Below I copied from a handout I created about discharge due to disability using a physicians letter (you can have a copy for free to use if you’d like just let me know where to send it; a higher level supervisor gave me some of the information I included in there including stupid reasons why they reject you – for example anything written outside of the tiny boxes, they won’t read attached letters so if you reason is in that, etc. although you can re-apply immediately unlike SSD rejections where you need a hearing).

Medicare premiums: Your Medicare B and D premiums depend on what your tax return from two years prior states your income was. If your student loans were formally and permanently discharged in, for example, 2027 and you received a 1099-C that year then in 2029 your Medicare premiums would go up if you moved into a higher income group. Of course now, in 2029, your income would be lower because the change in your “ordinary income” was due to student loan forgiveness and not actual ongoing income.

You have two different forms you need to look at to decide which best fits your circumstances to appeal the higher Medicare Premiums to get them adjusted. If your circumstances don’t fit what is on Social Security Form SSA-44 you can file Form SSA-561-U2, Request for Reconsideration. See the websites for the two different forms and the income dependent premium amounts.
https://www.ssa.gov/forms/ssa-44.pdf
https://www.ssa.gov/forms/ssa-561-u2.pdf

Also, of course, a tax payer could file for insolvency which may or may not solve the issue depending on what the IRS laws are at the time of the discharge.

Also do you know if there are any plans, any federal congress person working on a law, etc. to reintroduce a law to exempt those who had their loans discharged through disability (separately from the other “loaded” issue of anyone at the end of 20 or 25 years of pyament)?

I know if a disability discharge was done by way of a VA disability discharge you are not liable for taxes on the discharged amount, but if you get the discharge via social security or physician’s letter (starting 1/1/26 since that law ends the pause and there needs to be another law to address this, the IRS needs a law, not administrative action and is free to ignore court orders as has happened in the past over this exact issue) and aren’t done with your 3 year monitoring by 12/31/25, then this is taxable income. My tax (in my case both state and federal) will be about $32K which is far more than I get a year in income.

Thanks

The SAVE vs PAYE question is a really tricky one for borrowers like you. This morning, I published an article to help borrowers decide between lower payments on SAVE and faster forgiveness on PAYE.

As for who you can talk to, please send me an email and I’ll try to put you in touch with someone who can help.

I have a couple of thoughts here:

1) If you have a large amount of debt get forgiven in a particular year, you are likely to have a large tax bill when you file taxes for that particular year. Future refunds would not be impacted (unless you didn’t pay your previous tax bill and there was a garnishment situation)

2) The tax bomb for student loans is unlikely to happen to you. It doesn’t won’t happen to anyone until 2025, and there is a good chance that the policy become permanent. Preparing just in case is the smart route, but it hopefully never becomes an issue.

If I am use to receiving a refund at the end of the year, by what you said up top, I will not receive that refund any longer until my debt is paid. Or, would that earned income of 120k/yr before the year it is forgiven and the next year I can again receive my refunds.

If its the first, is that really a forgiveness?????

Unfortunately, self-employed people can’t qualify for PSLF.

Thanks for catching that… you are absolutely right.

The point remains the same, which is to say that it doesn’t make sense to pay more now to save a fraction of that amount in the future, but that $250 will be corrected.

I appreciate you taking the time to comment to make sure things are as accurate as possible.

The problem with this approach is that it would be a poor allocation of resources. Suppose that in the future, when the giant tax bill comes, the borrower is in the 25% income tax bracket.

By paying an extra $10,000 over the years, the borrower would reduce the eventual big tax bill by $250. In other words, by paying an extra dollar now, the goal would be to save 25 cents in the future”

In a 25% income bracket, you stated paying an extra $10,000 would only save you $250… Isn’t 25% of $10,000 equal to $2,500?

I personally think a target date fund would be smart. It does sound smart because it would be invested more aggressively in stocks early on and as you get closer to the target date be invested more conservatively.

My only opinion on these target date funds is to make sure to pick a low expense ratio one rather than an expensive actively managed one.