Public Loan Forgiveness FYI

uncreatedsnow · June 2014

Hey, I just got off the phone with my Student Loan Servicer and they confirmed that there aren't any tax implications with the amount "forgiven" after your 120 payments on Public Loan Forgiveness. But with all other plans there are.

This came up on my last thread and was going to play a big part on my decision to stay with Public Loan Forgiveness so I thought I'd share.

Xstatic3333 · June 2014

Ooo good to know! Although, I'd still be tempted to put some money aside just in case. The government could change their minds.

Have you found FedLoan Servicing to be difficult to deal with? Their horrible reputation has been one of the reasons I've stayed off PSLF so far.

uncreatedsnow · June 2014

They can always change their minds...

I moved from Great Lakes to FedLoan. I LOVED Great Lakes. FedLoan has been just OK, but I put up with them because of the money I'm saving. No major problems so far *Knocks on wood* Though I do talk to students frequently that hate them so YMMV...

hoffse · June 2014

Are you sure about that? I thought the public loan forgiveness was only tax-free if you were a teacher (and maybe something else)? I can't remember the precise rules, but for most folks it ought to be taxable.

You might want to call the IRS and ask them. Including debt forgiveness in income is part of the general tax code, and Congress would have to actively exclude something from that to get around those rules.

vlagrl29 · June 2014

I'd also contact your CPA if you have one to make sure that's true.

CuriousKiddosMama · June 2014

I had to report mine on my tax return. As a teacher in title 1 school I got 5k forgiven and had to report it. Just be careful! You may have gotten somebody on their first day!

Xstatic3333 · June 2014

uncreatedsnow said:
They can always change their minds...

I moved from Great Lakes to FedLoan. I LOVED Great Lakes. FedLoan has been just OK, but I put up with them because of the money I'm saving. No major problems so far *Knocks on wood* Though I do talk to students frequently that hate them so YMMV...

I'm with Great Lakes right now, too, and they are fabulous compared to other servicer. It's nice to hear it's workable though. I always try to take student loan complaints with a grain of salt.

jjbmstinco · June 2014

I am doing that program and haven't heard anything about it, but I am considered a "teacher". I wish my ten years was up this year!

Xstatic3333 · June 2014

hoffse said:
Are you sure about that? I thought the public loan forgiveness was only tax-free if you were a teacher (and maybe something else)? I can't remember the precise rules, but for most folks it ought to be taxable.

You might want to call the IRS and ask them. Including debt forgiveness in income is part of the general tax code, and Congress would have to actively exclude something from that to get around those rules.

I think OP means public service loan forgiveness, the program that includes teachers, nonprofit workers, public service lawyers, I think some healthcare workers in under served areas, etc. I think your idea of calling the IRS to ask is a great one. I'll definitely do that if I apply to the program!

Wulfgar · June 2014

I wonder if my brother knows this? He is a teacher and one of the Union leaders in his school district. My SIL is a banker so they will have the spare money no matter what but he is doing this.

uncreatedsnow · June 2014

Xstatic3333 said:

Are you sure about that? I thought the public loan forgiveness was only tax-free if you were a teacher (and maybe something else)? I can't remember the precise rules, but for most folks it ought to be taxable.

You might want to call the IRS and ask them. Including debt forgiveness in income is part of the general tax code, and Congress would have to actively exclude something from that to get around those rules.

I think OP means public service loan forgiveness, the program that includes teachers, nonprofit workers, public service lawyers, I think some healthcare workers in under served areas, etc. I think your idea of calling the IRS to ask is a great one. I'll definitely do that if I apply to the program!

Yep, the Public Service Loan Forgiveness. I work for a State University so am not sure how they considered it, but we had a fairly lengthy conversation about it and he said that it's one of the aspects about Public Service Loan Forgiveness that many people don't know. I looked it up and found this on finaid.org:

"The 10-year public service loan forgiveness is not taxable under section 108(f) of the Internal Revenue Code because the forgiveness is restricted to borrowers who work in specific occupations. However, the 25-year forgiveness for borrowers who don't work in public service careers will represent taxable income to the borrower under current law."

hoffse · June 2014

uncreatedsnow said:

Xstatic3333 said:

Are you sure about that? I thought the public loan forgiveness was only tax-free if you were a teacher (and maybe something else)? I can't remember the precise rules, but for most folks it ought to be taxable.

You might want to call the IRS and ask them. Including debt forgiveness in income is part of the general tax code, and Congress would have to actively exclude something from that to get around those rules.

I think OP means public service loan forgiveness, the program that includes teachers, nonprofit workers, public service lawyers, I think some healthcare workers in under served areas, etc. I think your idea of calling the IRS to ask is a great one. I'll definitely do that if I apply to the program!

Yep, the Public Service Loan Forgiveness. I work for a State University so am not sure how they considered it, but we had a fairly lengthy conversation about it and he said that it's one of the aspects about Public Service Loan Forgiveness that many people don't know. I looked it up and found this on finaid.org:

"The 10-year public service loan forgiveness is not taxable under section 108(f) of the Internal Revenue Code because the forgiveness is restricted to borrowers who work in specific occupations. However, the 25-year forgiveness for borrowers who don't work in public service careers will represent taxable income to the borrower under current law."

Ok that makes sense. Good on you for checking!

Public Loan Forgiveness FYI

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