Student Loan Forgiveness and Extended Deferment of Payments

By: Jonathan Godwin

Student Loan Forgiveness and Extended Deferment of Payments

This is a pretty big change that was made by Executive Order earlier this month. Details are limited, but here is what we have been able to learn as of now (and this is all subject to change). We will update you as more information becomes available.

 

  • The forgiveness is expected to be up to $20k for Pell Grant recipients and up to $10k for non-Pell Grant recipients.

  • Borrowers are eligible for this relief if their individual income is less than $125k or $250k for households. It appears that you are allowed to use either 2020 or 2021 as your base year for eligibility purposes.

  • To ensure a smooth transition to repayment and prevent unnecessary defaults, the pause on federal student loan repayment will be extended one final time to 12.31.2022. Borrowers should expect to resume payment in January 2023.

  • There is an application that will be launched sometime in early October 2022 for borrowers to provide their information if they’re unsure about their qualifications. It is also likely that since the Department of Education has information on current borrowers, eligible borrowers may be notified. If you’re unsure or want to learn more about this, you’re advised to sign up for updates on the Department of Education’s subscriptions page.

  • The loan forgiveness isn’t subject to federal taxes, but it does appear that SC will tax the loan forgiveness as income.