Financial Planning Corner
The Biden-Harris Administration and the U.S. Department of Education have built a plan to forgive up to $20,000 of student debt. The student debt forgiveness is dependent upon your income, tax filing status, and if you received a Pell Grant. Single tax filers with an Adjusted Gross Income under $125,000 in either 2020 or 2021 ($250,000 for married filing jointly households) are eligible for up to $10,000 of forgiveness. Those who have received a Pell Grant and are still within the income thresholds could receive an additional $10,000 for a total of $20,000. You may only receive forgiveness for loans incurred before June 30, 2022 and for the amount that you currently owe (ex: if you are eligible for $10,000 of forgiveness, but your loan balance it $7,000, you will only receive $7,000). You will not owe federal income taxes on the amount forgiven, but in certain states, you will owe state income tax (see article linked below for an up to date list). You can apply for student loan forgiveness as soon as October this year once the forms are made available. Federal government officials are advising that you file your application before November 15, 2022 in order to receive the forgiveness before the loan repayment pause ends at the end of December. You will have until December 31, 2023 to submit your application.
If you made payments during the forbearance period (March 2020-December 2022), you may be eligible to have your payments refunded. Please call your student loan service provider if you would like to request a refund. Please note that while refunds will be credited to you, the amount refunded will be added back to your loan balance and will be subject to interest when the forbearance rules end in 2023. If you choose this payment refund option, you may want to wait to apply for student loan forgiveness until the balance of your loan reflects the refund so that you are able to take full advantage of the forgiveness amount.
To sign up to receive updates and the student loan forgiveness form once it is released, please follow the link below and select “NEW!! Federal Student Loan Borrower Updates”:
Here’s a link to learn more:
The Biden-Harris Administration's Student Debt Relief Plan Explained (studentaid.gov)
To make sure that your information is up to date with the Federal Student Aid Office and to see if you ever received a Pell Grant, please following the link below:
To determine whether your state of residence is levying or waiving income tax on student loan forgiveness amounts, please see the following article: