Category: News

President Joe Biden has announced his final extension of the student loan payment pause. Here’s what you need to know and what it means for your student loans.

In this article, you will learn:

• Student loan payment pause: the details
• Student loan moratorium: student loan relief
• Student loan forgiveness: how to qualify
• Student loan forgiveness: next steps

[refinance_student_loans_table]

Student loan payment pause: the details

Biden has extended the student loan pause for millions of student loan borrowers. Here are the key details:

• Student loan moratorium extended for four more months;
• Student loan payments paused through December 31, 2022;
• Applies to federal student loans only;
• Federal student loan payments will restart on January 1, 2023.

This latest extension represents Biden’s fifth extension of the student loan payment pause. Previously, President Donald Trump extended the student loan pause twice. Biden has informed student loan borrowers that this will be the last extension of the student loan payment pause.

(Learn more: How to pay off student loans)

Student loan moratorium: student loan relief

The student loan payment pause includes several benefits for student loan borrowers, including:

• No mandatory federal student loan payments;
• 0% interest rates on federal student loans; and
• No collection of student loans in default

In March 2020, Congress passed the Cares Act, which is a $2.2 trillion stimulus package. That legislation included historic student loan relief such as the student loan moratorium. Through executive action, Trump and Biden extended student loan relief for more than two years. The U.S. Department of Education estimates that student loan borrowers have saved $5 billion a month during the student loan payment pause.

(Read: When to refinance student loans)

Student loan forgiveness: how to qualify

In addition to pausing student loans, Biden announced historic student loan forgiveness for millions of student loan borrowers. Biden will enact wide-scale student loan forgiveness up to $10,000 for federal student loan borrowers. Student loan borrowers who borrowed a Pell Grant for college are eligible to get up to $20,000 of student loan forgiveness.

To qualify for this historic student loan cancellation, student loan borrowers will need to meet the following qualifications:

• You must be a student loan borrower with a federal student loan that is owned by the U.S. Department of Education; and
• You earned up to $125,000 of annual income (or $250,000 as a married or joint filer) during the Covid-19 pandemic.

Contact your student loan servicer if you’re unsure which types of federal student loans you have. Importantly, FFELP Loans and Perkins Loans not owned by the U.S. Department of Education won’t qualify. Why? FFELP Loans, which are federal student loans issued prior to 2010, are primarily owned by third-party financial investors. Similarly, colleges and universities own most Perkins Loans.

If your income information is on file with the U.S. Department of Education, you could get automatic student loan forgiveness. If you haven’t provided your income information to the Education Department, then you should expect to apply online for student loan forgiveness in the coming weeks or months.

(Learn more: How to pay off $200,000 of student loans)

Student loan forgiveness: next steps

Federal student loan payments will restart on January 1, 2023. Start preparing now for the end of the student loan payment pause. Understand all your options for student loan repayment, including student loan refinancing, income-driven repayment and other options for student loan forgiveness. Find the best ways to save money and pay off student loans faster based on your specific financial situation. Once you do, you’ll be that much closer to financial freedom.

[related_posts post_1=’318′ post_2=’321′ post_3=’2937′]

President Joe Biden cancels $20,000 of student loans for millions of student loan borrowers. Here’s what you should know about this historic student loan relief.

In this article, you will learn:

• Biden cancels $20,000 of student loans
• Student loan forgiveness: $10,000 of student loan cancellation
• Student loan cancellation: how to qualify
• Student loan forgiveness: next steps

[refinance_student_loans_table]

Biden cancels $20,000 of student loans

Biden announced up to $20,000 of wide-scale student loan forgiveness for millions of student loan borrowers. This announcement will eliminate all federal student loans for approximately 20 million student loan borrowers. Student loan borrowers have been waiting years for Biden to announce his decision on broad student loan forgiveness. Here are the key details.

(Learn more: How to pay off student loans)

Student loan forgiveness: $10,000 of student loan cancellation

Biden’s new student loan plan includes $10,000 of student loan forgiveness for all eligible federal student loan borrowers who didn’t receive a Pell Grant in college. Student loan borrowers who received a Pell Grant in college will get up to $20,000 in student loan forgiveness. According to the White House, Pell Grant recipients generally have household incomes under $60,000 a year.

