The COVID-19 pandemic is causing all sorts of changes in the way people live their lives. And one of the most significant changes could be a new pathway to student loan forgiveness. The IRS recently announced that it will allow taxpayers to claim a special deduction for any tuition and related expenses paid in 2020, even if those expenses were incurred in 2019. This opens up the possibility that some borrowers could get their student loans forgiven sooner than expected.
The IRS deduction is just one of several changes that could make it easier for borrowers to get their student loans forgiven. The CARES Act, passed in March, included a provision that suspends all federal student loan payments through September 30, 2020. This means that borrowers who are currently in an income-driven repayment plan can take a break from making their monthly payments. And if you’re not in an income-driven repayment plan, your payments are still suspended, but you have the option to make a voluntary payment if you’d like.
Income-driven repayment plans are designed to make your monthly student loan payment more affordable based on your income and family size. And if you make your payments for 20 or 25 years (depending on the plan), any remaining balance on your loan is forgiven. So, the CARES Act suspension of payments could potentially shorten the repayment period for some borrowers and help them get to loan forgiveness sooner.
The IRS deduction and the CARES Act suspension of payments are just two of the many changes that have been made to student loans in response to the COVID-19 pandemic. If you’re a student loan borrower, it’s important to stay up-to-date on all the latest changes and how they might affect your loan.
What effect does COVID-19 have on forgiving student loan debt?
The effect of COVID-19 on forgiving student loan debt is twofold. The first is the IRS recently announced that it will allow taxpayers to claim a special deduction for any tuition and related expenses paid in 2020, even if those expenses were incurred in 2019. This opens up the possibility that some borrowers could get their student loans forgiven sooner than expected. The second is the CARES Act, passed in March, which included a provision that suspends all federal student loan payments through September 30, 2020. This means that borrowers who are currently in an income-driven repayment plan can take a break from making their monthly payments. And if you’re not in an income-driven repayment plan, your payments are still suspended, but you have the option to make a voluntary payment if you’d like.
How can I get my student loan debt forgiven?
There are a few different ways you can get your student loan debt forgiven. The first is to make payments for 20 or 25 years (depending on the plan) through an income-driven repayment plan. The second is to have your remaining balance forgiven after the CARES Act suspension of payments ends on September 30, 2020. The third is to claim a special deduction for any tuition and related expenses paid in 2020, even if those expenses were incurred in 2019.
What should I do if I’m struggling to make my student loan payments?
If you’re struggling to make your student loan payments, there are a few things you can do. First, you can consider an income-driven repayment plan. Second, you can take advantage of the CARES Act suspension of payments and make a voluntary payment if you’d like. Third, you can claim a special deduction for any tuition and related expenses paid in 2020, even if those expenses were incurred in 2019.
Does the COVID tax break also affect private student loan borrowers and federal student loan borrowers? How?
The COVID tax break affects both private student loans and federal student loans. For private student loans, the deduction can be used to reduce the amount of interest you pay on your loan. For federal student loans, the deduction can be used to lower your monthly payment or shorten the repayment period. The CARES Act suspension of payments applies to both private and federal student loans. Private lenders may offer their own forbearance or deferment options as well. If you have questions about your specific loan, contact your lender for more information.
What other changes have been made to student loans in response to COVID-19?
In addition to the IRS deduction and the CARES Act suspension of payments, there have been a few other changes made to student loans in response to COVID-19. For example, the Department of Education has extended the deadline for recertifying your income-driven repayment plan from October 31, 2020, to December 31, 2020. And if you’re a borrower with a Federally Held Student Loan, you can request forbearance of up to 12 months. To learn more about these and other changes, visit the Department of Education’s website or contact your loan servicer.
Can we still apply for existing debt cancellation programs?
Yes, you can still apply for existing debt cancellation programs. For example, the Public Service Loan Forgiveness program is still accepting applications. If you’re interested in applying for this or other programs, contact your loan servicer for more information.
If I already have existing forgiveness programs, will this be affected the COVID tax break?
No, the COVID tax break will not affect existing forgiveness programs. If you’re already enrolled in a program, you can continue to make payments and track your progress toward forgiveness.
Where does the federal government stand on the issue of the COVID tax break?
The federal government has not yet taken a position on the COVID tax break. However, some lawmakers have proposed legislation that would extend the deduction to 2021 and beyond. Stay tuned for updates as this issue develops.
Is there a tax free debt cancellation for private and student loan borrowers?
No, there is no tax-free debt cancellation for private and student loan borrowers. However, the COVID tax break could open the door to student loan forgiveness in the future.
The bottom line:
The COVID tax break could open the door to student loan forgiveness in the future. If you’re struggling to make your student loan payments, there are a few things you can do, including taking advantage of the CARES Act suspension of payments and making a voluntary payment if you’d like. You can also claim a special deduction for any tuition and related expenses paid in 2020, even if those expenses were incurred in 2019. Contact your lender for more information about your specific loan.
