The IRB isn't exactly a niche scheme, but if this is being taken as a taxable gift, holy shit are people gonna be fucking furious.
"You know that $20,000 we forgave? Yeah. You owe us $5,000 in taxes or we're seizing your home."
You starting to see why they needed 87,000 new IRS employees?
Edit -
Oh jesus, I realized what he's doing. The feds know that these students are A) never going to pay those loans back for the most part, and B) know that as inflation increases the loans themselves become more worthless, because the interest rate won't keep up with inflation.
This isn't debt relief...
It's a fucking tax hike.
Think about it:
Your loan gets paid off in 20 years, but inflation (especially high inflation) is going to make the value of that loan worse every year. Take an extreme example of Venezuela. If I owe someone 100 Bolivars in 2012, that's just 100 2012-Bolivars of value. But if I still owe that person 100 Bolivars in 2019, 100 Bolivars in 2019 won't buy me a peanut. The value of 100 2012-Bolivars is equivalent to 6,139,823.03 2019-Bolivars. Or another way of saying it, the value of my 100 2012-Bolivar loan, is now worth the equivalent of 0.001 2012-Bolivars of value.
Here's the math. Check out the Buying Power of $100 section
So, he's tricking these kids into paying more value now in taxes now, rather than less value in loan payments later.
Put it like this:
You owe me $100 in 2015. If I know that there's going to be inflation in 2022 by a specific amount, I can trick you into paying me more from a forgiveness than I'll get back in inflation normally.
Let us assert that I know that:
- In the year 2015, you need to pay me back $100 2015-USD by 2022
- In the year 2019, that loan represents the equivalent of $107.86 2019-USD
- In the year 2019, that loan represents the equivalent of $92.6 2015-USD
- In the year 2022, that loan represents the equivalent of $125 2022-USD
- In the year 2022, that loan represents the equivalent of $80.5 2015-USD
So, in my mind, I'm loosing $19.5 2015-USD of value if I wait for you to pay me back $100 2022-USD in 2022. I'm not getting my principle due to the rate of inflation. I need an interest rate to keep up with inflation, but you might not like it if I start charging you 8% interest out of the blue.
So I come up with a scheme:
I come to you at the start of 2019 and I say, "I'm such a good person, I'm going to forgive $5 off that loan if you pay me the whole thing right now."
What did I just do?
Instead of waiting to get $80.5 2015-USD equivalent in 2022, I got you to pay me $95 2019-USD in 2019, which is the equivalent of $88.07 2015-USD.
That means: By having you pay me back earlier, even with a discount, I got more of my value back. If you had just stuck to the the agreement, you'd have actually had the advantage.
That is why the regime is doing this. They know that the dollar will be worthless, and they are hitting you with a tax hike now, so they can get your money now, rather than have to accept the consequences of their own inflated dollars.
As evil as it is, I can say I'm impressed with their ingenuity.
The IRB isn't exactly a niche scheme, but if this is being taken as a taxable gift, holy shit are people gonna be fucking furious.
"You know that $20,000 we forgave? Yeah. You owe us $5,000 in taxes or we're seizing your home."
You starting to see why they needed 87,000 new IRS employees?
Edit -
Oh jesus, I realized what he's doing. The feds know that these students are A) never going to pay those loans back for the most part, and B) know that as inflation increases the loans themselves become more worthless, because the interest rate won't keep up with inflation.
This isn't debt relief... it's a fucking tax hike.
Think about it:
Your loan gets paid off in 20 years, but inflation (especially high inflation) is going to make the value of that loan worse every year. Take an extreme example of Venezuela. If I owe someone 100 Bolivars in 2012, that's just 100 2012-Bolivars of value. But if I still owe that person 100 Bolivars in 2019, 100 Bolivars in 2019 won't buy me a peanut. The value of 100 2012-Bolivars is equivalent to 6,139,823.03 2019-Bolivars. Or another way of saying it, the value of my 100 2012-Bolivar loan, is now worth the equivalent of 0.001 2012-Bolivars of value.
Here's the math. Check out the Buying Power of $100 section
So, he's tricking these kids into paying more value now in taxes now, rather than less value in loan payments later.
Put it like this:
You owe me $100 in 2015. If I know that there's going to be inflation in 2022 by a specific amount, I can trick you into paying me more from a forgiveness than I'll get back in inflation normally.
Let us assert that I know that:
- In the year 2015, you need to pay me back $100 2015-USD by 2022
- In the year 2019, that loan represents the equivalent of $107.86 2019-USD
- In the year 2019, that loan represents the equivalent of $92.6 2015-USD
- In the year 2022, that loan represents the equivalent of $125 2022-USD
- In the year 2022, that loan represents the equivalent of $80.5 2015-USD
So, in my mind, I'm loosing $19.5 2015-USD of value if I wait for you to pay me back $100 2022-USD in 2022. I'm not getting my principle due to the rate of inflation. I need an interest rate to keep up with inflation, but you might not like it if I start charging you 8% interest out of the blue.
So I come up with a scheme:
I come to you at the start of 2019 and I say, "I'm such a good person, I'm going to forgive $5 off that loan if you pay me the whole thing right now."
What did I just do?
Instead of waiting to get $80.5 2015-USD equivalent in 2022, I got you to pay me $95 2019-USD in 2019, which is the equivalent of $88.07 2015-USD.
That means: By having you pay me back earlier, even with a discount, I got more of my value back. If you had just stuck to the the agreement, you'd have actually had the advantage.
That is why the regime is doing this. They know that the dollar will be worthless, and they are hitting you with a tax hike now, so they can get your money now, rather than have to accept the consequences of their own inflated dollars.
As evil as it is, I can say I'm impressed with their ingenuity.
The IRB isn't exactly a niche scheme, but if this is being taken as a taxable gift, holy shit are people gonna be fucking furious.
"You know that $20,000 we forgave? Yeah. You owe us $5,000 in taxes or we're seizing your home."
You starting to see why they needed 87,000 new IRS employees?