How Biden’s Student Loan Forgiveness Plan Could Affect You
On Wednesday, President Joe Biden announced a student loan forgiveness initiative that will wipe out up to $10,000 in student loan debt, and up to $20,000 in loans for those who qualified for Pell Grants. The plan also extends a moratorium on student loan repayments through December 31, 2022.
The plan could affect hundreds of thousands of Louisiana residents, according to statistics gathered by The Daily Advertiser.
More than 650,000 Louisiana residents are carrying a combined $22.5 billion in student loan debt, according to Education Data Initiative research, though not all of those will qualify for the program.
Biden’s plan covers only federal student loans, not private ones, and is limited to individual borrowers with incomes less than $125,000 or household incomes of less than $250,000.
The average debt per student borrower in Louisiana is around $34,500, but the state has a higher percentage of citizens who have student loan debt at 14 percent. As well, 52.8 percent of those borrowers are under the age of 35.
Congressman Clay Higgins blasted the plan on Twitter.
One of the questions that has most frequently come up is whether or not you could be taxed for the loan forgiveness. Under normal circumstances, any sort of loan forgiveness is taxed as income, and the loan institution would send the borrower a 1099 form.
However, under the American Rescue Plan passed at the beginning of Joe Biden's term, loan forgiveness has been made non-taxable through 2025. So, you won't get hit with a tax bill for your federal tax returns.
For residents of Louisiana, it's currently unclear how that will be handled on your state tax return. One accountant who spoke to KPEL said it's not unusual for the state to wait until much closer to tax season to clarify the rule.
So, while you may find some relief in your long-term loan bill, you could find yourself with extra income to report come April, unless the Treasury Department changes its rules to match the American Rescue Plan's federal rules.
Celebrities Who Ran Into Serious Tax Troubles