Another reason why you should carefully look into loan forgiveness programs

JudithL_in_NH · May 11, 2003

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!

Ortho_RN · May 11, 2003

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....

camkib · May 11, 2003

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.

natsfanrn · May 12, 2003

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

gwenith, BSN, RN · May 12, 2003

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.

USA987, MSN, RN, NP · May 12, 2003

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...

peaceful2100, BSN, RN · May 12, 2003

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.