IBR + PSLF woes Forum

[Tanicius]

https://www.irs.gov/taxtopics/tc431.html

In general, if you have cancellation of debt income because your debt is canceled, forgiven, or discharged for less than the amount you must pay, the amount of the canceled debt is taxable and you must report the canceled debt on your tax return for the year the cancellation occurs.

EXCEPTIONS:

Certain qualified student loans canceled under the loan provisions that the loans would be canceled if you work for a certain period of time in certain professions for a broad class of employers

I guess that includes LRAP

It *might* include LRAP for fields in government/law, but I have yet to find confirmation of that. I know it does for medical professionals though.

[GreenEggs]

https://www.irs.gov/taxtopics/tc431.html

In general, if you have cancellation of debt income because your debt is canceled, forgiven, or discharged for less than the amount you must pay, the amount of the canceled debt is taxable and you must report the canceled debt on your tax return for the year the cancellation occurs.

EXCEPTIONS:

Certain qualified student loans canceled under the loan provisions that the loans would be canceled if you work for a certain period of time in certain professions for a broad class of employers

I guess that includes LRAP

It *might* include LRAP for fields in government/law, but I have yet to find confirmation of that. I know it does for medical professionals though.

What? No, that's not what that says. It clearly includes CLS's LRAP, and likewise programs that give you 6 month loans that are forgiven on the basis of you working in certain professions for certain periods of time.

[Nebby]

You trust your cousin Vinny, I'll trust what the tax professionals that run my school's LRAP program have told us. Forgiven debt under LRAP is not income. LRAP disbursements are not income.

And according to the IRS and simple reasoning, interest paid on student loans counts regardless of participation in LRAP or not. The only time it doesn't is when your employer makes a qualifying payment on your behalf.

[Tanicius]

Qualified lenders. These include the following.
The United States, or an instrumentality thereof.

A state, territory, or possession of the United States; or the District of Columbia; or any political subdivision thereof.

A public benefit corporation that is tax exempt under section 501(c)(3); and that has assumed control of a state, county, or municipal hospital; and whose employees are considered public employees under state law.

An eligible educational institution, if the loan is made:

As part of an agreement with an entity described in (1), (2), or (3) under which the funds to make the loan were provided to the educational institution; or

Under a program of the educational institution that is designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs where the services provided by the students (or former students) are for or under the direction of a governmental unit or a tax-exempt section 501(c)(3) organization.

Occupations with unmet needs include medicine, nursing, teaching, and law.

I think you're right now. This at least seems to say we don't need to report the LRAP forgiven loan as income.

Question then becomes, can we still also report the interest paid (by our forgiven LRAP loan)?

[Nebby]

The answer is yes!!!

[GreenEggs]

You trust your cousin Vinny, I'll trust what the tax professionals that run my school's LRAP program have told us. Forgiven debt under LRAP is not income. LRAP disbursements are not income.

And according to the IRS and simple reasoning, interest paid on student loans counts regardless of participation in LRAP or not. The only time it doesn't is when your employer makes a qualifying payment on your behalf.

eh

[Nebby]

You trust your cousin Vinny, I'll trust what the tax professionals that run my school's LRAP program have told us. Forgiven debt under LRAP is not income. LRAP disbursements are not income.

And according to the IRS and simple reasoning, interest paid on student loans counts regardless of participation in LRAP or not. The only time it doesn't is when your employer makes a qualifying payment on your behalf.

eh

I'm p sure that dude is a CPA

[Tanicius]

You trust your cousin Vinny, I'll trust what the tax professionals that run my school's LRAP program have told us. Forgiven debt under LRAP is not income. LRAP disbursements are not income.

And according to the IRS and simple reasoning, interest paid on student loans counts regardless of participation in LRAP or not. The only time it doesn't is when your employer makes a qualifying payment on your behalf.

Do you have documentation or links from your school? It sounds like Berkeley Law's LRAP functions effectively the same as yours, but they have only given us the weaksauce answers of "we don't think it's required to be reported, but consult a tax professional and trust us at your own peril."

[GreenEggs]

You trust your cousin Vinny, I'll trust what the tax professionals that run my school's LRAP program have told us. Forgiven debt under LRAP is not income. LRAP disbursements are not income.

And according to the IRS and simple reasoning, interest paid on student loans counts regardless of participation in LRAP or not. The only time it doesn't is when your employer makes a qualifying payment on your behalf.

eh

I'm p sure that dude is a CPA

Yeah, but they stress that they don't give tax advice (clearly for liability reasons), but I take most of what they say with some small grain of salt

[Tanicius]

Yeah, but they stress that they don't give tax advice (clearly for liability reasons), but I take most of what they say with some small grain of salt

This is the reason I'm hesitant to trust my own law school's "advice" on this issue, and it's also why the CPA handling my own taxes thinks I need to report this shit.

[GreenEggs]

Yeah, but they stress that they don't give tax advice (clearly for liability reasons), but I take most of what they say with some small grain of salt

This is the reason I'm hesitant to trust my own law school's "advice" on this issue, and it's also why the CPA handling my own taxes thinks I need to report this shit.

Your CPA is also a family member. Not saying he's a bad CPA, but he also might not have looked into this as much since you're not a real client.

