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Personal Finances / Paying Back Student Loans

URL:  https://boards.fool.com/necessary-disclaimer-i-am-not-a-tax-expert-this-23738862.aspx

Subject:  Re: Insurmountable Student Loan---help! Date:  2/21/2006  11:05 PM
Author:  aroneous Number:  4111 of 4854

Necessary disclaimer: I am not a tax expert. This is what I believe to be the case, but I COULD BE WRONG. (Amazing, but it has happened before. It was a Thursday, if I recall).

Anyway, I believe you'll get a 1099 form the year the rest of the loan is "forgiven", showing the forgiven amount as income. I believe you then include it in your income on you 1040, and figure your tax liability accordingly.

We're in a similar situation - DH's student loan is so big it's a joke. Minumum monthly payment more than he even earns (on standard repayment), the whole tragedy. So, he's on the ICR plan.

I honestly think the tax laws will have changed by then (if the Fair Tax ever happens, for example, or any of the other major tax overhaul proposals) and there won't be any income tax due by then. We'll see.

Something else to consider, their ICR program uses total household income (not just the borrower's income) to determine payment - so if you also have student loans, it MAY be best to consolidate with your spouse. If you each have separate loans, the other loan obligation is not considered in determining your monthly payment.

Kind of annoying to me - my income is counted to determine his payment. The government is requiring me to pay his loans.

Of course, there are downsides to consolidating with spouse, so read, learn and decide what's right for your guys.

-a-

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