Drexel University will provide up to $15,000 through a forgivable loan to any benefits eligible full-time or part-time employee for the purchase of a home within the defined borders. Drexel shall provide a $5,000 forgivable loan, with the option of $2,500 additional in a matching grant, to an eligible employee toward the renovation of a home within the defined borders.
Drexel University will forgive this loan on the following schedule:
- One year from your closing date, 20 percent of the loan will be forgiven and the employee is responsible for $12,000 repayment in the event that they are no longer a full-time benefits-eligible employee of Drexel University or in the event that they are no longer living in the home as their primary residence.
- Two years from your closing date, 40 pervent of the loan will be forgiven and the employee is responsible for $9,000 repayment in the event that they are no longer a full-time benefits-eligible employee of Drexel University or in the event that they are no longer living in the home as their primary residence.
- Three years from your closing date, 60 percent of the loan will be forgiven and the employee is responsible for $6,000 repayment in the event that they are no longer a full-time benefits-eligible employee of Drexel University or in the event that they are no longer living in the home as their primary residence.
- Four years from your closing date, 80 percent of the loan will be forgiven and the employee is responsible for $3,000 repayment in the event that they are no longer a full-time benefits-eligible employee of Drexel University or in the event that they are no longer living in the home as their primary residence.
- Five years from your closing date, 100 percent of the loan will be forgiven and the employee is responsible for $0 repayment in the event that they are no longer a full-time benefits-eligible employee of Drexel University or in the event that they are no longer living in the home as their primary residence.
Individual tax conditions vary and the University cannot estimate the tax implications for participants. We recommend consulting a tax advisor with questions concerning your particular tax situation.
Do I have to pay tax on the loan amount?
The amount of the loan that is forgiven in any one year will be reported as taxable income to the employee and appropriate federal, state and social security taxes will be withheld. This will first appear on the employee’s paycheck on the anniversary month of the loan disbursement and will be divided into equal amounts on each paycheck. For example, on a $15,000 loan disbursed Janu. 19, 2021, the employee would have $250 of imputed income on each paycheck from Jan. 2022 through Dec. 2022 for a total of $3,000 of for the year. This will appear on your paycheck under the Federally Taxable Benefits as “Employee Home Purchase Program” and is referred to as “Fringe Benefit Tax.”
What is Imputed Interest?
Even though the University does not charge interest on the Loan, the IRS requires that for a forgivable loan of more than $10,000, the amount over $10,000 is subject to imputed interest at rates set by the government. That interest calculation, which the University does not actually charge or collect from you, will be reported as taxable income on your W-2 form and will be subject to standard federal, state and social security tax withholdings for each year that the loan balance is more than $10,000 on Dec. 31 of that year. The imputed interest will appear on your paycheck as “Interest” under the Federally Taxable Benefits section.
By way of example only, for a $15,000 loan in which one-fifth of the loan is forgiven each year, interest will be imputed for only the first two years of the loan — the year in which the loan is disbursed when the loan balance is $15,000 (interest is imputed on $5,000); and the next year when the loan balance as of December 31 of that year is $12,000 (interest is imputed on $2,000).
Formula: (Initial Loan Amount * IRS Blended Interest Rate for the calendar year) + # of months.
If your employment is terminated either voluntarily or involuntarily, the remaining balance of the loan will become due in no more than six months from your termination..
If your position is eliminated and you are laid off, the remainder of your loan will be forgiven.
If your employment ends because of death or permanent disability for which you are collecting periodic income benefits from Drexel University's long term disability plan, Drexel University will forgive the balance of your loan.
If you are on an approved paid leave, the loan will continue to be forgiven. However, if you are on unpaid leave for more than 180 days, forgiveness of the loan is “suspended” during your leave period. In other words, the loan will not be reduced or “forgiven” over the time period of the unpaid leave. If you do not return to work within one year, the remaining balance of the loan will become due within 180 days. If you return, the forgiveness of the loan begins again in the month following your active return to work. Any time that you were out on unpaid leave will be added to the end of the original loan period.
No. Drexel University forgives the outstanding balance upon the death of the employee.
Once you are approved for the loan, Human Resources will provide you with the paperwork necessary for Drexel to make a check payable to the mortgage lender or the settlement agency that will be conducting your closing. It is your responsibility to complete these forms accurately and return them to Human Resources at least three weeks prior to your scheduled closing date.
No. You are encouraged to shop around and obtain vendors that meet your very specific needs.