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Tax-Free, Debt-Free

By Emma Martinez

The change in presidential administrations has brought a host of other changes with it. One more interesting to Malone students is the possibility of student loan forgiveness avenues that President Biden is attempting to create. Within the new stimulus package Biden has signed, the American Rescue Plan Act of 2021, there are provisions for student loan forgiveness, a matter of interest as well as controversy for Malone.

“The newest stimulus bill provides tax relief to students who have loans forgiven,” Laura Klco, associate director of financial aid said. “Prior forgiven loans were subject to federal income tax.

“There are ways that you can get your loans forgiven [without the bill],” Elizabeth Patterson Roe, director of the center for intercultural studies and professor of social work, said. “One of them is working for a non-profit for ten years, but you have to be on an income-based payment plan [for your loans] for that to work out.

“You still have to pay the interest on it,” Roe said. “There’s some loan forgiveness that is through a workplace … that you have to pay taxes on.”

Roe went on to explain that if you receive loan forgiveness through workplaces with contracts to work there for so long in exchange, it is marked as an income and the individual will be taxed accordingly.

“$10,000 in [cancelled loans through income] could trigger an extra $2,000 in taxes,” Roe said. The stimulus bill seeks to remove that issue by making such work arrangements tax-exempt.

As students and educators, many at Malone have reason to be excited at the prospect of loan forgiveness with tax exemptions, but there are many concerns about the matter.

 “On the one hand I think it’d be awesome and … great for my life,” Emma Tutak, junior history major, said. “But on the other hand nothing is free, so I don’t know if that would be a good idea, from an economic standpoint, for everybody.

“If they were to do it they should look at the person’s income and see ‘Will they be able to pay this off in a timely manner without creating some type of major economic strain on that person?’” Tutak said. “And if [they were] a lower-income person then it would make more sense.” 

The stimulus bill creates an interesting problem of determining who should receive relief, and where the cost is covered from.

“If I had to make the decision, I would advocate especially for students who are low- to moderate-income positions, such as our teachers, social workers and non-profit workers,” Roe said. “We have a definite, serious student loan issue.

“Ideally … students [wouldn’t] have to go in that debt in the first place, if there was more financial aid at the beginning,” Roe said. “Since we have so many students in debt, [student loan forgiveness] would be great.”

Most agree it would be more ideal if aid came prior to beginning college, rather than after graduation.

“That is scary when I hear other people talking,” Tutak said. “I got pretty lucky because I transferred, [so] I hardly have to take out anything. But one person I know is going to end up with $80,000 in student loans by the time she graduates. That [would] give me a panic attack!”

“When you think about loan forgiveness versus financial aid at the start, students aren’t necessarily going to know what the forgiveness [will] look like,” Roe said. “But it would probably help [to know] that if they work in certain fields or after so many years [they can] have some kind of loan forgiveness.” 

“I think that the biggest problem is institutions,” Tutak said. “I don’t think that the government should be everybody’s babysitter and solve everybody’s problems. I think that the way that the system is, you need to go to college.”

“I think it would be great if we had more scholarships — if there were ways to get scholarships that aren’t government-provided,” Roe said. “I’m all in favor of diverse packages [to] help our students. It would be great if there was an expansion of Pell Grants, [or] other [aid that] students wouldn’t have to pay back.

 “Maybe an expansion of work-study opportunities … and government grants … to a higher income level, but also [an expansion of] student loan forgiveness opportunities for the students who aren’t making as much money after they graduate,” Roe said. 

Which individuals receive relief is another concern, since there are various levels of needs, but there are competing understandings of what is fair to cover for others.

“If someone’s going to be a lawyer they’re gonna have a really high chance of paying that off in a very timely manner but, social work, definitely not,” Tutak said. “That would take I don’t know how many years.”

The overall consensus is that change is needed, even if disagreements appear on what kind of change there should be and who should be giving it.

“There’s just a problem and something needs to be done,” Tutak said.

“I work with a lot of students that are going to graduate and not make a lot of money because of the careers they choose, whether it be social work or other types of non-profit work,” Roe said. “People really have to think, ‘Do I want to graduate with … $50,000 to $100,000 worth of loans while I want to work for a ministry or a non-profit?’ Finances are a huge issue.”

While it is too soon to tell what the new policy towards loan forgiveness will do for students, this spring many will graduate with a crushing set of loans awaiting them, some with interest already accruing.

It is hoped that the top-down changes will be effective in assisting Malone students to begin their careers without having to make decisions from a purely financial perspective, but instead can follow the callings that brought them to Malone in the first place.

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