Biden has supported $10,000 of student loan forgiveness for borrowers since he was a presidential candidate during the 2020 election. The president has called on Congress to pass legislation to cancel student loans, but Congress never acted. Instead, Biden used his executive authority under the HEROES Act of 2003 to cancel student loans as part of the Covid-19 emergency.

Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) want Biden to cancel $50,000 of student loans. While they support Biden’s new student loan plan, they may continue to push Biden to cancel more student debt. However, Biden has publicly said he doesn’t support $50,000 of student loan forgiveness.

(Read: The Ultimate Guide To Student Loan Forgiveness)

Student loan cancellation: how to qualify

To qualify for this student loan cancellation, student loan borrowers will need to meet the following qualifications:

• You must be a student loan borrower with a federal student loan that is owned by the U.S. Department of Education; and
• You earned up to $125,000 of annual income (or $250,000 as a married or joint filer) during the Covid-19 pandemic.

Make sure that your federal student loan is owned by the federal government. For example, most FFELP Loans and Perkins Loans are owned by third party investors, financial institution and colleges and universities.

(Learn more: How to pay off $100,000 of student loans)

Student loan forgiveness: next steps

What are your next steps? First, logon to Federal Student Aid using your FSA ID. Determine how much federal student loan debt you hold. Private student loans are ineligible for Biden student loan forgiveness. Second, if the U.S. Department of Education already has your income information, then student loan forgiveness could be automatic. If you haven’t provided income information to the Education Department, then you should be able to apply online once a link is available. Third, if all your federal student loans aren’t canceled, then you should evaluate all your options to pay off student loans faster. This includes student loan refinancing, income-driven repayment and other options for student loan forgiveness.

[related_posts post_1=’318′ post_2=’321′ post_3=’2937′]

President Joe Biden excluded student loan cancellation from his annual budget. Here’s what it means for your student loans.

[refinance_student_loans_table]

Biden dropped student loan forgiveness

You won’t find any student loan forgiveness included in Biden’s new $5.8 trillion annual budget. Biden submitted his annual budget to Congress this week. While many hoped for a detailed plan on wide-scale student loan cancellation, Biden opted not to include this student loan relief for borrowers.

While only Congress approves the federal budget, the president can submit a proposed budget that reflect his policy priorities and legislative agenda. Biden’s decision may come as a major disappointment for Democrats in Congress and student loan borrowers alike.

Several Democrats in Congress have been lobbying the president to cancel up to $50,000 of student loans for borrowers. However, as Biden has done in previous years, he decided not to include any wide-scale student loan cancellation in his budget.

(Learn more: How To Pay Off $70,000 of Student Loans)

Democrats want $50,000 of student loan cancellation

Some Democrats in Congress, including Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA), want the president to act now to cancel student loans. They’re calling on the president to cancel up to $50,000 of student loans through an executive order.

However, Biden has said he doesn’t have legal authority to cancel student loans for every borrower. Therefore, Biden has asked Congress to pass legislation to enact wide-scale student loan forgiveness.

That said, Biden didn’t include $10,000 of student loan forgiveness in his budget either. Importantly, Congress isn’t required to accept the president’s proposed budget. Congress can amend the budget accordingly, which means that Congress could vote to include wide-scale student loan forgiveness.

Democrats in Congress also want Biden to extend the student loan payment pause for a fourth time. However, Biden did not include any federal spending on the student loan payment pause in his budget. (Here are 3 reasons why Biden could extend the student loan payment pause).

(Read: The Ultimate Guide To Student Loan Forgiveness)

Student loan cancellation is still possible

Since becoming president, Biden has cancelled $17 billion of student loans. Last week, for example, Biden announced plans to cancel $6.2 billion of student loans. Therefore, student loan borrowers shouldn’t think that there won’t be any student loan cancellation. It’s expected that Biden will continue to cancel student loans for specific student loan borrowers, rather than for every student loan borrower.

There is good news for student loan borrowers inside Biden’s proposed budget.

