VT Medical Student Loan Repayment Program Now Income Tax Exempt

A provision of the federal Affordable Care Act (ACA) passed on March 23, 2010 treats debt reduction under the Vermont State Educational Loan Repayment Program for Healthcare Professionals as income tax exempt, retroactive to Jan. 1, 2009.
Prior to passage of the ACA, only awards under federally funded loan repayment programs, such as the National Health Service Corps (NHSC), qualified for income tax exclusion. This change increases the value of Vermont’s awards and offers additional incentive for health care professionals to work in areas of greatest need. The Vermont Area Health Education Centers (AHEC) Network, with support from professional societies and others, has been advocating for years for this change at federal and state levels.
According to the Vermont Area Health Education Centers (AHEC) Network, the goal of the Vermont Educational Loan Repayment Program is to ensure a stable and adequate supply of healthcare professionals to meet the health care needs of all Vermonters.
“Removing our Educational Loan Repayment Program Awards from individual income tax liability significantly strengthens the recruitment and retention power of the program,” said Elizabeth Cote, University of Vermont AHEC Program Director.
Recipients of the Vermont Educational Loan Repayment Award for the 2009 tax year may qualify for a refund of federal and state income taxes associated with this award. Letters have been mailed to those recipients telling them what steps to follow to amend their 2009 tax returns. For recipients of awards in the 2010 tax year, their Vermont Educational Loan Repayment Service Contract is amended to reflect the change and will not be reported to the IRS for income tax purposes (Form 1099 will not be issued). For additional information about the Affordable Care Act’s educational loan repayment tax exclusion, please consult a tax advisor.
To learn more about AHEC and the loan repayment program visit www.vtahec.org.

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