Another reason why you should carefully look into loan forgiveness programs

  1. I am graduating a week from today and just the past week I did my exit loan counseling. Well, I owe a certain hospital in my city a 2 year work commitment and they paid 100% of my senior year tuition but I found out the past week that I would be taxed 50% of the total amount each year of my commitment. So that means each year they will take out $4,600 a year in taxes for each year I work because the total loan amount was $18,400.00. Each paycheck they will be taking out about 176 in taxes for JUST the loan that is not including the federal, state, local, Social security and other taxes they will take out. I can't believe I missed something like that. I just want to write this to make sure ALL students who are thinking about doing loan forgiveness programs like this to make sure they understand the program fully before they sign on the line. MANY of my classmates were like me and did not understand this at all either. IT comes as a shock to many of us.
    •  
  2. 7 Comments

  3. by   JudithL_in_NH
    Tonya,

    The scenario you've described just doesn't sound real!

    Are you certain that the deal isn't that 1/2 of the loan amount will be *included in your taxable income per year,* and you'll *pay tax* on that amount in addition to whatever tax you owe on the rest of your income?

    Tax on half the loan would, obviously, depend on your tax bracket, but $4,600 in tax on half the loan amount would put you in a 50% bracket, which I don't think is even possible. (I know my family pays approximately 15% in taxes on our income annually, once all deducations and such are figured in)--so if I had to pay tax on half your loan amount, it would be around $1,300 in additional taxes/year, which would still make the forgiveness a bargain over having to pay the full tuition.

    I just hope it isn't so that you'll owe that much, as that would be a really crummy deal!
  4. by   Ortho_RN
    I'm glad our hospitals don't do it like that... They just require you to work 1 month for every $100 they spend on you... They don't take any money away....
  5. by   camkib
    I'm so sorry to hear about your situation. I've been looking into programs like that, but decided against it. I receive the pell grant, but it doesn't seem like it will cover everything when I enter my program this fall.

    I have noticed that some hospital tuition programs pay your tuition for a work commitment only, while others loan you the money AND require a work commitment.
  6. by   natsfanrn
    Tonya--As Judith says, I'd look into this further to make sure that this is correct. I don't understand how you can be taxed on this money, especially at a 50% rate, when it's not part of your income. As a scholarship, the money should be tax deductible, anyway, as an education expense. But then again, I'm not an accountant...but I'd certainly check with one
  7. by   gwenith
    If this is true then go to your local TV station/newpaper/media outlet and report it so that others do not get trapped. I think you wil find that the media will jump on a story like this and it should stop it from happening in the future and occasionally all of the problems like 50% tax "evaporate" when teh media get involved.
  8. by   USA987
    I have actually just accepted a "Loan Forgiveness" payment. According to my contract, they will make it look like they are paying me so much a month, let's say $400 (Then they take that away from me on the deduction side since I have already received the money)...I will pay taxes on that $400 as if it were part of my income, what ever tax bracket I fall into. She said the reason they do it that way is so I wouldn't be taxed on it as a one time payment in which case they would have to withhold 38% in federal/state income tax. Your scenario just doesn't make sense to me....You said that they are "taxing" you 50% in ADDITION to federal/state/local/ss. What authority do they have to levy their OWN tax?????

    Maybe I'm misunderstanding something...
  9. by   peaceful2100
    That is the way the financial aid lady in the financial aid office explained it. Tomorrow I am going to talk to someone in human resources who will know.

close