Choosing to use your education and skills to serve in impoverished areas of the country or with a non-profit organization can bring many intangible benefits as well as eligibility for student loan forgiveness. Participation in government loan forgiveness programs can alleviate the tax liability you might otherwise incur for having debt forgiven. As of 2011, under normal circumstances, you must claim any forgiven debt over $600 as taxable income on your federal return.
Medical Service Jobs
As a doctor or registered nurse you can dedicate a portion of your time practicing medicine focusing on public health interest groups, serving in poverty-stricken areas or working for non-profit health-care organizations and earn forgiveness for government student loan debt. The U.S. Department of Health and Human Services offers student loan forgiveness programs through the National Health Service Corps and the Nursing Education Loan Repayment Program. As of 2011, the U.S. National Institutes of Health's NIH Loan Repayment Programs can forgive as much as $35,000 of your eligible government medical student loan debt. The IRS does not consider government student loan debt forgiven through such programs as taxable income.
International Non-Profit Organizations
Volunteering with an international non-profit organization, including the Peace Corps and Volunteers in Service to America, comes with a variety of benefits, including participation in government loan forgiveness programs. For example, as a volunteer with the Peace Corps you can earn a cancellation of your eligible federal student loans, including Stafford, Perkins and federal consolidation loans, at 15 percent per year of service up to 70 percent. Unlike traditional debt forgiveness, you do not have to claim debt forgiven through non-profit work as income on your federal tax return.
Teaching Jobs
If you're an elementary or secondary school teacher serving a low-income school district, you may qualify for debt forgiveness under the National Defense Education Act. This law grants you forgiveness on your federal Perkins loan up to 15 percent for your first and second years teaching in a low-income environment. This increases to 20 percent in your third and fourth year and to 30 percent forgiveness in your fifth year teaching. Forgiveness under this law does not require you to claim the forgiven debt as income on your federal return.
Lawyers Serving the Public
If you're a lawyer choosing to serve the public interest with a non-profit legal aid corporation, you can have a large portion of federal student aid forgiven through programs offered through Equal Justice Works. This organization was formerly known as the National Association for Public Interest Law. The American Bar Association also maintains a list of student loan forgiveness programs on the organization's website. As with other government programs, the IRS will not consider government student loan debt forgiven in this manner as taxable income.
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