College PlanningIncome Taxes

Student Debt Relief Crisis?

By December 7, 2018 No Comments

I saw an article recently in the Wall Street Journal saying that there might be a ticking time bomb in the forgiveness of student loan debt. you read that right and that’s something that frankly I hadn’t thought about.

Borrowers can have their debt forgiven if they take certain public service or public interest jobs. People borrow a lot for school and grad school, and if you have some sort of indebtedness forgiven, it is often considered income to you.

In the article, there was an estimate one year that the Obama administration official had said that the average of income forgiveness or debt forgiveness was $41,000, so there were people much higher than that too. If you’re forgiven $41,000 and you’re in the 25% bracket, that’s a $10,000 tax bill that you may not be expecting and may not have the money for.

Anyway, if you’re paying your student loans and hoping to get some part of them forgiven because you’re in one of these programs, you need to be aware of that and if possible start to save for that separately so that you don’t have to borrow more money to pay back the tax that was owed on the other loan was forgiven. Anyway, just an interesting article and something I had not thought about.

Michael Garry

Author Michael Garry

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