43 S. 1414, introduced , sponsored by Sen. Richard J. Durbin, D – Ill .; H.R. 7655, introduced , sponsored by Rep. Mary Gay Scanlon, D – Pa .
44 Pentis, ” Income – Share Agreements vs. Student Loans: Which Is Right for Your Profession?” Lending Tree (), available at studentloanhero.
45 Federal Student Aid Office of the U.S. Department of Education, ” Income – Driven Repayment (IDR) Plan Request,” available at .
51 There is a safe harbor for distributions for certain expenses for medical care, tuition, casualty, etc. See Regs. Sec. 1.401(k)- 1 (d)(3)(ii).
57 Distributions to pay current – year education expenses are not subject to the 10% early – withdrawal penalty. Additionally, funds in an IRA can be withdrawn at any time; however, the amount withdrawn may be subject to income tax and the early – withdrawal penalty.
58 Congress could one day decide to provide some type of widespread student loan forgiveness, but it is prudent to have a debt repayment plan instead of relying on potential debt forgiveness.
59 Sec. 6511(a) (three years from the date the return was filed or two years from the date the tax was paid, whichever is later).
The CARES Act, enacted in , provided relief to students in several ways. First, federal student loans were automatically placed into administrative forbearance until , which meant payments were not required until that time. 9 In , President Donald Trump issued a memorandum extending similar relief until . 10 Because only government – held federal student loans are covered by these actions, millions of student loan borrowers with private loans and commercially issued federally guaranteed loans are not provided relief. Private lenders may offer their own help, however; borrowers should contact their lender for assistance. 11
KPMG’s approach involves student loan avoidance rather than repayment assistance. KPMG has created a Master of Accounting With Data and Analytics Program, and the company funds tuition, fees, books, and a stipend to cover room and board to a select group of students accepted into the program. 20 Students take courses and obtain their degree from one of the universities participating in the program. The amount received is included in the student’s income. KPMG also pays the student for an approximate amount of taxes due on the funds. The program includes an internship and a full – time associate position with the firm.
Typically, the lender forgives some or all of the student’s debt in exchange for the student’s commitment to serve in a public service occupation or underserviced geographic area. In other cases, the original student loan is refinanced in exchange for the student’s commitment to work in a public service – oriented occupation. 30 The lender must generally be a government entity or tax – exempt education institution.
Individuals whose student loan debt is discharged because of death or total and permanent disability may exclude the debt discharge from gross income. 36 This exclusion applies to loans discharged after 2017 and before 2026.
An increasing number of universities and private investment companies are offering ISAs, which can ease borrowers’ debt burden and enable more students to fund their college education.
In addition to the above conditions, the plan may require additional conditions be met for a distribution to be treated as necessary to satisfy an employee’s immediate and heavy financial need. For example, while under Sec. 401 and the regulations, employees do not have to take a plan loan as a condition before taking a hardship distribution, a plan may include a condition that an employee is required to take a nontaxable plan loan available under the plan or another plan of the employer before a hardship distribution is made. 55
9. Student borrowers resorting to bankruptcy should consult a local bankruptcy attorney. Bankruptcy involves state – specific laws that are used to apply the federal tax rules. Currently, student loans are generally not dischargeable in bankruptcy; however, it may be possible under the undue financial hardship test, as discussed above.
41 Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987). The Bankruptcy Code does not define undue hardship.
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