The new Federal Student Loan Debt Relief Program that the President put into place by Executive Order in August 2022 is now open to accept applications. To apply visit: https://studentaid.gov/debt-relief/application. You do not need a log-in or to provide any documents to apply.
How much could be forgiven?Federal Pell Grant recipients could receive relief for loans up to $20,000, and non-Pell borrowers may get relief for loans up to $10,000.
What loans are eligible? Only the following types of loans that were disbursed on or before June 30, 2022 are eligible; Federal Direct Loans, Federal Family Education Loans held by ED (US Dept. of Education) or in default at a guaranty agency, Federal Perkins Loans held by ED, Defaulted loans including ED-held or commercially serviced Subsidized Stafford, Unsubsidized Stafford, parent PLUS, graduate PLUS and Perkins loans held by ED.
What are the income limits?
Less than $125,000 for individual filers in 2020 or 2021, and
Less than $250,000 for all other filing statuses in 2020 or 2021.
Will the forgiven loans be taxed?
Amounts forgiven under this program will not be taxable income for federal purposes. It is up to each state to determine how they will handle the loan forgiveness. Most states including New York, New Jersey and Connecticut have said that they will not tax this benefit.
Borrowers who still have outstanding loans after the forgiveness should receive new lower monthly repayment amounts based on their lower balances from their loan servicers.
Honorine Campisi, CPA
