IBR/PSLF is a sure thing

[sazerac]

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Some people have commented that you will have to pay a tax on the amount forgiven by the government after 20 years of making payments through the PAYE program or 25 years on the IBR program. Well, according to the IRS, there is a provision in which cancelled student loan debt (which I believe includes PAYE and IBR) is not included in your gross income and thus is not taxed. Pretty encouraging, although I guess the tax code could be rewritten 20 years from now.

Certain student loans provide that all or part of
the debt incurred to attend a qualified educa-
tional institution will be canceled if the person
who received the loan works for a certain period
of time in certain professions for any of a broad
class of employers.

If your student loan is canceled as the result
of this type of provision, the cancellation of this
debt is not included in your gross income. To
qualify for this treatment, the loan must have
been made by:
1.
The federal government, a state or local
government, or an instrumentality, agency,
or subdivision thereof​

You have completely left off the definition of "any of a broad class of employers," which is going to be the same class of employers that qualify you for tax-free 10 year PSLF, namely non-profit institutions.

If you work for yourself or for a for-profit institution and get the 20/25 year forgiveness, your loan forgiveness is still taxable.

 

[@JackShephard]

I remember reading this thread a while back... ironic as the government is now attempting to back out.

 

[DrMidlife]

Gov't isn't backing out, it's finally remembering to put a limit on PSLF corresponding to undergrad debt, so that it helps the teachers/nurses/etc it was designed for. There's no way PSLF was ever intended to forgive six figure debt for doctors & dentists.

 

[@JackShephard]

Gov't isn't backing out, it's finally remembering to put a limit on PSLF corresponding to undergrad debt, so that it helps the teachers/nurses/etc it was designed for. There's no way PSLF was ever intended to forgive six figure debt for doctors & dentists.

I call it backing out because they said it would work for medical students. To forgive a medical student 57k when a person who owes 250k can payback nearly 600k with interest is pretty bad.

If PSLF was never intended for medical students then they should have capped it from day 1.

A corollary would be offering a 1% tax rebate to Americans. Then multiple years later saying, "Oh, that's only for income earners < 100k". That would be a surprise to those earning more. I'm not saying one group needs it or not, just that it's a change of terms.

I've heard a lot about helping the nurses. They seem to be doing pretty well these days.

 

[TheWeeIceMan]

I call it backing out because they said it would work for medical students. To forgive a medical student 57k when a person who owes 250k can payback nearly 600k with interest is pretty bad.

If PSLF was never intended for medical students then they should have capped it from day 1.

A corollary would be offering a 1% tax rebate to Americans. Then multiple years later saying, "Oh, that's only for income earners < 100k". That would be a surprise to those earning more. I'm not saying one group needs it or not, just that it's a change of terms.

I've heard a lot about helping the nurses. They seem to be doing pretty well these days.

I read this on another forum, but it I think it sums it up pretty well.

"Obama used programs like PSLF to buy political support from young voters while the program was free (b/c forgiveness was 10 years away) and then when the costs appear on the horizon he ditches it because he no longer needs them."

 

[Postictal Raiden]

I call it backing out because they said it would work for medical students. To forgive a medical student 57k when a person who owes 250k can payback nearly 600k with interest is pretty bad.

If PSLF was never intended for medical students then they should have capped it from day 1.

A corollary would be offering a 1% tax rebate to Americans. Then multiple years later saying, "Oh, that's only for income earners < 100k". That would be a surprise to those earning more. I'm not saying one group needs it or not, just that it's a change of terms.

I've heard a lot about helping the nurses. They seem to be doing pretty well these days.

I don't think it is a conspiracy against medical students and physicians; it is against everyone who chooses to go to a professional school. Lawers, denstists, podiatrist, pharmacists, optometrists, and even CRNA's are screwed.

 

[@JackShephard]

I don't think it is a conspiracy against medical students and physicians; it is against everyone who chooses to go to a professional school. Lawers, denstists, podiatrist, pharmacists, optometrists, and even CRNA's are screwed.

Not conspiracy.

My point is that a lawyer trains 3 years and then works for basically his full salary. A fellowship trained surgeon or even IM specialist could take 10-12 years before earning his full salary (which is also on the chopping block). So with #1 losing the loan forgiveness and #2 cuts to higher paid physician in the next decade, this factors much worse for the higher paid physician with decade long training.

 

[@JackShephard]

I read this on another forum, but it I think it sums it up pretty well.

"Obama used programs like PSLF to buy political support from young voters while the program was free (b/c forgiveness was 10 years away) and then when the costs appear on the horizon he ditches it because he no longer needs them."

Ha. Probably true.

 

[Chipster.]

I read this on another forum, but it I think it sums it up pretty well.

"Obama used programs like PSLF to buy political support from young voters while the program was free (b/c forgiveness was 10 years away) and then when the costs appear on the horizon he ditches it because he no longer needs them."

Thanks a lot, Obama.

But for accuracy's sake, it should be noted that Bush signed PSLF into law in 2007. So whoever said that is misinformed.

 

[TheWeeIceMan]

Thanks a lot, Obama.

But for accuracy's sake, it should be noted that Bush signed PSLF into law in 2007. So whoever said that is misinformed.

Yeah, that's true. Obama definitely campaigned on promises to promote favorable student loan legislation, though.

Also, to be fair, the PSLF bill was proposed by the dems and passed with veto-proof majorites in the House and Senate.

 

[Perrotfish]

I call it backing out because they said it would work for medical students. To forgive a medical student 57k when a person who owes 250k can payback nearly 600k with interest is pretty bad.

If PSLF was never intended for medical students then they should have capped it from day 1.

A corollary would be offering a 1% tax rebate to Americans. Then multiple years later saying, "Oh, that's only for income earners < 100k". That would be a surprise to those earning more. I'm not saying one group needs it or not, just that it's a change of terms.

I've heard a lot about helping the nurses. They seem to be doing pretty well these days.

I can't weep to much for people that tried to exploit the letter of a law that pretty obviously wasn't meant to apply to them. Beyond the fact that this wasn't meant to apply to the borrowers of hundreds of thousands, it clearly wasn't meant to apply to physicians who work full time for a full, competitive salary in a hospital that just happens to be a non-profit. This was always meant to make public service accessible to people who otherwise would have taken more lucrative jobs, not to give a windfall to people whose most lucrative salary happened to be in something that legally could be classified as public service.

BTW this doesn't really apply to nurses either, I'm not aware of any that couldn't pay off their undergraduate loans with 10% of their salary after 10 years of full time work.

 

[@JackShephard]

I can't weep to much for people that tried to exploit the letter of a law that pretty obviously wasn't meant to apply to them. Beyond the fact that this wasn't meant to apply to the borrowers of hundreds of thousands, it clearly wasn't meant to apply to physicians who work full time for a full, competitive salary in a hospital that just happens to be a non-profit. This was always meant to make public service accessible to people who otherwise would have taken more lucrative jobs, not to give a windfall to people whose most lucrative salary happened to be in something that legally could be classified as public service.

BTW this doesn't really apply to nurses either, I'm not aware of any that couldn't pay off their undergraduate loans with 10% of their salary after 10 years of full time work.

Fair enough.