Status Of The Biden Administration’s Student Loan Forgiveness

Article Highlights:

• The Forgiveness Plan
• Supreme Court
• Qualifications
• Tax Issues
• Payment Moratorium
• Current Applications

President Biden's student loan debt forgiveness plan was originally authorized by an executive order and announced on August 24, 2022. It subsequently hit a snag when two court cases put a hold on the plan, which was one of Biden’s campaign promises.

The issue has since found its way to the Supreme Court, which will hear arguments about the case in February. Thus, the plan is on hold until the Supreme Court rules, which at the earliest will be in February.

If the case is decided in the Administration’s favor, to qualify for forgiveness the loans must have been taken out before June 30, 2022, and the individual’s AGI must have been less than $125,000 in either 2020 or 2021. For married couples their AGI must have been less than $250,000 in 2020 or 2021. For Pell grant recipients the amount of the forgiveness is capped at the amount of the loan but not exceeding $20,000. For others who qualify the maximum amount is $10,000.

Under normal circumstances forgiven debt becomes taxable income. However, coincidentally the American Rescue Plan Act (ARPA) of 2021 included a provision making student loan forgiveness free from income tax for 2021 through 2025. In addition most states have conformed to the exclusion under ARPA.

Of course, there remains the fairness issue for those who have already paid off their loans or never borrowed money to pay for college expenses.

While the plan is waiting on the Supreme Court ruling, the Biden Administration announced the payment moratorium, which was begun in 2020 by the Trump Administration, would be extended once again, this time through June 30, 2023, or longer pending resolution of the legal issues.

When and if the Supreme Court comes down with a favorable ruling, most federal student loans will qualify for forgiveness. Those are generally the ones that have qualified for payment pause. The Department of Education (DOE) is looking into adding other non-federal student loans to the forgiveness program. These are not part of the president’s forgiveness plan.

Approximately 26 million borrowers have applied for forgiveness and the DOE had already approved about 16 million before the DOE stopped taking applications after the court challenges to Biden’s authority to authorize the program began.

So, we will have to wait for the Supreme Court ruling to see if the forgiveness plan will happen.

Share this article...

Facebook

Twitter WhatsApp LinkedIn Pinterest Pocket Reddit Email

Want tax & accounting tips and insights?

I confirm this is a service inquiry and not an advertising message or solicitation. By clicking “Submit”, I acknowledge and agree to the creation of an account and to the and .

Plans & Pricing

Painless, transparent pricing.

Choose the coverage level that fits your needs. All plans cover the current-year return for its full audit window (typically 3 years federal / 4 years state), including extensions and amended returns.

Basic

$60 /return

IRS account monitoring — Monthly
Notice/correspondence response
Individual IRS & state audit defense (up to 10 hrs)

Gold - Best Value

$130 /return

Everything in Silver (weekly account monitoring) plus:
Four 15-min calls + two office visits
1 hour of consults on non-covered matters
Priority 24-business-hour response

Silver

$80 /return

IRS account monitoring — Bimonthly
Everything in Basic plus:
Identity theft remediation

Frequently Asked Questions

: Your current-year return is covered for as long as it can be audited—generally 3 years for the IRS and 4 years for the state.
: Yes. Returns filed on extension and amended returns are covered under the package. (Preparation fees for an amended return may be separate.)
: All related state returns tied to your covered filing are included.
: Yes. You may cancel within 30 days of signup for a full refund of the package fee.