Will my student loan debt forgiveness be taxable?
- June 19, 2018
- David Greene
- Comments Off on Will my student loan debt forgiveness be taxable?
When you take out student loans, you are borrowing money and are legally obligated to repay a fixed or determinable amount at a future date. You have a debt. Under the Income-Based Repayment (IBR) plan, your student loans will be forgiven after 20 or 25 years of qualifying payments, depending on when you initially borrowed. The current tax system does classify this as a cancellation of debt, thus making the amount of loans forgiven taxable in the year the debt is cancelled. Thankfully, there are several exceptions to student loan forgiveness which can make it tax exempt. The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your student loans after you have made payments for 10 years under a qualifying repayment plan while working full-time for a public service qualified employer. In this instance loans forgiven under the PSLF Program are tax exempt. There are additional federal programs to have student loans forgiven, and if you think you make qualify, you should seek the guidance of the Federal Aid Office in U.S. Department of Education.