Are there any accountants or other peeps here with actual working knowledge of what happens when one's federal student loan balances are forgiven? I've heard endless opinions from everyone and his brother, but no one who seems to actually handle this stuff.
I took out approximately $200,000 in student loans for medical school. Unfortunately, just 3 years after starting repayments a turn of events left me no longer able to practice medicine. It is very unlikely I will find another profession that would allow me to make reasonable payments on this debt. (I would have to pay over a grand a month just to cover the interest and keep the balance from increasing.)
Thankfully I'm on the Income Based Repayment plan. So I'm not in default, and while the balance grows at a rate of 6.8% at least the interest doesn't capitalize. I took on all my loans before Obama's changes though, so I'm stuck on the 25 year forgiveness model instead of just 20. But thankfully I'm 6 years into that, so only 19 years left to go. :)
Out of curiosity, I plugged my current balance, the interest rate, and the remaining years into a calculator to see what the balance might be once the time is done and all is forgiven. At that point, my loan balance will be approximately $872,000. Yikes.
Plugging that into a personal income tax program suggests an income tax of about $342,000 on my "income" of 872k. Of course, this is very grossly estimated, and tax rates will be who knows what two decades hence. But still.
Am I really going wake up one day when I'm 57 years old and suddenly find myself owing $342,000 to Uncle Sam? Something tells me the IRS won't be as sympathetic to my situation as the federal student loan agency was. I'm not sure how they expect someone to pay more in taxes than what the original loan amount was for. :/
Submitted January 23, 2018 at 11:56PM by JohnGarrison1870 http://ift.tt/2DCHxGn
