Student Loan Forgiveness Plan
August 28, 2022
Last week the White House announced the Tuition Debt Relief Program to cheers and jeers, depending on your viewpoint.
According to the fact sheet provided, tuition debt relief will not be treated as taxable income for federal tax purposes.
This new program will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education and up to $10,000 in debt cancellation to non-Pell Grant recipients.
This relief program is specifically created for those who borrowed money to fund their education and whose incomes are up to $125,000 for an individual or up to $250,000 for married coupl.es. The fact sheet states, "No high-income individual or high-income household in the top 5 percent of incomes will benefit from this action."
Federal student loan payments will continue to be paused through the end of 2022.
The American Rescue Plan, signed into law in March 2021, allows an individual to exclude from gross income the amount of qualified student loans canceled or discharged from 2021 through 2025. Eligible student loans include loans for post-secondary education provided by the government or educational institutions; private education loans, and original and refinanced loans from tax-exempt organizations with a public service requirement; and refinanced loans. The exclusion does not apply to private education loans from tax-exempt organizations if the discharge is due to services provided to the lending organization.
Please contact our team to discuss the impact of the Student Loan Forgiveness Plan on your taxes.