• First, Biden proposed that income-driven repayment plans be simplified. Income-driven repayment plans such as IBR, PAYE, REPAYE and ICR set a monthly student loan payment based on a borrower’s discretionary income and family size.
• Second, Biden said he wants to double the amount of Pell Grants to make college more affordable. Increased Pell Grants would help student loan borrowers get grants that don’t have to be repaid.
• Third, Biden called for more investment into Historically Black Colleges and Universities (HBCUs).
• Fourth, Biden wants to improve the Public Service Loan Forgiveness program, which helps public servants get total federal student loan forgiveness after meeting certain requirements. (How to get student loan forgiveness for teachers). This program, which Congress passed in 2007, has at times rejected up to 99% of applicants. In October, Biden made major changes to student loan forgiveness, which should help more student loan borrowers get access to student loan cancellation. For example, student loan borrowers can complete a limited waiver for student loan forgiveness to count previously ineligible student loan payments toward the required 120 monthly student loan payments.

(Learn more: The Ultimate Guide To Lower Student Loan Payments)

[related_posts post_1=’318′ post_2=’321′ post_3=’2937′]

President Joe Biden may cancel $10,000 of student loans. However, student loan cancellation may not be available for everyone. Here’s what you should know about this new proposal.

[refinance_student_loans_table]

Biden could cancel $10,000 of student loans

Since becoming a presidential candidate, Biden has supported $10,000 of student loan cancellation for borrowers. Now, a new plan could help Biden achieve his campaign goal. Several private student loan companies have pushed a new proposal that would cancel student loans for certain student loan borrowers.

According to the plan, Biden should cancel student loans for student loan borrowers who meet the following:

• Low income
• Struggling financially
• Student loan default
• Student loan delinquency

Rather than provide wide-scale student loan cancellation, this new plan would target student loan forgiveness only for borrowers who need financial relief the most. The plan doesn’t specify what “low income” or “struggling financially” means.

That said, student loan default means a student loan borrower hasn’t paid a student loan in at least 270 days. Student loan delinquency means a borrowers hasn’t paid a student loan in at least 90 days.

(Learn more: How to pay off student loans)

Democrats call for $50,000 of student loan cancellation

While progressive Democrats in Congress support wide-scale student loan cancellation, they want to maximize student loan forgiveness for most or all borrowers. For example, Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) want Biden to cancel $50,000 of student loans.

Based on their plan, student loan cancellation only would be available to federal student loan borrowers who earn up to $125,000 annually. Biden has opposed $50,000 of student loan forgiveness and has said that Congress, not the president, should cancel student loans. Biden believes he doesn’t have legal authority to enact wide-scale student loan cancellation.

Last week, Biden announced plans to cancel $6.2 billion of student loans. Previously, Biden cancelled $15 billion of student loans since becoming president.

(Read: The Ultimate Guide To Student Loan Forgiveness)

Why private student loan companies want to target student loan cancellation

While many student loan borrowers want total student loan cancellation, not everyone agrees. For example, some private student loan companies argue that wide-scale student loan cancellation would provide student loan forgiveness to too many borrowers.

Instead, they believe targeted student loan cancellation would help provide student loan relief to the most financially vulnerable borrowers. This way, higher income earners such as doctors, lawyers and dentists who can afford student loan payments wouldn’t need student loan forgiveness. This helps the federal government save money, which could be used to help pass Biden’s legislative agenda.

(Learn more: How to pay off $100,000 of student loans)

Will Biden cancel student loans?

Biden hasn’t decided on whether he will issue an executive order to enact wide-scale student loan cancellation. Some members of Congress are urging the president to cancel student loans to cancel student loans during the Covid-19 pandemic. However, Biden has focused on targeted student loan cancellation rather than wide-scale student loan forgiveness. Expect more student loan forgiveness for certain borrower groups, including public servants, borrowers with a permanent disability, and borrowers who qualify for student loan forgiveness through borrower defense to repayment. That said, it’s less likely that Biden will enact wide-scale student loan cancellation for all student loan borrowers.

[related_posts post_1=’318′ post_2=’321′ post_3=’2937′]

President Joe Biden will cancel $6.2 billion of student loans for borrowers. That’s good news if you have federal student loan debt and are pursuing student loan forgiveness.

[refinance_student_loans_table]

Student loan cancellation: 100,000 student loan borrowers get $6.2 billion of student loan forgiveness

The U.S. Department of Education made the major announcement, which could initially impact 100,000 student loan borrowers. Over time, the Education Department expects that 550,000 student loan borrowers can get their student loans cancelled. The Biden administration has made several historic changes to the Public Service Loan Forgiveness program. These changes have relaxed the requirements, which has increased how many borrowers can qualify.

