Hello, I’m 68, I was never able to finish my doctorate due to illness at the time. Total loans, 75,000. It is now at 356,000 and they add about 2K every month. I left school in 1995. I wasn’t able to really pay anything, and when I called they always told me to take a forbearance, hardship, or whatever. I never understood about the interest they would be adding. I’m on an income based, so I pay 0.
However, I freak out when I see how much they keep adding. The thing I worry about is if my some miracle, this is forgiven, I read that I’ll have to pay income tax on this ! Income tax on 300K dollars ? They won’t have any kind of payment plan, ect. This is worse than the student debt ! Does anyone know about this ? I work part time to make ends meet. I’m thinking of quitting and getting disability (I may be able to ). Or filing for bankruptcy, although I hate to do that.
Does anyone know about this income tax thing ?
It depends which state you live in. My state, Connecticut, does not have that tax.
Thank you. I’ll have to check somehow with my state, although not sure where to begin. Florida. I don’t see how they could consider that income! It’s not .
Through 2025 your forgiven amount won’t be taxable. Starting in 2026, unless a new law is implemented it will be and you will be hit by the tax bomb. You may or may not be able to claim insolvency on your federal taxes (be aware your state may tax the money to - I think around 10 do, mine does).
a. For more information about IRS tax consequences and/or how to potentially avoid them if you qualify see:
i. IRS general information taxes and loan cancelation, including student loan cancelation.
https://www.irs.gov/taxtopics/tc431
ii. IRS instructions for debt forgiveness and insolvency:
https://www.irs.gov/forms-pubs/about-form-982
https://www.irs.gov/pub/irs-pdf/p4681.pdf
Depending on the situation you could declare bankruptcy and include your student loans as part of what is called an “adversarial proceeding”. Not going to work in TX, LA, or MS due to a judge in Dallas setting a precedent. If you get rid of them that way no tax.