I'm also not a tax professional in anyway, and a 1L, so I would still lean towards listening to your CPA.

[Nebby]

You trust your cousin Vinny, I'll trust what the tax professionals that run my school's LRAP program have told us. Forgiven debt under LRAP is not income. LRAP disbursements are not income.

And according to the IRS and simple reasoning, interest paid on student loans counts regardless of participation in LRAP or not. The only time it doesn't is when your employer makes a qualifying payment on your behalf.

Do you have documentation or links from your school? It sounds like Berkeley Law's LRAP functions effectively the same as yours, but they have only given us the weaksauce answers of "we don't think it's required to be reported, but consult a tax professional and trust us at your own peril."

I don't have documentation. Our school's LRAP folks came and talked to us and that's what they told us.

They didn't talk about whether interest paid utilizing LRAP funds qualifies for the interest deduction. I came to that opinion by reading the IRS opinion and using the overpriced reasoning skills I obtained in law school

[GreenEggs]

You trust your cousin Vinny, I'll trust what the tax professionals that run my school's LRAP program have told us. Forgiven debt under LRAP is not income. LRAP disbursements are not income.

And according to the IRS and simple reasoning, interest paid on student loans counts regardless of participation in LRAP or not. The only time it doesn't is when your employer makes a qualifying payment on your behalf.

Do you have documentation or links from your school? It sounds like Berkeley Law's LRAP functions effectively the same as yours, but they have only given us the weaksauce answers of "we don't think it's required to be reported, but consult a tax professional and trust us at your own peril."

I don't have documentation. Our school's LRAP folks came and talked to us and that's what they told us.

They didn't talk about whether interest paid utilizing LRAP funds qualifies for the interest deduction. I came to that opinion by reading the IRS opinion and using the overpriced reasoning skills I obtained in law school

They also said that our income for LRAP calculations is our gross income, they would have mentioned the fact that the LRAP loan is part of that if that was the case.

[Tanicius]

Does the IRS have a hotline or something?

[GreenEggs]

Does the IRS have a hotline or something?

They used to

[GreenEggs]

In case you had any remaining suspicions, here is the IRS's official deceleration that LRAP programs are qualifying student loan payments:

https://www.irs.gov/irb/2008-28_IRB/ar06.html

[Nebby]

In case you had any remaining suspicions, here is the IRS's official deceleration that LRAP programs are qualifying student loan payments:

https://www.irs.gov/irb/2008-28_IRB/ar06.html

Good find. Straight from the horses mouth

Tanacius, I honestly think you're more prepared to answer these tax questions than a CPA.

[GreenEggs]

In case you had any remaining suspicions, here is the IRS's official deceleration that LRAP programs are qualifying student loan payments:

https://www.irs.gov/irb/2008-28_IRB/ar06.html

Good find. Straight from the horses mouth

Do you think working at CLS's LRAP department counts as qualifying employment?

[hennenr]

Does anyone know if you can remain eligible for PSLF if you work for a prosecutor's office or public defenders office that is a member of a labor union? The PSLF certification form asks "Is your employer a labor union?" But technically your employer would be the state or the county and not a labor union. Any info is much appreciated.

[A. Nony Mouse]

Do you mean that the office is unionized? That's fine. The union isn't your employer.

[hennenr]

That's what I was getting at. Thanks.

[Tanicius]

Update on my loan with FedLoan that took 3-4 extra months to be recertified back onto IBR: FedLoan reviewed it and determined it was their fault for it taking so long, so they've back-billed me at my own request. Justice.

[Nebby]

Update on my loan with FedLoan that took 3-4 extra months to be recertified back onto IBR: FedLoan reviewed it and determined it was their fault for it taking so long, so they've back-billed me at my own request. Justice.

Good shit brother

[Anonymous User]

does anyone here have a federal perkins loan? From what I understand, as long as I consolidate my perkins loan I will still remain eligible for PSLF. I have all federal loans and was about to submit the application for consolidation of all my loans but then I saw this disclaimer and now I'm confused:

IMPORTANT: Loan Types F, M, and N are loans made under the Federal Perkins Loan Program. You may qualify for cancellation (forgiveness) of these loans based on your employment in certain occupations. If you are working toward cancellation on one of these loan types, you should not consolidate those loans because you will lose your eligibility to receive cancellation. See StudentAid.gov for more information about Perkins Loan cancellation.

Why is it telling me I should NOT consolidate my perkins loan?

[Tanicius]

does anyone here have a federal perkins loan? From what I understand, as long as I consolidate my perkins loan I will still remain eligible for PSLF. I have all federal loans and was about to submit the application for consolidation of all my loans but then I saw this disclaimer and now I'm confused:

IMPORTANT: Loan Types F, M, and N are loans made under the Federal Perkins Loan Program. You may qualify for cancellation (forgiveness) of these loans based on your employment in certain occupations. If you are working toward cancellation on one of these loan types, you should not consolidate those loans because you will lose your eligibility to receive cancellation. See StudentAid.gov for more information about Perkins Loan cancellation.

Why is it telling me I should NOT consolidate my perkins loan?

Call your loan provider.

And FYI, never consolidate ALL your loans with the Perkins loan or your interest rates will be higher on a bunch of loans. Consolidate it with a loan that already has a similar interest rate.