GatorRRT Posted June 13, 2014 Share Posted June 13, 2014 Monthly interest was estimated around 670/mo. 170k is roughly my total student debt. So it is just that one year you get hit hard by taxes? Thanks for the info it is very appreciated. Im assuming the 670 a month payment estimate for IBR or PAYE. Hypothetically let's say again the forgiveness at year 20 is 150k. You are looking at roughly a 40k tax bill just on the forgiveness, not counting your deductions or income. That's quite a hit. Link to comment Share on other sites More sharing options...
GatorRRT Posted June 13, 2014 Share Posted June 13, 2014 I read somewhere that there are times when the loan forgiveness is not taxed. I think it was on a government sight and if I remember correctly, military and rural locations were among those that are sometimes tax exempt. In any case, with my debt, my 10yr payment IBR will be about $500-700/month. That will leave a significant forgiveness amount if I qualify at the end. I'm ok with saving a little extra each month to pay the taxes on that and have my debt gone in 10 years vs paying nearly $3000/month at my age with significant family obligations. But that's a great point about taxation on loan forgiveness! The IRS spells out that forgiveness is tax deductible under the NHSC program as well as the public service forgiveness. With the current plans, public service (working for a nonprofit) is forgiven after 10 years, tax free. The problem with this program is there is no guarantee or contract. Once the government starts to realize the actual cost when people qualify for for forgiveness in 2017, they will likely scale back or eliminate the program. There is already talk about limiting forgiveness (public service and IBR) at 57k. As for IBR, the day they remove the tax penalty is the day I'll sign up, until then I intend on making my standard payment. Link to comment Share on other sites More sharing options...
WhippyFlagellum Posted June 13, 2014 Author Share Posted June 13, 2014 Keep in mind that student loan forgiveness is taxable and added to you income the year it is forgiven. Example: let's say at the end of 20 years your taxable income is 80k/year and your total loan forgiveness is 100k, taxable income for that year is now 180k .... Makes for quite a nasty tax bill. Also, making a payment as low as 170/month on 170k won't cover the monthly interest accrued on the loan, meaning that when loan forgiveness comes, your grand total will be much higher than the original 170k you started with. Is this true? When I spoke to the folks at HRSA, they said it was tax-exempt loan repayment. winterallsummer, I'm not too much less than you when it comes to loan repayment. The part where I get killed is my wife has a similar debt, yet only makes about $40k / year. For a while I thought about the tremendous debt as being similar to paying off a house... the true fear kicked in when I realized that most people who make house payments aren't also paying rent on an apartment, lol. Anyways, I feel your pain. I too worked through undergrad and lived cheap. It's pretty messed up how easy it is to rack up such high debt. Link to comment Share on other sites More sharing options...
GatorRRT Posted June 13, 2014 Share Posted June 13, 2014 HRSA/NHSC is not taxed. Public service is not taxed. IBR is taxed. As for military and other programs, you'd have to search. Link to comment Share on other sites More sharing options...
winterallsummer Posted June 13, 2014 Share Posted June 13, 2014 I spoke with the officials at the public service loan repayment government business and wanted to give everyone some info. No matter what the lowest payment possible is the 20-25 year IBR which for a 90k salary is about 700/mo. If you work for a non-profit group then your debt is forgiven and NOT taxed against you at all after 10 years. This can be done making the payment on a 20 year IBR plan and only paying it for 10 years. If you do NOT work for a non-profit company, you cannot qualify for the 10 year plan. You can still do the IBR 20-25 year plan and then at the end of your years the loan is forgiven and it IS taxed against you. Link to comment Share on other sites More sharing options...
OpSite Posted June 14, 2014 Share Posted June 14, 2014 I spoke with the officials at the public service loan repayment government business and wanted to give everyone some info. No matter what the lowest payment possible is the 20-25 year IBR which for a 90k salary is about 700/mo. If you work for a non-profit group then your debt is forgiven and NOT taxed against you at all after 10 years. This can be done making the payment on a 20 year IBR plan and only paying it for 10 years. If you do NOT work for a non-profit company, you cannot qualify for the 10 year plan. You can still do the IBR 20-25 year plan and then at the end of your years the loan is forgiven and it IS taxed against you. Thanks for the clarification. I couldn't remember the specifics. I'm starting at a nonprofit rural location soon and plan on IBR, praying that the loan forgiveness is still around after ten years. If not, then I'll cross that bridge when I get there. Link to comment Share on other sites More sharing options...
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