cormy3
February 19, 2011, 11:47am
18
<p>Good news concerning the tax on debt forgiveness issue:</p>
<p>[IBRinfo</a> :: Frequently Asked Questions](<a href=“http://www.ibrinfo.org/faq.vp.html]IBRinfo ”>http://www.ibrinfo.org/faq.vp.html )</p>
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Will forgiven loan amounts be taxed as income?</p>
<p>The U.S. Department of the Treasury determined that debt forgiven through PSLF is not considered taxable income under current law. That means that when you qualify for PSLF, you won’t get slapped with a huge tax bill.</p>
<p>Unfortunately, the same good news doesn’t extend to debt forgiven through IBR. In response, Congressman Sandy Levin (D-MI) is leading a bipartisan effort to ensure that borrowers who qualify for loan forgiveness through IBR (and Income Contingent Repayment) get the same treatment. Responsible borrowers with modest incomes shouldn’t have to pay potentially crippling taxes on forgiven student loans. We are hopeful that this issue will be resolved before any borrowers qualify for forgiveness through IBR. We’ll continue to work on this issue and keep you informed. Urge your representatives to support H.R. 2492. Learn more about the bill.
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<p>Hopefully this change will be implemented soon, and that will be the end of the threat of taxation in the off chance that you have significant debt after 20 years. Obviously this is a situation to avoid altogether.</p>