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The Story Behind The Story: What's With Student Loans


Dorothy Philbin | CNBNews Columnist 


The answer is - maybe nothing.  Even the Washington elites can't agree.  President Joe Biden announced on Wednesday, August 24, 2022, that he was going to forgive between $10,000 and $20,000 of undergraduate and graduate student loans.  However, Speaker of the House Nancy Pelosi says that the President doesn't have the authority to forgive the loans.  That authority lies with Congress.

President Biden is a lawyer but has never practiced law.  Nancy Pelosi is not a lawyer, so I don't see this as a battle of the great legal minds.  The question is what will get the most votes for the Democratic Party.  Assuming that the loan forgiveness goes through, what will it mean for you and me?
For those with outstanding student loans and now making less than $125,000 a year if single or $250,000 for a couple, you will most likely qualify for $10,000 forgiveness.  If you received a PELL grant you should qualify for $20,000.  A PELL grant is given to those students who are most in need.  It usually doesn't have to be paid back but it also doesn't usually cover the full cost of college.  So, the student usually has to take out loans to cover the difference.  It is $20,000 of that loan amount which will be forgiven.
Some questions which haven't been address yet are:
-      How will people apply for the loans?  The government is hoping to have the applications ready by December 31, 2022.  What are the chances of the government meeting that goal?
-       What happens if the student got a private loan from a bank?  The answer is - you are out of luck.  It is only federal loans which will be forgiven.
-      How much will this cost?  No one knows for sure, but estimates are about $300 billion dollars.  This is above the federal budget and above $450 billion we're planning to send to the Ukraine for their payroll and to fund the pension plan.  Are American pensions fully funded?  It is also above the billions we are spending on housing, feeding, and caring for the 3 to 5 million illegal immigrants who cross the border, more than 220,000 crossing the southern boarder each month.
Who will pay for all this?  In short, the taxpayers will. 
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This can go one of two ways.  First, the government can just print more money - they are good at that.  Printing more money, however, will only increase inflation.  Do you think the price of everything is too high now?  Wait to see what is coming. 
The second way of paying for it is through direct taxes.
Remember when President Biden promised no tax increases for anyone making less than $400,000 a year?  If we pay for student loan forgiveness through taxes each of the 143 million taxpayers will have to pay $2,097.  It looks as though the loans will be paid for by printing more money.  Inflation is not, technically, a tax.