With the cost of a college education continuing to increase, student loans have added significant weight onto the shoulders of many US taxpayers. We had been hearing rumors of potential forgiveness of student loan debt for months but with much uncertainty as to if and when it would happen. In the last few weeks, more details have come forth about the specifics of who qualifies and when you might actually see the balance of your loans reduced.  Below is a quick outline of what we know so far:

  • Continued deferral option of repaying federal student loans:
    • Eligible for all holders of Federal student loans
    • This final pause is active through 12/31/22, payments will resume on 1/1/23
  • Direct debt relief of qualifying federal student loans:
    • Up to $10,000 if you did not receive a Pell Grant and up to $20,000 if you did. You can check this at https://studentaid.gov/ if you are unsure.
      • Required Adjusted Gross Income (AGI) amounts: Less than $125,000 if filed single; $250,000 if married filing jointly. Income based on 2020 & 2021 tax returns.
      • Eligibility is based on loan type. Eligible loans include debt under the William D. Ford Federal Direct Loan Program. This includes Direct Stafford Loans and all Direct subsidized and unsubsidized federal loans.  Parent Plus and Grad Loans are also eligible.
    • Timeline for direct forgiveness:
      • In early October we are anticipating a 1-time application to become available to initiate a review of your federal student loans. You can sign up here to request updates. Take note, you should plan to submit your application no later than November 15,   If eligible, the process could take up to 8 weeks to have your debt discharged. There has been mention that some borrowers will automatically see their debt forgiven but most will need to apply for forgiveness.
    • How does this affect your remaining monthly payments?
      • After forgiveness is applied, monthly payments should lower if you still have a remaining balance. According to the Biden Administration, they are expecting 45% of borrowers to have their debt fully canceled and approximately 95% of overall borrowers to benefit.
    • What if I already made recent payments to eliminate my loan balances?
      • You may receive a refund for payments made during the “paused payment period” which started on 3/13/2020. This will happen automatically once you apply for and receive debt relief under the plan.
    • What about my private loans? Sorry, this does not apply ☹
    • Records to keep: IRS will issue a tax form to those who will receive forgiveness, important to note this is NOT TAXABLE, this is simply to report any aid received.

If you have questions regarding the debt relief plan our dedicated team is here and ready to answer them.  Keep investing in your future & career, and remember, your human capital is the most valuable asset on your balance sheet!