The Tax Bomb!

The Student Loan Tax Bomb!! Man in lab coat with images of loans around himGreetings!

Today I am putting on my mom’s hat to rant about The Tax Bomb!

Did you know that canceled student loan debt is taxable as of this date?

In general, if you have a cancellation of debt income because your debt is canceled, forgiven, or discharged for less than the amount you owe, the amount of the canceled debt is taxable. Therefore, you must report the canceled debt on your tax return for the year the cancellation occurred. There are exceptions, so checking with your tax advisor is advisable.

My tax bomb rant?

Our son, Dr. Cameron Adler, DVM, is a veterinarian and was recruited by a company that owns multiple practices in Las Vegas after completing his LSU internship. He is making an excellent wage, especially for a newbie doctor. This was in 2020, at the beginning of the pandemic.

On  April 6, 2022, President Biden directed the U.S. Department of Education to extend the coronavirus-related payment suspension and 0% interest rate on certain federal student loans for four months. The payment suspension was due to expire at the end of April but was extended to August 31, 2022. As a result, Cam will have to begin paying his student loan back unless it is extended again.

We have received a lot of mail offering to refinance his student loan. The upside of a refi is that the interest rates are relatively low. The downside is that he owes so much money that purchasing a house, car, or high-value item would be nearly impossible. If he applies for a mortgage, they will see that he already has a sizeable personal loan upon a credit check. They do not know that it was a conversion from a student loan. He would probably not be able to get the mortgage without a consignor.

The alternative will be the direction he will likely go in. Not much he caCam will enroll in an income-driven repayment plan to get a more affordable monthly student loan bill and to earn credit toward the cancellation of any debt remaining after 20 to 25 years of repayment. The interest rates stay the same as his current loans. Sounds reasonable. However, he must complete paperwork annually to reevaluate his annual payment, which increases as his salary does.

Then he is hit with the tax bomb!

I’m not sure how he will ever be able to afford a lifestyle he sees for himself. Were his choice of career and education worth it? I’m not sure, and at this point, neither is he. However, I can still say my son the doctor!!!

Ali Schneider “I gotta rant” Schneider
Director of Business Development

P.S. For more information about income-based repayment, visit