Student Loan Forgiveness Plan
The Federal government announced recently that many borrowers with federal student loans will receive up to $20,000 in debt forgiveness. The loans must be held by the U.S. Department of Education to qualify. Those that do qualify**, will receive $10,000 in student loan forgiveness and those with Pell Grants are eligible for up to $20,000 of loan forgiveness.
Requirements for Loan Forgiveness
- The loans must be held by the U.S. Department of Education to Qualify
- Borrowers who make less than $125,000 (Individually) or $250,000 (for married couples) are eligible to receive student loan forgiveness.
- This requirement is in conjunction with the years of 2020 or 2021
Is The Student Loan Forgiveness Taxable?
Some who are eligible to receive loan forgiveness are asking, “will this be taxable???” No one wants to get surprised come tax time by an unexpected tax bill. The American Rescue Plan ensures that it will be tax free though 2025. Additionally, the debt forgiveness will not be taxable for Michigan income tax purposes either.
Key Dates to Remember:
- Temporary changes providing flexibility, allows some borrowers to receive credit for past repayments, ends October 31, 2022 for the Public Service Loan Forgiveness Program (PSLF). Enrollments on or after November 1, 2022 will not be eligible for this treatment.
- Borrowers are advised to apply for student loan relief by November 15, 2022 to receive relief before payments and interest start again in January.
- The pause by the Department of Education on student loan repayments ends December 31, 2022
Be Prepared
Online applications for government loan forgiveness is expected to open sometime in October (2022). Be sure to keep an eye out for the launch of the application and apply before November 15. Learn more by Clicking Here. Also, visit T&I Credit Union for more informational articles, helpful resources, and loan refinance options.
Written by April Thiel, CPA (Updated on 10/05/2022)
