June 1, 2001

Congress Approves SLID Provisions, NHSC Scholarship Tax Exemption

The House and Senate May 26 approved a $1.35 trillion tax cut package (H.R. 1836) that includes provisions related to the student loan interest deduction (SLID) and the National Health Service Corps (NHSC) Scholarship tax exemption. President Bush is expected to sign the bill during the week of June 4.

Specifically, the tax cut bill alters existing student loan interest deduction provisions by eliminating the 60 month rule and raising the income thresholds to $65,000 for single filers (phase out of the deduction begins at $50,000) and $130,000 for joint filers (phase out begins at $100,000). Perhaps most importantly to medical students and residents, the provisions also eliminate the restriction prohibiting the deduction of voluntary payments.

H.R. 1836 also includes provisions altering the tax status of payments made under the NHSC Scholarship Program and the F. Edward Hebert Armed Forces Scholarship and Financial Assistance Program. Under the tax bill's provisions, payments made to borrowers for tuition, fees and related education expenses would no longer be considered in gross income calculations for tax purposes.

Information: Jonathan Fishburn, AAMC Office of Governmental Relations, 202-828-0525.