URGENT: Don’t miss the April 30 deadline to save big with this one-time student loan adjustment!
Doctors of chiropractic are the second highest defaulting professional borrower behind attorneys.
But imagine what it would feel like to look at your bank account and see it has $500,000 more in it than you thought it had, have 100% of your debt forgiven or have your payments dropped to zero at 0% interest rate with a huge projected forgiven amount.
Updates to the federal student loan program
Recent updates to the federal student loan program will allow some borrowers to count backdated months toward their loan forgiveness date, and the Biden Administration is waiving federal taxes on loans forgiven through 2025.
These changes apply to more than 43 million Americans holding federal student loans, and may amount to a projected $400 billion in loans forgiven. But many don’t know how to take advantage of the new rules, nor how they’ll be affected when forgiveness occurs.
The waiver allows borrowers to have all previous payments, regardless of loan or repayment type, count toward forgiveness. Backdated payments may now include any months deferment prior to 2013 and any months of payments before consolidation of federal student loans.
This one-time account adjustment expires on April 30, 2024, so borrowers who want to take advantage of this provision must consolidate their loans in the Department of Education’s Direct Loans Program before that date. Some who consolidate their loans on time will find they are much closer to their loan forgiveness date than they realized, and some will even receive a refund for months or years paid beyond when they should have received forgiveness.
Here’s the real kicker: Once the loans are consolidated, there’s no way to differentiate the loan sets. So if you graduated in 1995 with student loans and then went back to school in 2020 and acquired more loans — and then consolidated them by the deadline — the Department of Education has been shown to backdate all the loans to 1995, meaning even the new loans may be forgiven.
And there’s more — The American Rescue Plan Act that Biden passed in March 2021 was implemented to make sure any canceled debt from federal student loans is not subject to federal taxation and was put in place to offset the taxes that would be assessed on the $10-20K in forgiveness. This has an added benefit for anyone who benefits from the one-time account adjustment and reaches a total of 20-25 total years of payments; they will not have taxes due on the forgiven debt.
Canceled federal student loan debt normally involves a tax implication. But all canceled debt on federal student loans between December 2020 until December 31, 2025, will not be taxed. Please note there may be state tax for borrowers in Minnesota, Arkansas, Indiana, Mississippi, North Carolina, and Wisconsin.
This is also newsworthy because it sets a precedent for further student loan reform. There may be future class action lawsuits to drop the tax implication altogether. The general trend in legislative changes is only improving the repayment programs so they’re more in favor of the borrower.
Who should get help?
- If you have federal student loans older than 2013
- If you had a break between undergraduate and graduate degrees
- If you don’t already have a direct consolidated loan, not to be
confused with FFEL consolidated loans.
What should I keep in mind?
- You must consolidate different loan sets into a single direct loan.
- You must be enrolled in an active Income-Driven Repayment
program or Public Service Loan Forgiveness program.
ZACK GEIST founded Student Loan Tutor in 2015. As one of the leading experts in federal student loan repayment, he and his team have taught thousands of student loan borrowers all over the country how to save enormous amounts of money and hassle. He currently splits his time between his farm on the Hamakua Coast of Big Island Hawaii and Salt Lake City, the location of Student Loan Tutor’s corporate offices. For your free evaluation, use this link or call 805-617-9584.