How does Student Loan Repayment Work?

[2000 Man]

When loan repayment is a part of a job offer, how does it work? Let's say it's $20,000/yr. Do they pay the $20,000 in one lump sum or do you have the option of having them make 12 payments of $1670/month in essence making your loan payment each month)?

I ask as my student loan debt will be so large that I would plan on taking IBR for 25 years. If they paid 20K once a year I am still on the hook for the monthly payments and in the end I would not be any better off (particularly if I have to make the same monthly payments as well as the tax on the addtional 20K)

Is this money taxed? So if my salary is 160K do I owe the taxes on 180K? Do they withold the tax that prior to making the payment?

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[cabinbuilder]

When loan repayment is a part of a job offer, how does it work? Let's say it's $20,000/yr. Do they pay the $20,000 in one lump sum or do you have the option of having them make 12 payments of $1670/month in essence making your loan payment each month)?

I ask as my student loan debt will be so large that I would plan on taking IBR for 25 years. If they paid 20K once a year I am still on the hook for the monthly payments and in the end I would not be any better off (particularly if I have to make the same monthly payments as well as the tax on the addtional 20K)

Is this money taxed? So if my salary is 160K do I owe the taxes on 180K? Do they withold the tax that prior to making the payment?

It really depends on the job you take and how they structure the payments. I had a job that was supposed to pay my monthly payment and it never happened. I was able to leave that job for breach of contract. Some pay lump sums after you have worked for a set length of time so you would have to pay the payments each month. Not sure about how the taxes would work. I would inquire with a tax accountant to see the best way to avoid a higher tax rate. Definitely something you need to ask and get in writing when in job negotiations. Be sure to have your contract reviewed by a lawyer to avoid any legal holes in the future.

 

[deleted87716]

Under current tax law, loan repayment dollars are considered taxable income.

 

[MOHS_01]

Under current tax law, loan repayment dollars are considered taxable income.

Yes, the IRS blows. Imputed income and all that jazz... but don't think for one second that if you donate your services that you should be able to claim the fair market value of those services as a donation for tax purposes... no, no, no... that would not be appropriate. If someone donates their services to you, well, that's another matter entirely -- you are supposed to claim the value of those services as income.

WTF?

 

[Fitzgerald]

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[lowbudget]

That's madness! What a disincentive for physicians to volunteer where they are needed. Can you point me to a reference for this information?

+1

And, I want the source of information for if someone donates to / volunteers for me, that I have to claim the value of their services as income.

 

[MOHS_01]

That's madness! What a disincentive for physicians to volunteer where they are needed. Can you point me to a reference for this information?

Ask any accountant. The IRS has us by the short & curlies, my friend.

 

[TPBC]

Under current tax law, loan repayment dollars are considered taxable income.

It is only tax free if it comes from a non-profit entity (i.e. federally funded clinics in underserved areas, etc.).

 

[MOHS_01]

It is only tax free if it comes from a non-profit entity (i.e. federally funded clinics in underserved areas, etc.).

I may be mistaken, but I believe that it is still considered taxable income irrespective of the paying institution.

 

[deleted87716]

It is only tax free if it comes from a non-profit entity (i.e. federally funded clinics in underserved areas, etc.).

I may be mistaken, but I believe that it is still considered taxable income irrespective of the paying institution.

If a student loan is forgiven by a tax-exempt educational institution, the forgiveness is excluded from gross income if the student is not employed by the educational institution or if the loan forgiveness was based on an agreement by the former student to work for a specific number of years in certain professions.

Chapter 5 of IRS Publication 970 contains more information on the tax implications of loan forgiveness: http://www.irs.gov/pub/irs-pdf/p970.pdf