IBR and Tax Bomb

[chasing5ym]

Interviewed at USC. They basically said you're gonna have to take a 500k loan out, but don't worry because you can do PAYE/REPAYE/IBR loan forgiveness programs. Sounded all gravy. Cool. I'm down. Then she mentioned the tax bomb that comes with it at the end of such programs. My question is if you do an IBR loan forgiveness program at the end of the 20 years do you have to pay that entire hefty tax bomb that tax season or can you spread it out somehow? (It's usually 100k+, right? so you'd have that much saved up to pay upfront because you're expecting that tax bomb?)


Just trying to mentally prepare and know what I'm getting myself into for any dental school. Solely mentioned USC and used it as an example because it was the only school to mention such programs.

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[FlossyLady1]

Yes it counts as taxable income in the year it is forgiven. Applies to the current year just like any other form of income. If you can't pay it right away you must make sure to set up a payment plan with IRS to avoid penalties.

 

[sobertiger]

You can enter into a monthly payment plan with the IRS.

 

[Alpha Centauri]

Payment plan for a payment strategy that helps lower your monthly payment.

 

[FanOfCostco]

I've been hearing a lot of mixed opinions during my loan exit class or whatever Uncle Sam wants to call it. They basically said to enter a pay as you earn first because you don't have the speed or the private practice knowledge. Once you get a stable income then go into the standard.

Now from people with experience, they said instead of the standard once you get stable income, you should go consolidate and get a lower interest rate with a bank. The problem
With that is that if you can't make the payments you can't change the plan. You basically stuck if you can't make the payments.

The other option is just to keep the loans with the government. Every president has some sort of bill for student loans. Not sure if you want to risk it with trump.

Lots of options, just gotta wait and see how you do on a monthly basis before you can decide on anything