(Learn more: How to pay off student loans)

How public service loan forgiveness works

Created in 2007, the Public Service Loan Forgiveness program helps student loan borrowers get student loan cancellation for their federal student loans. There are several qualifications needed to get student loan forgiveness.

• First, a student loan borrower must work for a qualified public service or non-profit employer.
• Second, a borrower must enroll in an income-driven repayment plan.
• Third, a borrower must make at least 120 student loan payments.

After meeting these requirements, and others, the borrower’s remaining federal student loan balance will be cancelled.

There are many jobs that qualify for student loan forgiveness. This includes police officers and firefighters to teachers and members of the military. Student loan borrowers can apply through their student loan servicer or directly with the U.S. Department of Education.

(Read: The Ultimate Guide To Student Loan Forgiveness)

Major changes to student loan forgiveness

In October 2021, the Biden administration announced major changes to student loan forgiveness. These changes will make it easier for more student loan borrowers to get student loan cancellation. To date, the Biden administration has identified the 100,000 student loan borrowers who collectively will get $6.2 billion in student loan cancellation.

The major changes will now “count” previous student loan payments that were previously ruled to be ineligible. These payments can now be “counted” toward the 120 monthly payments. The major changes include:

• Count student loan payments that were late;
• Count partial student loan payments;
• Count student loan payments made under the wrong student loan payment plan;
• Count student loan payments while members of the military were on active duty; and
• Count student loan payments that were made prior to student loan consolidation.

(Learn more: How to pay off $50,000 of student loans)

[related_posts post_1=’318′ post_2=’321′ post_3=’2937′]

Here are three reasons why President Joe Biden could extend the student loan payment pause. 

[refinance_student_loans_table]

Federal student loan payments have been paused since March 2020. That’s when Congress passed historic student loan relief that:

• paused federal student loan payments
• set interest rates to 0%
• stopped collection of student loans in default

Federal student loan payments are expected to restart on May 1, 2022. However, it’s possible that Biden may extend the student loan payment pause beyond May 1. While no decision has been made, White House Chief of Staff Ron Klain indicated that Biden will be making a decision soon.

Here are three reasons why Biden could extend student loan relief:

1. Student loan relief could provide a safety net for borrowers
2. Democrats could lose the midterm elections
3. Many student loan borrowers will have new student loan servicer

1. Student loan relief could provide safety net for borrowers

First, Biden could extend student loan relief beyond May 1, 2022 to provide a safety net for student loan borrowers. With no mandatory student loan payments, borrowers could pay off other debt, invest for retirement, or save to buy a home.

The U.S. Department of Education estimates that student loan borrowers collectively will save $5 billion every month there is student loan relief. Since March 2020, student loan borrowers have saved more than $120 billion of student loans. If Biden extends the student loan payment pause three months, for example, borrowers could save an additional $15 billion.

Sen. Elizabeth Warren (D-MA) has expressed concern about rushing to restart student loan payments when the Covid-19 pandemic hasn’t ended. A recent survey shows that 93% of student loan borrowers say they are ill-prepared to start repaying federal student loans. By extending the student loan payment pause, borrowers could have more time to make a smoother transition to restart payments.

(Learn more: Compare the latest rates to refinance student loans)

2. Democrats could lose the midterm elections

A second reason to extend student loan relief is to help Democrats win the midterm elections in November. If Biden doesn’t extend the student loan payment pause, it could hurt Democrats in the midterm elections. Rep. Alexandria Ocasio-Cortez (D-NY) has said that Democratic voters may not support Democrats without more student loan relief. This includes wide-scale student loan cancellation too.

However, Biden says he doesn’t have the legal authority to cancel student loans for all student loan borrowers. While Biden has cancelled more than $15 billion of student loans since becoming president, he has focused on targeted student loan cancellation. That said, Biden has called on Congress to cancel up to $10,000 of student loans for borrowers.

While progressives want an extension of student loans relief, Biden must weigh the political ramifications. For example, a fourth extension of student loan relief could alienate independents and moderates. If Democrats want to retain a majority in Congress, they will need both independents and moderates to vote for Democrats in November. Therefore, Biden must weigh the advantages and disadvantages of extending the student loan payment pause.

(Learn more: How to pay off student loans faster)

3. Many student loan borrowers will have a new student loan servicer

A third reason for Biden to extend the student loan payment pause is the transition of millions of borrowers to a new student loan servicer. Student loan servicers collect student loan payments from student loan borrowers and provide customer service. This year, many student loan borrowers will have a new student loan servicer due to a major shakeup with federal student loan servicers. Several leading student loan servicers, including Navient and FedLoan Servicing, announced they will no longer service federal student loans.

