While the American Rescue Plan does not contain student loan forgiveness it does allow temporary relief of taxes on student loans that are forgiven through 2025.
“If you get your loans forgiven through a certain loan forgiveness program, that would normally be treated as taxable income. Thanks to the American Rescue Plan through 2025 you won’t have to pay taxes on that forgiven amount,” said Loan Expert and Student Loan Hero Rebecca Safier.
Before with student loan forgiveness for example a teacher, they were taxed on the amount forgiven on the loan. Safier said this also applies to forgiveness on an income-driven repayment plan.
“Those would forgive your student loans, but you might also get hit with a tax bill because that amount that you get was treated as taxable income, but now through 2025 you won’t have to worry about a tax bill,” said Safier.
According to Lending Tree, approximately 600,000 borrowers in the state juggle an average balance of almost $34,000 in student loans with monthly payments averaging $246. If the proposed student loan forgiveness of $10,000 passes, 35-percent of borrowers in Louisiana would have their debt eliminated. Safier said since the pandemic student loan forgiveness has gained traction.
“I think it’s becoming more and more likely, but we will definitely have to wait and see,” said Safier.
Louisiana has the 18th highest student loan obligation in the nation with a cumulative of $21.7 billion in federal and private loans.
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