Paying Student Loans with Pre-tax dollars

[deleted162650]

So Jet's thread on being debt free got me thinking. Is there any way to legitimately (i.e. legally) pay your student loans with tax free dollars when your in our tax bracket? Let's say you're a new grad going to work for a PP group. You'll be a W-2 employee. Could you work out an arrangement with the group whereby they offer a "loan repayment program" that essentially takes some of your collections each month and uses them to pay the loan payment pre-tax (along with the other overhead expenses like billing costs, etc.)?

I'm assuming that if this was legal it would already be a fairly common arrangment but please enlighten me.

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[nimbus]

In order to do so, you would have to show that it is a legitimate current business expense. This is easy with ongoing cme but I don't think its possible for education expenses incurred before date of employment.

 

[lord_jeebus]

The list of things that can be paid for by an employer with pre-tax dollars is defined by federal statute. So I think you're out of luck.

 

[deleted162650]

So how is it that jobs in less desirable areas are able to offer loan repayment options?

 

[caligas]

So Jet's thread on being debt free got me thinking. Is there any way to legitimately (i.e. legally) pay your student loans with tax free dollars when your in our tax bracket? Let's say you're a new grad going to work for a PP group. You'll be a W-2 employee. Could you work out an arrangement with the group whereby they offer a "loan repayment program" that essentially takes some of your collections each month and uses them to pay the loan payment pre-tax (along with the other overhead expenses like billing costs, etc.)?

I'm assuming that if this was legal it would already be a fairly common arrangment but please enlighten me.

Loan interest can be deductable in residency when youre income is low enough to allow it. Thats as close as you will get.

 

[countingdays]

Loan interest can be deductable in residency when youre income is low enough to allow it. Thats as close as you will get.

You can deduct the interest from your student loans when you retire too!

 

[ProwlerturnGas]

You can deduct the interest from your student loans when you retire too!

Hahaha....that's just sad.

 

[imfrankie]

So how is it that jobs in less desirable areas are able to offer loan repayment options?

My bet is that a person gets to pay tax on the loan repayment.

 

[D P356]

My bet is that a person gets to pay tax on the loan repayment.

That sucks.

I've thought about all of this stuff. If you're paid the avg for anesthesiologists, you will need to 100k pretax to pay roughly 60k (depending on the state). Not only do you get kicked in the balls for taxes, but they kick you again when you're trying to pay off your debt, which they "own." ........at 6.8 to 7.9%

Finish!

 

[W222]

So how is it that jobs in less desirable areas are able to offer loan repayment options?

Many of those repayment offers are in actuality private loans granted by the hospital and those loans are forgiven after a certain period of service at that hospital. They can and will come after you if you decide to leave before your service commitment is up and they will make you repay. Hospitals can also structure these as advances on future income.

 

[pgg]

Many of those repayment offers are in actuality private loans granted by the hospital and those loans are forgiven after a certain period of service at that hospital.

It's my understanding that those forgiven loans are reported to the IRS as income.

As a rule, any time a business entity forgives an amount of debt, they write it off as their own business expense. The IRS looks for some other entity to have corresponding income.

It's just like doing a short sale on a house - the bank may "forgive" part of the loan to get an underwater house sold, but they'll hit you with a 1099-C ("cancellation of debt") for the amount forgiven. If it's a tax writeoff for the bank, it's a tax liability for the homeowner.

Worse, 1099 "income" carries tax liability that W-2 income doesn't: double the payroll taxes.

They can and will come after you if you decide to leave before your service commitment is up and they will make you repay. Hospitals can also structure these as advances on future income.

Still taxed as income.


My understanding is that there is no way to pay back student loans with pretax income. And it's worth looking at the fine print of any employer's loan repayment program to determine exactly how they will report that payment to the IRS as your income.


I'm not an expert and I've never been through any of this. This is just how it has been explained to me. Anyone feel free to correct me if anything above is wrong

 

[Avefenix]

My plan is to use the state government to pay my loans for me. Check with your state as far as loan repayment options.

I plan to return to Texas which has the following :

Physician Education
Loan Repayment 160 k / 4 years service
Program
(PELRP)


Children's Medicaid
Loan Repayment 140 k / 4 years
Program
(CMLRP)

I would not sign a loan repayment option with a hospital since they would negotiate it as part of your salary. I would rather have other perks in my contract instead.