Disabled Can Now Avoid Taxes When Student Loans Forgiven
Published On: March 14, 2018
After January 1, 2018 borrowers whose student loans are forgiven due to “total and permanent disability” no longer have to pay federal income taxes on those forgiven loans. Anyone who is permanently disabled, including military veterans, will no longer be hit with a tax bill when their student loans are eliminated (referred to by the IRS as ‘forgiveness of debt’).
The Bad News in the 2018 Tax Law:
Unfortunately, the change is not retroactive. This is all part of a massive overhaul of the tax code spelled out by the Tax Cuts and Jobs Act. Those borrowers whose loans were forgiven before January 1, 2018 will still have to pay the taxes (as ordinary income); but should talk to their accountant to see if there are other exceptions (see IRS form 982).
Note: according to the U.S. Government Accountability Office, the Department of Education forgives about $2 billion in loans owed by disabled borrowers every year.
Who can be considered Disabled?
Veterans who cannot work as a result of service-related injuries aren’t the only disabled borrowers who can qualify for federal student loan forgiveness. Anyone who’s receiving disability benefits from the Social Security Administration, or has been certified as “totally and permanently disabled” by a physician, may qualify.
Seniors Social Security Seized to Pay Student Loans:
Issues for older borrowers (age 50 and older) who default on federal student loans and must repay that debt with a portion of their Social Security benefits often have held their loans for decades and had about 15 percent of their Social Security benefit payment withheld.
By Diane Drain|Published On: March 14th, 2018|Last Updated: October 24th, 2022|
Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.
*Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice, nor create an attorney client relationship between you, me, or the author of any article. Information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*
5 / 5
“You folks are the BEST OF THE BEST in Arizona.” M.H.
You and Jay are the best attorneys I have ever had or needed and thank God for the Honorable Robert Gottsfield in recommending you folks – I would have never made it through the entire process without you and Jay and God Bless you both always and stay in touch as well. You folks are the BEST OF THE BEST in Arizona.
5 / 5
“My only regret is that I didn’t find Diane sooner.” K.H.
I can’t say enough good things about Diane. The way she handled my not typical circumstances was amazing. I was very nervous to start the bankruptcy process but Diane just has a very comforting way of explaining the whole process. My only regret is that I didn’t find Diane sooner. If you find yourself in a financial situation that you can’t correct on your own, please Call Diane Drain as soon as possible.
5 / 5
“Filing for bankruptcy can be a stressful life event” R.A.
Filing for bankruptcy can be a stressful life event, and selecting the right attorney can add to this stress. Diane and Jay were a pleasure to work with, and it is obvious that they are passionate about helping people get their life back on track. I would highly recommend them if you need a bankruptcy attorney.
Education Loans Can Be Discharged in Bankruptcy Busting myths about bankruptcy and private student loans By Robert G. Cameron – APR 12, 2022 (Reprint from Consumer Financial Protection Bureau "www.CFPB.gov". The following is an [...]
CFPB Charges Performance SLC and Performance Settlement, Daniel Crenshaw, with Using Deceptive Tactics November 5, 2020 – The Consumer Financial Protection Bureau (Bureau) filed a complaint against Performance SLC, LLC [...]
CFPB Settles with Discover Bank, the Student Loan Corporation and Discover Products for violating a consent order and other unlawful practices December 22, 2020 Consumer Financial Protection Bureau issued a [...]
My intention is to put you back in control of your life
Start with $0 down*. We provide affordable payment plans.
We are a debt relief agency; we help individuals and small businesses through the bankruptcy process. Attorney Advertising. This website is designed for general information only. Any information you obtain from this website should not be construed as legal advice, nor as grounds for forming an attorney-client relationship. You should consult an attorney for information on obtaining formal legal advice.