Therefore, nearly 16 million student loan borrowers will get a new federal student loan servicer this year. The U.S. Department of Education is responsible to ensure that there is a smooth transition as borrowers are transferred to new student loan servicers.

The Education Department has been contacting borrowers for months to alert them of the transition. However, Biden could give the Education Department and borrowers more time to change student loan servicers.

(Learn more: How to pay off $70,000 of student loans)

[related_posts post_1=’318′ post_2=’321′ post_3=’2937′]

The student loan interest deduction allows you to deduct up to $2,500 on your federal income taxes for qualified interest payments made on your student loans.

In this guide, we will address everything you need to know, including:

1. Is student loan interest tax deductible?
2. How to deduct student loan interest
3. How to qualify for the student loan interest deduction
4. Which student loans are eligible for the student loan deduction?
5. Who doesn’t qualify for the student loan deduction?
6. Can I deduct student loan payments?

[refinance_student_loans_table]

1. Is student loan interest tax deductible?

Yes, student loan interest is tax deductible on your federal income tax returns up to $2,500 of student loan interest each tax year. It’s important to note that in 2020, federal student loan interest was temporarily suspended due to the Cares Act (the financial stimulus package). This may impact your ability to deduct interest on your 2020 income taxes, since you may not have paid less student loan interest due to the Cares Act.

If you are like many student loan borrowers, then your goal is likely to pay off student loans faster. The sooner you pay off student loans, the less student loan interest you will have. If you have a choice to pay off student loans or take a higher student loan deduction, you can likely save more money by getting a lower interest rate or paying off your student loans.

2. How to deduct student loan interest

Student loan interest can be deducted for both federal student loans and private student loans. When you prepare your federal income taxes, treat student loan interest as an above-the-line deduction.

This means that student loan interest is not considered an itemized deduction. Since student loan interest is an above-the-line deduction, the amount of student loan interest you paid in a given year is subtracted from your taxable income.

Student loan interest: taxes

To deduct student loan interest on your income taxes:

• $600 or more of student loan interest: Use Form 1098-E, which you will automatically receive if you paid more than $600 of student loan interest in a calendar year.
• Less than $600 of student loan interest: If you paid less than $600 of student loan interest in a given calendar year, ask your student loan servicer for a student loan deduction form.

You can still get the student loan interest tax deduction whether you paid more or less than $600 in student loan interest in a given year (up to $2,500 total).

3. How to qualify for the student loan interest deduction

To qualify for a deduction on student loan interest:

• You must have modified adjusted gross income (MAGI) of less than $70,000 if you are individual taxpayer.
• You can receive a lower deduction if your MAGI is greater than $70,000 but less than $85,000.
• The maximum deduction you can receive is $2,500.

4. Which student loans are eligible for the student loan deduction?

Importantly, only interest paid on qualified student loans are eligible for the deduction. This includes:

• Student loans you borrowed: If you borrowed student loans for your own education, you can deduct student loan interest whether you are a current student or are no longer in school.
• Student loans you borrowed for someone else: You can get the student loan deduction if you borrowed student loans for someone else. For example, if you borrowed a Parent PLUS Loan or your dependent child, you could qualify for the student loan deduction (assuming you meet other requirements).

5. Who doesn’t qualify for the student loan tax deduction?

There are several examples in which you may not qualify for the student loan interest tax deduction. This includes:

• You earn more than $85,000 per year as an individual tax filer.
• You can be claimed as a dependent on someone else’s income tax return if you file as a single taxpayer.
• You or your spouse cannot be claimed on anyone else’s tax return if you file as married filing jointly.
• You are married and file your income taxes as married filing separately.
• You paid no student loan interest in a given tax year.

6. Can I deduct student loan payments?

When it comes to student loan repayment, many borrowers wonder whether they can deduct student loan payments. There are many ways to pay off student loans, ranging from student loan refinancing to making an extra student loan payment.

When you pay off student loans, you pay your principal balance (the amount you originally borrowed) plus any interest. You can deduct student loan interest payments on your federal income taxes. However, you can’t deduct student loan payments such as paying off your principal student loan balance.