Recent updates to the federal student loan program will allow borrowers to count backdated months toward their loan forgiveness date, and federal taxes on loans forgiven through 2025 are being waived.
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The waiver allows borrowers to have all previous payments, regardless of loan or repayment type, count toward forgiveness.
Backdated payments may now include any months deferment prior to 2013 and any months of payments before consolidation of federal student loans.
Borrowers who want to take advantage of this provision must consolidate their loans in the Department of Education’s Direct Loans Program before the 30th of June 2024.
Some who consolidate their loans on time will find they are much closer to their loan forgiveness date than they realized, and some will even receive a refund for months or years paid beyond when they should have received forgiveness.
Student Loan Tutor does what you wish your servicer did. We treat your loans as if they were ours. For a fee for service your Tutor will craft a custom repayment strategy that navigates the system to save you the most money allowable.
We then handle all of the paperwork and servicer follow up to ensure servicer errors are corrected and deadlines are met. As your financial situation evolves and new laws develop we'll make sure you're always on track for the greatest possible savings.
Once the loans are consolidated, there's no way to differentiate the loan sets. So if you graduated in 1995 with student loans and then went back to school in 2020 and acquired more loans — and then consolidate them before June 30, 2024 — the Department of Education will backdate all the loans to 1995, meaning even the new loan will be forgiven
The American Rescue Plan Act was implemented to make sure any canceled debt from Federal Student Loans is not subject to federal taxation and was put in place to offset the taxes that would be assessed on the $10-20K in forgiveness.
This has an added benefit for anyone that benefits from the One Time Account Adjustment and reaches a total of 20-25 total years of payments, will not have taxes due on the forgiven debt. Canceled federal student loan debt normally involves a tax implication.
But all canceled debt on federal student loans between December 2020 until December 31, 2025, will not be taxed.
Please note there may be state tax for borrowers in Minnesota, Arkansas, Indiana, Mississippi, North Carolina, and Wisconsin.
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If you have federal student loans older than 2013
If you had a break between undergraduate and graduate degrees
If you don’t already have a direct consolidated loan
If any of these applies to you, we highly recommend reaching out to schedule a free evaluation call to ensure you’re in the best scenario before the waiver ends.
You must consolidate different loan sets into a single direct loan
You must be enrolled in an active Income-Driven Repayment program or Public Service Loan Forgiveness program
You must submit your application before June 30, 2024
Don’t miss the potential impact of this one-time account adjustment. Get our assistance and schedule your free evaluation: