Let me run an idea by you guys. I don't know if this is already being done in any certain situations, but what if the US allowed making payments to student loans from 401Ks and other pre-tax savings vehicles tax free? This would be used ONLY for student loans and there would be some restrictions based on income, but generally it would be a pre-tax payment for student debt to help relieve some of the debt load.

Tear it apart.

those people are voting Hillary  for student loan forgiveness

The government would be getting a lot less tax from me if my student loan payments could be pre-tax.

Horrible idea on a couple different levels.

1. The feds already offer tax credits to students for expenses if you are paying as you go.  If you have loans there is deductions related to the interest.

2. You are talking about taking money away from the feds during repayment when you are (assumed) gainfully employed.  Keep in mind that public universities are already subsidized with tax payer funds, now it's your time to start chipping in to those subsidies, not to get a third freebie on your also subsidized loans.

3. Your 401K is your retirement fund - money for your future, you shouldn't touch it to be paying for things in your past.  Contributions made to retirement funds in your first few years of employment would have the most benefits from compounding, why would you want to take them out and not give them a chance?

I like the idea of student laon payments being tax free, not so much the idea of it coming out of my 401k, that needs to stay where it is.

I guess you would.  I would like everything I do to be tax free.

So tell me why they should be?
Here's a scenario (true story):
I am a high school student.  I want to go to college.  I get a job and put at least half of everything I earn in to a savings account.
I graduate high school.  I buy a crappy car for cash.  I enroll and start college.  I continue working.  I write a check for my tuition.  I write a check for my books.  I write a check every month for rent.  I pay for all of of my living expenses with after tax money.
Five years later I graduate college debt free.  I start making real money.  I pay quite a bit more in taxes.

Why in the world should you get to pay your deferred cost of college (the loan) tax free at a time that you are earning multiples of what I was earning when I paid tax on it as I was doing it?
You don't get a special reward for making the bad decision of borrowing for your education at the cost of those who busted their rear to avoid that debt in the first place.

I love this idea. You may be in for a rude awakening when you go to write the check for your tuition though, unless you go to a CC. Nothing wrong with that. I got my first degree from a CC.

I think we can stop fretting about student loans and start teaching kids about personal responsibility and get them some REAL personal finance training prior to leaving high school. I honestly think it should be a required course for half a year prior to graduating HS. Responsibility with personal finances and an understanding of how to handle money and how NOT to spend every dime you own is obviously the key factor missing from most people in our society.

I like all the discussion here. Like I said, it was just an idea and to tear it apart how you saw fit. I am only looking at what could happen as an alternative to "forgiveness" of loans, which I think would cost taxpayers more than allowing pre-tax income to be used for school loan payments.

I took a couple of finance classes in high school, but they were electives. Nothing required. They were pretty decent. It was the same teacher and he taught basic stuff like balancing a checkbook and writing out a budget. We used real world scenarios for examples in class and he adjusted it for a job a high school kid would have. Pretty basic, but fundamentals is really what got me where I am today. Never lived above my means and always saved something, even in high school and college.

I do think, with the financial struggles of an entire generation of people, finance and basic budgeting courses should be required.

That would be like the blind leading the blind, wouldn't it?  The government can't figure out how to reduce its own debt, so I'm sure they'll just ignore the student debt problem.  


The government will need to start auctioning off spots on the food pyramid to corporations to help pay off the debt.  Now you're going to have your MONSTER ENERGY group, your WAL MART group, your McDonald's group, etc.


 

Yep.  It's the next big bubble to pop, and the next cause thats "just too important to fail".  You bet your ass all the fucking morons who racked up $80K of debt living the high life in college are getting that shit "gifted" back to them and the suckers who paid theirs off are getting fucked.  

If you were to repay your student loans tax free they would have to eliminate all the other tuition/education tax deductions and 529 type stuff

Why do you think this would happen?

 

What possible way can you imagine to buy more votes?  The FSA is strong and well, if you haven't noticed, and nobody likes "free" shit more than Americans do.  College tuition costs are out of control, and have been inflated massively past their natural equilibrium by the easy availability of federally backed student loans.  We have an entire generation of "women's studies" majors with $100K+ student loan debt working at starbucks and bitching about their crippling loans.  It's only a matter of time until the fedgov figures out a way to forgive those loans outright or with very easy stipulations.

I've been a strong believer of this for quite some time.  Understanding personal finance is vital to financial security, and a broader understanding could really transform a nation's reliance on government.  Unfortunately, my last point is only valid provided a government wants it's people to become self-reliant.

I know a particular individual that fits into the bolded comment. This particular individual is all about student loan forgiveness as they are generally unable to hold down a job and paid a crap ton of money to a high demand college in Florida that shall remain unnamed. They dropped out after being unable to keep up with the program but used debt to cover everything - rent, food, utilities, internet, and other expenses including tuition, books, etc. Now they have $50k+ in student loan debt and want someone else to pay for it.

I was blessed enough that my parents paid for MOST of my undergrad degree, but I still worked and at one time worked full time while going to school full time to cover my own expenses in addition to books and other fees. Most people want to "live the college experience" and treat it like a combination of school and a summer camp. The idea of working your way through college if you don't have the means to pay for it outright is lost.

I knew many people that worked part-time their junior and senior years of high school/full time over the summers for extra money to save for college - not spend on ipads and beer.

Amen to that.

Kids don't understand that paying down $100K in student loans making $35K (poor degree choice) a year is hard. If you're gonna have that much dept  you better major in something worth it.

Someone that spends a fraction of $100K on a 2 year degree can make more than $50K in the right fields.

Part of the issue is how much tuition has gone up far exceeding the rate of inflation.

However, teaching them this early and what saving and compound interest can gain you would be eye opening to them at that age.

My college roommate majored in "General Studies".
To me that degree is suitable for one kind of person:  A person born in to wealth.  As in enough wealth to never have to work a day in their life.  It just says that this person is a well rounded individual and has a great understanding about a lot of things.

The problem with student loans is there is no underwriting standards.  Would you lend 100K or even 50K unsecured to an art history major?  Even if the person is an engineering major, would you continue to fund his education for the following year if he bombed the last semester?  How about providing a loan to a prospective teacher attending a 45K per year private institution.

While I agree with the concept, there needs to be restrictions like a graduated level of funding based on the demand for graduates with those majors (ie a nurse will get more funding than an art history major), substantial progress needs to be made toward a degree before further funding is released, and minimum grade point requirements need to be implemented.