John Oliver Forgave Borrowers' Medical Debt. But They Could Still Be Screwed.

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The Internet fell in love with John Oliver when the "Last Week Tonight" host forgave US$15 million in debt for only about $60,000.

The HBO personality had a total Oprah moment this week as he wiped out the debt of thousands of people and won praise all over social media.

It was a great moment in television. But it masked the fact that people whose debt is forgiven can still face financial trouble down the road.

Salon writer and author David Dayen noted that those whose medical debt is forgiven have to report it as earned income on their taxes.

Those with mortgage and student loan debt have the same issue — and it can lead to a higher tax bill.

Borrowers can avoid this if the parties forgiving their debt are registered as tax-exempt organizations.

john oliver

"Last Week Tonight" transferred the debt it bought to an organization known as RIP Medical Debt — which has not yet been recognized as a non-profit under section 501(c)(3) of the U.S. Internal Revenue Code.

Should the Internal Revenue Service (IRS) deny RIP Medical Debt's non-profit status, then the thousands of people that Oliver helped could still face a hefty tax bill.

There are ways that forgiven borrowers can avoid a shock at tax time. The U.S. government can reduce their Social Security, or their wages can be reduced.

None, of course, seems like an attractive option.

john oliver

But this isn't the only controversial point that has emerged from Oliver's debt industry rant.

An organization known as Debt Collective has been buying and cancelling people's debt for years, as part of a program known as Rolling Jubilee.

It has raised US$700,000 to wipe out more than $30 million in tuition and medical debt. It worked with "Last Week Tonight" ahead of Sunday night's broadcast.

But the show opted against crediting Rolling Jubilee during Oliver's monologue because of the organization's "roots in Occupy Wall Street," according to a blog post.

In a statement provided to Marketwatch, "Last Week Tonight" producers admitted that they spoke with Rolling Jubilee ahead of its segment, but said it was just one of a number of groups it consulted prior to airing.

The producers noted that Rolling Jubilee was mentioned in the show's end credits.

Oliver's segment remains a powerful one. But clearly, forgiving debt isn't quite as simple as buying it and then writing it off.

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