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Canceled student loan debt may still cause problems for disabled

When a Montclair resident suffers a significant illness or injury he may end up living with a disability for the rest of his life. That disability may impact his chances of finding and holding down work, his opportunities to thrive in a career, and his prospects of being able to care for himself and others. Federal agencies like the Social Security Administration offer individuals in these difficult situations different benefits that may help them care for themselves when they suffer from a lack of income.

One benefit that some disabled individuals may be able to secure is the forgiveness or cancelation of their federal student loans. Individuals who cannot work and earn money generally cannot pay off their debts; this loan forgiveness program is intended to help those who cannot help themselves by lightening their debt burdens.

Unfortunately, however, a person who has his student loan debt canceled is subject to taxation on the amount of the forgiven debt as that sum of money then becomes income under the rules of taxation. Depending upon the size of the forgiven loans a person may face a very big tax bill if his loans are canceled by the government. Taxation of the loan amount as income can create different money problems for disabled individuals as they may undergo a garnishment of benefits from the Social Security Administration if they cannot pay their tax obligations.

Some members of Congress have tried to close this damaging cycle for disabled individuals through talks with the Treasury Department but as of now disabled people may still be taxed on their forgiven student loans. If they cannot pay off their tax bills their disability benefits may be affected and they may face more financial uncertainty in the future.

Source:, "Feds refuse to stop taxing the canceled student debt of severely disabled people," Danielle Douglas-Gabriel, Dec. 23, 2016

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