Getting Student Loans Forgiven

Submitted by latoyairby on Thu, 12/11/2008 - 14:12

Paying my student loans didn't seem like it would be big deal when I first applied. Now when I look down the road and I see a future filled with student loan payments, I wish I could turn back the hands of time. Oh how I wish I was able to have my student loans forgiven. Certain people can have their student loans forgiven and unfortunately, I'm not one of them.

According to FinAid.org, people who volunteer for any of these organizations qualify for student loan forgiveness:

  • AmeriCorps
  • PeaceCorps
  • Volunteers in Service to American

The Army National Guard has a repayment program that may pay up to $10,000 of student loans.

Students who go on to become teachers in qualified elementary or middle schools that serve low-income families can have their Perkins or Stafford loans completely forgiven.

There is a long list of people who qualify for student loan forgiveness. You may be one of them. Check out the list at FinAid.org.

There is a drawback to student loan forgiveness though. A few weeks ago, I talked about how student loan interest is tax-deductible. Well, it's just the opposite with student loan forgiveness.

If you have your student loans forgiven, you must report the forgiven amount as taxable income in the year the loans were cancelled. This increases the amount of income taxes your liable to pay. It could mean a decrease in your tax refund, if one is due. Or, you could have to send a check to Uncle Sam if you didn't have enough taxes withheld from your paychecks.

Paying taxes on a forgiven student loan is a fair enough trade. It would be a lot easier to pay those taxes next year than to repay the student loans for the next 20 years.