|States Expected to Tax Student Loan Forgiveness||States Expected to Not Tax Student Loan Forgiveness||States Without Income Tax (thus, no tax on student loan forgiveness)|
New Hampshire does not tax earned wages, so student loan debt forgiveness likely won’t be taxed.
Remember Other Aspects of Biden’s Relief Plan
The focus of President Biden’s student loan relief plan has been on forgiveness, but there are other parts to be aware of, such as the end of the forbearance period.
If forgiveness won’t be wiping out your entire balance, you’ll need to prepare for payments to restart on January 1st, 2023 when the forbearance ends.
To estimate your monthly payment amount, log into your loan servicer’s account. In some accounts, there is an option to view your projected monthly payment for each individual loan. While the number will likely drop due to a portion of your balance being forgiven, it’ll give you a solid estimate for what to expect once the forbearance ends.
This is a good time to look at your budget and make adjustments to your spending to accommodate a loan payment.
Sign Up for AutoPay
It’s been quite a while since borrowers have been required to make payments on their federal student loans. If you’re worried that the change of pace may cause you to miss a payment once the forbearance ends, now is a good time to opt in to autopay. This will automatically withdraw your payments from your account each month, so you never miss a payment.
Make Sure Your Contact Information is Updated
If you’ve recently moved or changed email addresses, log into your account and ensure the contact information is updated. Important information regarding your loans, the forgiveness application, and changes to the program will be sent to the information on file. If the information isn’t current, you could miss out on key details.
Look at Other Forgiveness Opportunities
If you don’t qualify for President Biden’s student loan relief, don’t fret. There are other programs you may be eligible for:
Public Service Loan Forgiveness
Also known as PSLF, this program eases the burden of federal student loan debt for eligible public service workers. If you work in a qualifying role, such as a teacher or law enforcement officer, you may qualify to have your entire loan balance forgiven.
Teacher Loan Forgiveness
If you are a highly-qualified teacher with federal student loan debt, this program is for you. To qualify, you must have taught at a low-income school or educational service agency for at least five consecutive school years.
Nurse Corps Loan Repayment
If you’re a nurse working in a critical shortage facility, you may be eligible to have up to 85% of your nursing school debt forgiven.
Income-Driven Repayment Forgiveness
After making qualifying payments on an IDR plan for 20-25 years, your entire remaining balance can be forgiven. While this option requires a lengthy commitment to receive relief, it is a great option for those committed to remaining on an IDR plan for that length of time.
Beware of Student Loan Forgiveness Scams
While student loan scams aren’t new, they’re increasing in number since the Biden Administration’s plan was announced. To prevent falling prey to a scam, here are a few red flags to look out for:
- Language that suggests urgency. You will never be asked to decide quickly when it comes to student loan forgiveness. Plus, most student loan forgiveness programs will require you to have made a certain number of payments. That requires preparation and, therefore, can’t be a decision made in a moment’s notice.
- Saying the program ends soon. Federal student loan forgiveness programs have been running, and will continue to run, for many years to come.
- Promising immediate loan forgiveness. Loan forgiveness programs all have a variety of criteria you need to meet. Plus, you’ll usually need to apply to even be considered. So, in any case, your loans won’t automatically be forgiven.
- Asking for your FSA ID or password. Neither the Department of Education nor a Federal Student Aid representative will ask for your personal information over the phone.
- Requesting a fee to discharge your debt. Legitimate student loan forgiveness programs do not require a fee to participate.
Remember, scammers are smart. Some may even utilize telemarketing services that place their location at Washington, DC to make the call look more reputable. Be wary of any call you receive in relation to student loan forgiveness. Always contact your loan servicer directly if you’re unsure whether something is real or a scam.
Final Thoughts from the Nest
As the application release date approaches, it’s important to start preparing. Make sure to gather all necessary documentation, ensure your contact information is up-to-date, and prepare for the potential loan forgiveness tax.