How the Affordable Care Act Affects Student Loans

Although the Patient Protection and Affordable Care Act – a recent US federal statute signed into law in 2010 –  has been dogged by uncertainty since its passage, the Supreme Court’s recent ruling means that what was once a mere possibility is now near certainty. Given the sheer size and scope of this landmark legislation, many seemingly unconnected aspects of daily life will be affected by the law. While student loans, at first glance, would seem to beyond the scope of the law, they will be impacted by it in dramatic ways. As a result, students and educators alike should be aware of how the Affordable Care Act affects student loans and, indeed, themselves.

One of the more understandable examples of the law’s ramifications involves tax benefits for some members of the healthcare industry. Prior the passage of this legislation, only federal and state loans (such as those made under the National Health Service Corps Loan Repayment Program or certain state loans eligible for funding under the Public Health Service Act) were qualified for a tax benefit. Designed to provide tax benefits to health professionals that work in what are considered “underserved areas,” the Affordable Car Act expands this tax exclusion to include any state loan repayment or loan forgiveness programs.

That means that, the Department of Treasury and the IRS will exclude from taxes the value of student loans that were repaid or forgiven because the taxpayer worked to provide healthcare to areas that need it most regardless of the loan’s origin. This means that private loans – if they themselves qualify for eligible loan forgiveness programs – will be entitled to the same tax benefits enjoyed by federal and state loans. This aspect of the legislation, which will implemented immediately, is also being retroactively applied to 2009 (and other past) returns and will amount to tax refunds in excess of $10 million for eligible healthcare workers.

Thus, as you can see, the Affordable Care Act affects student loans whether you are in the industry or not and, in the end, it can (quite literally) pay to know exactly how.

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