Federal Loan Forgiveness Bill Signed Into Law

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I blogged about this bill last month. President Bush signed it into law last Thursday. Equal Justice Works has a good summary of the bill here and the ABA has an editorial about the bill and the importance of public interest legal work here.

One thing not mentioned in these links is that covered employment includes any 501(c)(3) organization, which means that, contrary to my fears expressed last month, reproductive rights non-profits will be included.

This is great news for feminist law students!

– David S. Cohen

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0 Responses to Federal Loan Forgiveness Bill Signed Into Law

  1. Bridget Crawford says:

    I agree with David that this is fabulous news. There is an additional factor that bears mention. Under current law, when the unpaid loan balance is forgiven by the federal government, such forgiveness gives rise to taxable income under IRC Section 61(a)(12). All in all, still a good choice for those facing huge loan repayments and folks working in the nonprofit sector — but we need to be sure to add into the mix consideration of the income tax consequences. (Spoken like the tax professor that I am!) The income tax rules on discharge of indebtedness could change in the future, but recently the President has indicated an unwillingness to broaden the exceptions to the rule that debt discharge gives rise to income.

  2. Very true Bridget. As always, the best advice when figuring out the tax implications of LRAPs (or anything) is – talk to a tax professional about it.