Grieving mother ordered to pay $14,000 in taxes on the student loans that were written off after son’s suicide: Loans Forgiven by the Government are Considered Taxable Income by the IRS

  • Russell Friend,  22, committed suicide shortly before graduating from college
  • His mother Regina  had accumulated $55,400 in loans and interest to help him pay for  school
  • Those loans  were forgiven by the government but IRS considers that ‘gift’ taxable income so  she has to pay an additional $14,000 more in taxes

By Meghan Keneally

PUBLISHED:04:20 EST, 21  September 2012| UPDATED:06:17 EST, 21 September 2012

A mother in Maryland still grieving the death  of her 22-year-old son is now faced with a new unwelcome reminder of his  suicide: a $14,000 tax bill.

When Russell Friend was found dead in late  August last year, the government forgave his student loans and the portion of  the payments that his mother Regina was expected to pay as is protocol.

But not all of the payments stopped because  the Internal Revenue Service considers forgiven loans to be a form of taxable  income, so now Ms Friend faces a substantially higher tax bill that she won’t be  able to pay.

Loving mother: Regina Friend (right) accrued $55,400 in  loans and interest in order to help her son Russell (left) pay for his tuition  at Temple College in Pennsylvania

After originally starting college at Morgan  State, Russell transferred to Temple College where he was a popular member of  the track team and had completed enough credits to graduate.

He went missing in August 2011, left a note  saying ‘sorry guys’ and a message on his Facebook saying ‘I’m sorry everyone’,  and his body was found on the banks of the Delaware River days later.

Federal policy automatically dismisses any  loans taken out by students in the case of their death of permanent disability,  and the loans and interest that Ms Friend had accrued- which totalled $55,400-  were also dropped.

Ms Friend was far from the only parent to  have to rely on this regulation when their child died, as The Baltimore  Sun reports that the Department of  Education cancelled $2.7billion in such loans in 2011.

The problem that comes with said  cancellations is that the amount of those forgiven loans are taxable, and now  that means Ms Friend is faced with a $14,000 payment on top of her existing  taxes.

Though she has a steady job in the technology  department of PHH Corp, a mortgage company, both Ms Friend and her tax preparer  do not know what to do about the additional costs.

Tragic: Russell, a popular member of the school’s track  team, disappeared in August 2011 and his body was found on the shore of the  Delaware River

‘As far as what I intend to do about it, I  have no idea,’ Ms Friend told The Baltimore Sun.

‘I don’t think I’ve even seen $14,000 all at  once. I don’t want to give  the impression that I’m dirt poor or anything, but I  do not have any  means of taking on that kind of debt.’

Similar situations happened to the families  of Freddy  Reynoso and Amanda  Greenhalgh, students in California  and New Jersey respectively who both died and  their parents were left  struggling to pay the thousands of dollars of  taxes that followed the  forgiveness of their loans.

‘While there are options for some borrowers,  they are complicated and  confusing,’ said Persis Yi, a lawyer for the National  Consumer Law  Center.

‘It is most unfortunate that the system is  set up to wreak great havoc on borrower’s lives at a time when the borrower  deserves the most compassion,’ the lawyer told The Huffington  Post.

The confusion and bills just add to the pain  that Ms Friend has tried to deal with over the past 13 months.

‘I don’t think there will ever be closure for  what happened. It’s something I will have to learn to live with, but it is like  throwing salt into a wound,’ Ms Friend said

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