What You Need to Know About Student Loan Forgiveness

My clients have started asking me about how the new $10,000-$20,000 student loan debt forgiveness is going to work in real life, questions such as:

  • Will I get the debt forgiveness?
  • How much debt forgiveness will I get?
  • Do I need to fill out an application?

I wanted to take the opportunity this week to provide some insight.

The Basics

The student loan debt repayment forbearance from the federal government has been extended until December 31, 2022. President Biden officially announced student debt relief, providing up to $10,000 per household, or up to $20,000 if you received a Pell Grant to attend college.

How Do I Know if I Received a Pell Grant?

There’s a great article here from CNBC that can walk you through checking on this. It involves going to studentaid.gov and looking at your account. Taxpayers who received this grant with annual income up to $125,000 (not married) or $250,000 (Married Filing Jointly) will qualify for this new relief.

When Will this Debt Forgiveness Happen?

At this point, it seems extremely likely, although not 1,000% for sure yet, that this relief will start being available for real, in real life, around December of 2022. It is believed, although not 1,000% known for sure yet, that the government will “automatically” reduce debt amounts for some borrowers if the government has the necessary info. And then for other borrowers, there will be some kind of application process. Any student loan forgiveness will be non-taxable on the federal return but may be taxable in some states.

You can read more of the latest tax, business, and accounting news at our blog.

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