UPDATE as of 11/14/2022
President Biden originally announced a plan to forgive up to $20,000 in student loans, however, the program is now in question, as a federal judge in Texas struck down the program in November 2022. After the federal judge ruled against Biden’s plan, financial advisers, including Williams & Schiller, are recommending that borrowers prepare to make payments.
This one-time debt relief is provided by the U.S. Department of Education (ED) as part of the Biden-Harris Administration student debt relief plan. Eligible borrowers can get a full or partial discharge of Federal student loans through an online application. Private loans (i.e., non-federal loans) are not eligible for this relief.
How do I apply?
Visit www.studentaid.gov to apply for forgiveness or to learn more.
How much will be forgiven?
Up to $10,000 if you didn’t receive a Federal Pell Grant in college and meet the income requirements.
Up to $20,000 if you received a Federal Pell Grant in college and meet the income requirements.
The debt relief applies only to loan balances you had before June 30, 2022. Any new loans disbursed on or after July 1, 2022, aren’t eligible for debt relief.
Is it taxable?
At the federal level, this forgiveness is NOT taxable.
Some states may tax the forgiveness, see your resident state for further information. Currently, common W&S client states such as Idaho, Montana, and North Dakota will NOT tax this debt forgiveness. Minnesota will levy income tax on this forgiveness unless a change is made to the current tax law. For other states, check with the state department of revenue or contact our office for more details. Note that state taxability could change before the filing season begins.
What are the income requirements?
You may receive debt relief if you have eligible federal loans and meet the following income requirements in either 2020 or 2021. For recent college students classified as dependent students, the income requirements may be based on the parent’s income.
|Tax Filing Status||2020 or 2021 Income (Based on AGI*)|
|Did not file taxes||Made less than the required income to file federal taxes|
|Married, filed your taxes separately||Under $125,000|
|Married, filed your taxes jointly||Under $250,000|
|Head of household||Under $250,000|
|Qualifying widow(er)||Under $250,000|
Note: Parents of Children With Eligible Student Loans
If you’re a parent with eligible loans of your own, including parent PLUS loans, you can submit your own Student Loan Debt Relief Application. Your application will be processed separately from the one your child submits.
BEWARE OF POTENTIAL SCAMMERS
Scammers are utilizing student loan forgiveness to try to steal applicants’ money and/or personal information.
Five Red Flags of Potential Scams
- You’re not applying directly at StudentAid.gov. Don’t give your information to a third party offering to apply on your behalf. Apply directly at StudentAid.gov/Debt-Relief. Right now, the application is online only. There will be a paper application available at a later date.
- There’s a fee to apply. Anyone who says you need to pay to apply is a fraudster, the FTC said: “And anyone who guarantees approval or quicker forgiveness: scam, scam, scam.”
- You’re uploading financial documents. The real application is short and straightforward: It asks for your name, birth date, Social Security number, phone number, and address. When you apply online, you don’t have to upload or attach any documents such as past tax returns to prove income. Nobody “legit” will ask for your Federal Student Aid (FSA) ID, bank account, or credit card information, the FTC said.
- Email updates come from an odd address. Once you apply for forgiveness, expect e-mail updates from the Education Department, the FTC said. The agency may ask you to upload tax documents verifying your income or maybe give updates on your application. But the emails will only come from these legitimate senders: [email protected], [email protected]
gov, or [email protected]. Pay close attention to the sender’s address, the agency said. Anything different from the above – even slight typos – are signs you’re getting a fake e-mail from a con artist.
- Promises to help you qualify, for a fee. People who say they can get your debt relief approved, for a fee, are criminals, according to the FTC.