Will your student loans be forgiven?

On August 24^th, President Biden announced a proposal for a broad student loan forgiveness package. What does that mean if you’re one of the millions with a student loan—and student-loan debt?

Prior to President Biden’s announcement, the existing programs—administered through the Department of Education’s federal student loan forgiveness programs—focused on workers in certain fields of employment: teachers, public service workers, military, and AmeriCorps. Income-based repayment plans were (and are) available to more people; these allow for forgiveness after 10 to 20 years. Yet these forms of forgiveness are often hard to qualify for—and can be taxable.

The President’s recently-announced proposal is less restrictive. It would allow anyone earning less than a certain Adjusted Gross Income ($125,000 for single, $250,000 for married filing jointly) to qualify for up to $10,000 in federal student loan forgiveness. The maximum forgiveness goes up an additional $10,000 (with a total of $20,000) to those who received Pell Grants.

The application for this new forgiveness program was just released. Also, the Department of Education just pushed back the forbearance (the temporary ability to stop making monthly payments) on federal student loan payments and interest to December 31^st, 2023. Note that the taxability of loan forgiveness also has not been announced.

The Department of Education has recommended that all federal student loan borrowers re-certify their income (if applicable) and make sure their loan servicer and the Department of Education have their most recent income information. As the application opens, it is likely that borrowers who took these preemptive steps will enjoy a smoother and faster application process. The Department of Education has also announced that it will refund any student loan payments made since March of 2020.

If you need help exploring your options or determining if you qualify, contact your tax preparer, financial advisor, or visit the Department of Education’s website.

Author: Kyle McCune

As our Wealth Management Associate, Kyle has an unquenchable thirst for knowledge.  Which is a great asset here at Bridge Financial Strategies! His inquisitive nature and love of investigation have helped him understand the details of complex situations.  And that’s helped him to empathize with clients or provide an objective viewpoint, when needed.  He supports our advisors as they service their clients; he also plays a key role in the preparation of tax returns.  Kyle is an Investment Advisor Representative with a Bachelor of Science in Business Administration (with an emphasis in Financial Planning) from Creighton University. He passed the Series 65 exam for Uniform Investment Adviser Law, and is studying to sit for the CFP^® exam in November.