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West grad takes on student debt crisis
By Bill Conrad, bconrad@starlocalnews.com
Student debt has become a hot political topic lately, with both President Barack Obama and Mitt Romney weighing in on the issue at campaign stops.
While the issue is in the national spotlight, one Plano West graduate feels he has a solution which would help some students pay off their loans in a more timely manner. Brian Ransdell, who graduated from West in 2004, has started a petition on change.org which he hopes will get the attention of the United States Congress.
Ransdell's plan would allow people to give money to graduates to help them pay for their debt, and then take a tax deduction in the amount of the payment, similar to donations to 501 (c) 3 organizations. Currently, payments to graduates to help pay off debt are considered gifts and cannot be deducted.
The Project on Student Debt, a division of the Institute for College Access and Success, said that two-thirds of 2010 college graduates had outstanding debt upon graduation, with the average amount totaling $25,225, a 5 percent increase compared to the previous year. In comparison, graduates from Texas universities ranked 39th in terms of total debt, with an average of $21,000.
While Ransdell admits his proposal is not a solution to the student debt problem, he thinks it may prove popular and have a positive effect on the economy.
"I certainly think there are people willing to help students, and I say that because of the people willing to pay for layaway items," he said. "I think a student debtor should be able to solicit donations and tell people they will get a tax write off. It will help the American economy because you are freeing up cash for student debtors who are going to turn around and put it back in the economy by buying mortgages and other things."
Ransdell said he believes that corporations which make hundreds of millions of dollars in charitable contributions annually may also be drawn to help out students by paying off a portion of their debt. Although the details of the plan are not ironed out, he decided to begin the petition in order to get the ball rolling in an attempt to gain momentum.
Jim Smith, a Dallas-based CPA and the managing director of Smith, Jackson, Boyer and Bovard, has never spoken to Ransdell, but said the plan sounds viable.
"It is going to be hard to determine the impact on the federal budget because you don't know how many good Samaritans are out there," he said. "You don't know how many people are already doing this and not receiving a charitable deduction. We mainly see this happening with people's families, but it could happen with total strangers also. Does this have potential? It does, it just takes an action of Congress."
The plan would not be too different from a parent or grandparent paying the student's school, and then having the student pay them back, Smith said. He added that the payments would likely be made directly to the loan holder and not to the student, if Ransdell's plan was adopted.
Smith said that under the current tax code, individuals are allowed to donate up to $13,000 per year to a person without having to report it to the federal government. If a person donates more than $13,000 to an individual during one year, they must report the gift to the government, but no taxes are owed. It is only when a person has donated more than $5 million total that taxes are owed. In addition, students are currently not required to pay taxes on the money they receive to help pay off their debt since it is not considered income.
To view a copy of Ransdell's petition, visit www.change.org/petitions/modify-tax-law-for-student-debt-relief.
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