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Is Student Loan Forgiveness For The Disabled Worth The Tax Liability?

Under federal law, certain totally and permanently disabled individuals who have federal student loan debt may be eligible to have those loans forgiven. Not everybody knows this, and those who do still face the obstacles of providing proper documentation of the total and permanent disability.

The problem is that currently, when a federal student loan debt gets discharged, the U.S. Department of Education reports that forgiveness to the IRS, and the IRS translates the sum into taxable income. If you fail to report that loan forgiveness on your tax return, you could lose your disability or other benefits, or have your bank account slapped with a lien, according to an article in the Los Angeles Times. While there have been efforts to get the IRS to refrain from taking action against disabled individuals who have their loans forgiven, there has been no definitive action taken thus far.

If you're disabled and unable to work, it's important to take advantage of every financial benefit and debt relief resource available to you, including Social Security Disability Insurance (SSDI). It's also important to know the hidden impacts that some of these tools will have on your overall financial well-being. In the case of student loan forgiveness, make sure you don't forget to report the amount of the loan as income on your tax return. If you're concerned about your ability to pay the resulting tax liability, remember that the IRS often works with people to set up installment payment programs. In other words, you wouldn't have to pay it off all at once.

Above all, you want to make sure that you don't lose access to your SSDI benefits. To learn about student loan forgiveness and how you can safeguard your SSDI benefits, it's important to speak with a qualified SSDI attorney with experience working with these types of issues.

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