Questions re: filing US taxes/student loan

Oh just the inevitable one at the end of my repayment period (20 years away). I've got law school debt galore and a terrible interest rate.

Im planning on being very aggressive with repayment, regardless of what IBR requires, but I'm just stuck with lower wages at the moment since I took a pretty big starting pay cut by moving over here. I know I'll get there eventually, just hard to see it on this side of the 20 years.


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Ah, okay. That would definitely be stressful! I'm sure you'll be climbing up the ladder in no time!

I was lucky, my debt is under $20k, but it's a big chunk of change to me. My student loans equaled more than my first new car! But I had that set up to be paid in 5 years... How weird that my student loan payments were set for much, much longer...

The day I paid off my loans was the BEST DAY!

That's such a big deal. Congratulations.

You can do it!  The day I paid off my loans was the BEST DAY!

Thanks for the encouragement!


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So if I understand this, as the law currently stands, we can keep our payments to $0 on an IBR plan as we were advised by Nelnet when we called and set it up, and that the loan would be forgiven in 20 years time (I checked and this would be the time period for my wifes), but at the time that this occurs the amount we are forgiven is liable to be taxed by the IRS and would need to be settled, is this correct?

If this is correct, does it work by you being taxed a percentage of the sum you are forgiven? If so, does anyone know what this percentage would be if it were to occur today? I understand all this can change wildly in a twenty year period, but just so I have an idea where the land would lie today.

Many thanks for all your help guys!

How much are the loans and what is the annual percentage interest rate that it accruing on the outstanding balance?

Great thread, I've learned something new too. However, since 2005 it has frequently saved tax not to elect to claim the foreign earned income exclusion (because of something known as the "stacking rule"). This may need to be considered over the next 20 years.

Although sometimes controversial, the easiest way to avoid paying tax on the cancellation of debt income would be to renounce US citizenship before the 20 years and argue when the time comes that the cancellation of debt income is exempt from US tax under the "other income" article of the US treaty.

How much are the loans and what is the annual percentage interest rate that it accruing on the outstanding balance?

The current balance is $9,790.42, and the interest rate is 6.125%

The current balance is $9,790.42, and the interest rate is 6.125%

In 20 years the balance owed will be $33,225.  If the IRS tax rate remains at 15% for that bracket, she will owe c$5,000 (assuming that the only taxable item of income she has that year, if she earned a salary in addition it could easily push into the 28% bracket meaning she would owe $9,300 in taxes for the loan cancellation).

I have to admit to be very surprised at the very low balance of student loans owed.  As you have the money to put a down payment on a second home in the US, have you considered just paying off the loan and being done with it forever?  It's less than £7k.

No judgement - but morally a student loan really should be paid off if one has the means to do so.  The recipient has received the education (which cannot be taken away) and likely a solid career path on which to build their life.  But paying off the debt would give you and your wife the ability to live in either country without a dark cloud hanging over your head.