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Student loan Forgiveness Update – Pauses, Cancelations and What You Should Be Doing Now

November 17, 2022 admin Comments Off
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Application is open, but debt discharge is paused. As a result of a court order, we are temporarily blocked from processing debt discharges. We encourage you to apply if you are eligible. We will continue to review applications. We will quickly process discharges when we are able to do so and you will not need to reapply.

The Biden Federal Student Loan Forgiveness Application Has Launched What You Need To do now to get in line to get you federal student loan forgiveness started.

If the president’s policy remains blocked in the courts by the end of the year, higher education expert Mark Kantrowitz said, “the Biden Administration is likely to further extend the payment pause.”

Americans currently owe about $1.62 trillion in federal student loans. Biden’s plan will provide relief to most of them – 43 million borrowers – and will completely erase the student debt of about 20 million.

Individuals with federal student loans who make under $125,000 per year, or couples earning less than $250,000, qualify for up to $10,000 in forgiveness.President Joe Biden’s long-awaited plan for widespread student debt relief will cancel up to $20,000 in federal student loans for individual borrowers who earn less than $125,000 a year. Married couples who file taxes jointly will qualify if they make under $250,000.

Questions about taxes are popping up now that the cancellation of student loan debt is set to become reality. If Biden wipes out your student loans, will you be stuck with a tax bill? Here’s a look.

The plan the president unveiled on Wednesday, Aug. 24, would cancel up to $20,000 in student loan debt for borrowers who received a Pell Grant and meet the program’s income limits. Those who did not get a Pell Grant could see up to $10,000 in student debt cleared away.

Typically, any debts that are forgiven are treated as taxable income by the IRS and are subject to taxes.

For example, if you owe a creditor $25,000 and the amount is forgiven, you would need to include the $25,000 when determining your taxable income.

But here’s the word from the White House: Loans forgiven under the Biden administration’s new program will be exempt from federal taxation. That’s thanks to the American Rescue Plan Act, Biden’s Covid-19 relief bill that Congress passed in the spring of last year.

It allows taxpayers to exclude canceled federal student loan debt from their gross income through 2025.

Nearly 8 million borrowers may be able to receive debt forgiveness automatically because the Department of Education already has their income information, FSA says.
The Biden administration will launch an application in the coming weeks for borrowers to provide their income information or if borrowers are unsure if the department has their income information already. After a borrower completes the application, the individual can expect the student loan relief within four to six weeks, the official also said.
To be notified when the application is open, borrowers can sign up at studentaid.gov.
FSA says the application will be available before the federal student loan repayment pause ends on December 31. Borrowers are advised to apply before November 15 in order to receive relief before the repayment pause expires, but the Department of Education will continue to process applications even after the pause expires, the official noted.

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