Student loan forgiveness 2022? Where do your student loans stand right now? It can be pretty confusing to figure that out. Covid deferrals, loan servicer mistakes, and now forgiveness have led to a mish-mash of options. However, the big financial mistake you can make is to assume you don’t qualify for some kind of relief.
One piece of good news on the mish-mash front, especially if you have more than one loan: Those loans can now be seen on one page at www.studentaid.gov. No more checking on each servicer’s website for your information. It has a helpful feature. The site divides your loans into those that can be forgiven (through any existing forgiveness program, not only the most recent one), and those that cannot (mostly private loans).
To use studentaid.gov, you will need an FSA ID. This is different from your loan number. Apply for one at the website, and you’re in.
6 Questions to Ask Yourself
Before deciding, like Seinfeld’s Soup Nazi, “No forgiveness for you,” (90s reference – might make no sense to recent graduates), ask yourself these 6 questions to start:
1) Were your loan payments ever on some kind of income-driven repayment plan (IDR)? If so or you are not sure, see “Income-Driven Repayment Loans,” below.
2) Have you worked in medicine, education, or for government, at all since graduation? You may have been given bad advice about Public Service Loan Forgiveness. Skip to “Public Service Loan Forgiveness,” below.
3) Does your employer offer any type of student loan reimbursement benefit? If not, might they consider one? It’s tax-free to both you and them until 12/31/25. For more info, see “Tax-Free Student Loan Reimbursement,” below.
4) Did you repay some or all of your Covid-deferred loans in the last 33 months despite the fact they were on deferral? Skip to – “Forgiveness – What We Know So Far,” below.
5) Is your household Adjusted Gross Income (look on your tax return or ask your CPA or CFP) less than $125K (single) or $250K (married)? Skip to – “Forgiveness – What We Know So Far,” below
6) If you are a parent of a current student getting loans, is your household Adjusted Gross Income (look on your tax return or ask your CPA or CFP) less than $125K (single) or $250K (married)? Skip to – “Forgiveness – What We Know So Far,” below
Income-Driven Repayment Loans
If your loan payments were ever calculated based on your income, you may be entitled to some relief. Many errors were made in the calculations of those payments, mostly in the loan servicers’ favor. Most of those errors have now been corrected. You may owe less than you think. You may also qualify for lower payments.
Go to student aid.gov, sign up for an FSA ID, and find out.
Public Service Loan Forgiveness
A study showed that nearly all applications for PSLF had been rejected over the past several years when many of them should have been approved. Additionally the loans suffered from accounting errors.
Plus, more jobs have now been added to the PSLF program eligibility.
****But in order to have your case reviewed, you have to enroll at the student aid.gov site by getting an FSA ID by 10/31/22.****
Anyone in medicine, education or government work should go ahead and enroll. Enrolling sooner than later will reduce the chance of getting caught up in a last-minute rush of applicants.
Tax-Free Student Loan Reimbursement
With the 2017 Tax Act, employers and employees were given a special benefit. Employers can reimburse employee’s student loans up to $5250 (but any tuition directly reimbursed is subtracted first). The employers get to deduct the compensation, and the employee doesn’t pay tax on it. This benefit is available regardless of salary, income, or occupation.
Because the 2017 Act sunsets in 2026, however, this means that this benefit is only available until 12/31/25, unless it’s extended by Congress.
Ask your employer if this benefit is available to you. If you work for a small-ish employer, that employer may not be aware of this benefit. Given the tight labor market, it might be a good time to make the request to add it, or to provide it for you.
Forgiveness – What We Know So Far
While many of the details still have to be worked out, you’re probably aware that the recently-enacted loan forgiveness applies if you are single with Adjusted Gross Income (AGI) of less than $125K or married with AGI of less than $250K.
Again before letting that internal Soup Nazi strike you down, remember AGI is not your gross income/salary. If you are a W2 employee, your AGI would be approximately:
Salary+Bonus minus Retirement contributions minus HSA (Health Savings Account) contributions.
In addition to retirement and HSA contributions, there are many other adjustments that can affect your AGI, but they are less common. The point is that if you make $135K and think you don’t qualify, think again. If you contribute $6K to your 401K and $6K to your HSA, your AGI is $123K, so you actually do.
If you are self-employed you probably have even more deductions, so a thorough tax review would be in order. Maybe an amended return for 2021 might be worthwhile if you find a deduction that was missed.
The amounts that can be forgiven are $10,000 for all borrowers with public loans (not private ones), and an additional $10,000 if they were also Pell Grant recipients. The website at student aid.gov will tell you which loans you have that are forgivable.
What if you paid off your loans within the past year and you would otherwise qualify for forgiveness? Surprise – you will be able to apply for a refund. Details on that yet to come, though.
What if you are the parent of a current student? As long as the student had loans as of 7/31/22, and your household’s AGI falls below the income eligibility figures, your child’s loan(s) would qualify for forgiveness.
Summary – Several Strategies
In summary, now there are several strategies to employ that can help ease the burden of student loan debt. Consult with a knowledgable CPA or CFP on what opportunities there might be for you.
You can make an appointment to speak with us about your student loans or other concerns on our Contact Us page.