Are there any drawbacks to student loan forgiveness?
There may be tax consequences to student loan forgiveness. Normally, debt that is forgiven counts as income for tax purposes in the year that it is forgiven. Federal tax law excludes forgiven student loan debt from income when that debt is forgiven by a qualifying lender for a qualifying reason. However, current federal law seems to require that the loan forgiveness provision was contemplated and included in the loan agreement at the time that the loan was made. Likewise, state law may treat forgiven student loan debt as income in the year that it is forgiven. National groups are working on making the debt forgiveness from the federal loan forgiveness program non-taxable. What if I have more questions? The Equal Justice Works website contains additional information on this public interest student loan forgiveness program. The website also contains helpful links to a number of other articles and websites. You may also contact David Loetz in Iowa Legal Aid’s Southeast Regional Office in
