A small but significant provision in the stimulus package signed by President Biden will temporarily exclude forgiven student loans from taxes, a move that could make it easier for Biden to forgive some student debts.
[Stay on top of all the new stimulus bill developments – Sign up for the Kiplinger Today E-Newsletter (opens in new tab). It's FREE!]
Student Loan Forgiveness Won’t Increase Your Tax Bill
President Biden campaigned on a pledge to forgive $10,000 in student loan debt, but it was unclear whether the forgiven loans would be taxable. Ordinarily, with some exceptions, if a student loan is canceled, forgiven, or discharged for less than the amount you owe, the amount of the canceled debt is treated as taxable income in the year the cancellation occurs.
Federal student loan borrowers in income-driven repayment plans are eligible to have the balance of their loans forgiven after making payments for 20 to 25 years.
Tax Relief for Cancelled Student Loan Debt Also Includes Private Student Loans
The tax relief isn’t limited to federal student loans. If your private lender forgives some or all your student loan debt, you won’t have to pay taxes on those forgiven loans, either.
The Tax Relief on Cancelled Student Loan Debt is Temporary
Unless Congress extends it, the tax relief on student loan debt cancellation expires at the end of 2025.
Emma Patch joined Kiplinger in 2020. She previously interned for Kiplinger's Retirement Report and before that, for a boutique investment firm in New York City. She served as editor-at-large and features editor for Middlebury College's student newspaper, The Campus. She specializes in travel, student debt and a number of other personal finance topics. Born in London, Emma grew up in Connecticut and now lives in Washington, D.C.
The Divorce Gap: Unique Retirement Issues for Women Over 50
The shocking loss of income and retirement savings that disproportionately affect divorced women is a big challenge – especially for those over 50.
By Stacy Francis, CFP®, CDFA®, CES™ • Published
4 Steps for Managing Income Withdrawals in Retirement
Investing for Income How Roth IRA conversions can help you minimize your taxes in retirement, extending the life of your savings.
By Kyle Hammerschmidt, Investment Adviser • Published
Student Loan Refunds Are Real, But You Might Not Be Eligible
student loans Since President Biden announced broad student loan debt relief, there has been a lot of talk about student loan refunds, which surprisingly have been around for a little while.
By Kelley R. Taylor • Last updated
Fed Signals That More Interest Rate Hikes are Coming
interest rates The stock market may have hoped that the Federal Reserve will soon slow down its pace of increasing interest rates, but the Fed chair had a different message for the markets.
By David Payne • Published
Biden's Student Loan Forgiveness: What it Means for You
student loans Biden’s long awaited announcement on whether or not his administration will forgive a portion of federal student loans is in. Here’s what it means for you.
By Rivan V. Stinson • Last updated
How Congress Might Ease the Pilot Shortage
travel Congress is debating how to fix the current pilot shortage, and one idea revolves around retirement age.
By Sean Lengell • Published
COVID’s Financial Toll Isn’t What You Think
Coronavirus and Your Money From a grandma’s retirement in ruins to a troubled teen inheriting too soon, COVID’s effects will last for generations. While nothing can prepare you for the pain of losing someone you love, a financial planner explains how preparation can lessen the financial devastation.
By Erin Wood, CFP®, CRPC®, FBSⓇ • Published
Stimulus Check Money is Still Available…But You Must File a Tax Return to Get It
Tax Breaks If you didn't get a third stimulus check last year – or you didn't get the full amount – you may be able to cash in when you file your tax return this year.
By Rocky Mengle • Last updated
Why This Tax Filing Season Could Be Ugly
Coronavirus and Your Money National Taxpayer Advocate Erin M. Collins warns the agency will continue to struggle with tight budgets and backlogs. Her advice: File electronically!
By Sandra Block • Published
Final Child Tax Credit Payment Opt-Out Deadline is November 29
Tax Breaks The due date for opting out of the December 15 monthly child credit payments is almost here. Missing the deadline could cost you in the long run.
By Rocky Mengle • Published