STUDENT LOAN FORGIVENESS APPLICATION OFFICIALLY LAUNCHED
On August 24th, the Biden Administration announced its plan to forgive up to $10,000 of federal student loan debt for borrowers that meet certain income limitations. While this initiative was implemented through executive action and is already being subjected to legal challenges, the application to request this loan forgiveness is now available.
To summarize the details of this anticipated student loan forgiveness plan, nearly every type of student loan disbursed prior to June 30, 2022, qualifies for forgiveness. This includes subsidized and unsubsidized loans, as well as graduate and Parent PLUS loans. Basically, any loan that qualified for the pause in student loan payments should be eligible for forgiveness. Most borrowers are eligible for forgiveness of up to $10,000 of student loan debt, however, students who received a low income-based Pell Grant during their education are eligible for up to $20,000 of forgiveness.
As previously mentioned, to be eligible for this loan forgiveness the borrower must meet certain income limitations. Borrowers must have reported income less than $125,000 (single) in 2021 or 2020 to be eligible for forgiveness. The income threshold rises to $250,000 for families. These income limitations may be applied to the parents’ and not the student’s income if the student borrower is currently in school and a dependent of his/her parents.
In addition to loans borrowed in the name of the student, the current plan also applies to outstanding Parent PLUS loans issued in the parents’ name. Eligibility for forgiveness of these loans is subject to the same income limitations, but the eligibility is based upon the income of the parent, and not the student.
Borrowers who meet the requirements and have their loans forgiven will not need to report this as taxable income on their federal tax return. This debt forgiveness may be subject to income in certain states, however, including Indiana.
While this loan forgiveness plan is still being challenged, it is possible for eligible borrowers to complete the necessary forgiveness application now by visiting https://studentaid.gov/debt-relief/application. This application is short and requires only general information from the borrower, along with a self-certification that they meet the income eligibility requirements. Borrowers have until December 31, 2023, to apply. However, it may be wise to apply by November 15th, 2022, to have the form processed before the current pause on student loan payments ends.
If you have further questions or would like additional information on this program, please do not hesitate to contact us!