3 ms·
With PAYE and IBR, it seems like one could permanently take a couple of classes, receive all of the loan money for "living expenses," and then run up an unlimit
by pwned1 8y ago
With PAYE and IBR, it seems like one could permanently take a couple of classes, receive all of the loan money for "living expenses," and then run up an unlimited amount of student loans... and they never have to pay back more than just a percentage of your income...
- ben1040 8y agoAny amount forgiven at the end of an IBR term is considered taxable income, so at some point you're going to just trade your student loan servicer's payment plan for an installment plan with the IRS. And if your IBR payment isn't enough to cover the interest as it accrues, your balance at the end might be pretty big. There was a story in the WSJ about a dentist who currently has $1MM in student loan balances and is on IBR. When the IBR period expires, he'd be likely to have a $2MM balance forgiven and consequently a $700K tax liability. https://www.wsj.com/articles/mike-meru-has-1-million-in-student-loans-how-did-that-happen-1527252975 https://www.wsj.com/articles/mike-meru-has-1-million-in-stud...
- pwned1 8y agoGenerally the IRS will not tax you on a forgiven debt to the extent that you are insolvent. Insolvent to the IRS mean more liabilities than assets. https://www.irs.gov/newsroom/what-if-i-am-insolvent https://www.irs.gov/newsroom/what-if-i-am-insolvent