updates on the opening of the application for loan forgiveness can subscribe to the Ministry of Education update page.

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