NYTimes: Vets in debt-low income -IBR discussed

This article is worth reading. Page 3: (Note: Today she has $312,000 in student loans.) Today, her debt exceeds her salary by a factor of five — much higher than the recommended twice-starting-salary ratio. She signed up for income-based repayment, a government program available to federal student loan recipients. (A newer program with slightly more generous terms, called Pay As You Earn, or PAYE, is available to more recent graduates.) Both income-based repayment and PAYE allow graduates to lead relatively normal lives by paying back a modest percentage of their income based on a formula. After a fixed amount of time, from 10 to 25 years, the balance of the debt is discharged. That’s the good news. The bad news is that the interest on the debt keeps growing and taxes must be paid on the amount discharged, as if it is a gift. Dr. Schafer sends $400 a month to Sallie Mae, a sum that will rise. But what kind of tax bill awaits her? Asked to run the numbers, GL Advisor, a financial services company that specializes in student loans, calculated that Dr. Schafer’s debt is likely to exceed $650,000 when her tax bill lands 25 years after the start of the loan, which means she will owe the Internal Revenue Service roughly $200,000. That will happen while she is still deep in her career, perhaps around the time she wants to send some children to college.
Source: Student Doctor Network Forums - Category: Universities & Medical Training Authors: Tags: Financial Aid Source Type: forums