Aug 29 Student Loan Forgiveness Announced
After months of anticipation, on August 24, President Joe Biden announced a three-part plan to address student loan debt. To be eligible for forgiveness, borrowers must make less than $125,000 (single) or $250,000 for couples filing jointly and as head of household.
The plan would allow up to $10,000 in student loan debt forgiveness for those who are eligible. However, if a borrower was a Pell Grant recipient, they are eligible to have up to $20,000 of debt relieved. Pell Grant recipients will also have their repayments capped at 5% of their monthly income. An application will be created by the Education Department within the coming weeks for borrowers to complete and verify their income information before the forgiveness is applied to their loan account.
Undergraduate, graduate, and Parent Plus loans are all eligible for forgiveness. Current students are also eligible for forgiveness, but if they are claimed as a dependent, their eligibility would be based on their parent’s income as opposed to their own.
Under the American Rescue Plan of 2021 (ARP), student loan debt relief is not federally taxable. It may be taxable by the state if the state did not conform to ARP.
In addition to forgiveness, Biden has announced an extended pause on federal student loan payments for a final time through December 31, 2022.
For questions, feel free to contact your Sax Advisor.