Loan forgiveness is an important topic, whether it is a concern or a strategy for you. When I started explaining Studious Solutions’ policies to my friends and families, the number one response I got was “What if student loans get forgiven?” and if they ever truly go away, then I will pack up the company, give America and pat on the back, and find something else to do with my life.
That said, student debt won’t be going away. Even if there is a successful debt forgiveness program during the Biden administration, students will still take out loans. The cost of college will not decrease, and the forgiveness may result in relief for you now, but it does nothing to protect your children from the cost of college by the time they would be taking out their own loans.
Outside of Biden’s current plans and program, student loan debt can be forgiven after 20 to 25 years of repayment. That is a substantial amount of time to have loans hanging over you and hampering your income. On top of this, most forms of debt forgiveness are considered taxable income. That means after 25 years of repayment, your may get your loans forgiven and then receive a huge tax bill! Certain forgiveness programs can remove your federal tax liability for this forgiveness, but they do not remove state tax liability, and this kind of legislature can change with every election.
Insurance payments, on the other hand, are very rarely considered taxable income. Insurance indemnifies you; it tries to restore what you have lost to you. By putting a valuation on your lost education, Studious is restoring you or your child to the wealth you should have if you finished your education or did something entirely different with your time.
This concept means you will not get an unexpected tax bill if Studious pays for your loans, but you can if your loans are forgiven by the government. Also, Studious plans pay for your loans right after school, so there won’t be 25 years of debt hanging over your children.
If this isn’t enough to convince you, consider reading my earlier post about the benefits of a Studious policy compared to a traditional 529 plan.
Studious policies are valuable even if you expect loan forgiveness, and it is a strategy that can set your child up for a bright future.