Today, President Biden signed the American Rescue Plan Act of 2021, which makes all student loan forgiveness tax-free for borrowers.
Normally, the cancellation of debt is treated like income to the borrower. The amount of cancelled debt is included as gross income on the borrower’s federal tax return.
Under previous law, the cancellation of the remaining student loan debt after 20 or 25 years in an income-driven repayment plan was taxable. The new legislation makes this loan forgiveness tax-free.
The tax-free status is set to expire at the end of 2025. This gives borrowers who are currently repaying their student loans under the Income-Contingent Repayment (ICR) plan an opportunity to take advantage.
Borrowers with private student loans who do not qualify for student loan forgiveness may consider refinancing. Interest rates are still very low, which means you could save money on your loan if you qualify.
Read the full article and learn more about what’s included in the new law. Source: Savingforcollege.com
|
