In the ever-changing world of student loans, staying on top of current events and student loan rates is critical. Below are this week’s student loan trends that could affect your loans — and your wallet.
2 current trends within student loans for the week of March 15, 2021
1. New stimulus bill makes student loan forgiveness tax-free
On March 11, President Biden signed the most recent COVID-19 relief bill — also called the American Rescue Plan — with a provision that makes all student loan forgiveness free from federal taxation through 2025.
This feature is part of the Student Loan Tax Relief Act, which was introduced as a provision to the American Rescue Plan by Democratic Sens. Elizabeth Warren and Bob Menendez on March 1. Progressive Democrats are hopeful that this will pave the way for mass student loan forgiveness in the near future, since the cancellation would now be tax-free.
How this affects student loans
Borrowers will no longer be responsible for paying federal taxes on the canceled balance of their student loans from 2021 to 2025. While some forms of student loan forgiveness are already tax-free, borrowers on income-driven repayment plans will no longer be subject to the potentially huge income tax that is charged at the end of the repayment period.
In order to qualify for the provision, borrowers must meet the requirements for forgiveness before Jan. 1, 2026, although it’s possible that this provision could be extended. Those who do qualify have the potential to save thousands of dollars.
2. New student loan scams circulate following stimulus bill
A Pittsburgh resident, Alaina Luft, was almost scammed into giving away her personal information under the guise of student loan forgiveness after news about the new stimulus bill broke. She’s warning others not to fall victim to scammers.
According to Luft, the scammers asked for her address, full name and Social Security number, claiming that they were going to forgive her student loan debt. The timing of the call led her to believe that the scammers were taking advantage of borrowers’ confusion over the contents of the new stimulus package.
While the stimulus bill does make student loan forgiveness tax-free, it does not cancel any debt. If someone calls you asking for personal information in exchange for student loan cancellation, hang up immediately.
How this affects student loans
With the recent passing of the stimulus bill, student loan scams are likely to be on the rise. Be on the lookout for scam calls and do not provide personal information to someone offering to cancel your student loan debt. If someone asks for information like your full name, address or Social Security number and has limited information about the details of your student loans, err on the side of caution. If you have any questions about your eligibility for income-driven repayment plans or student loan debt relief, contact your servicer directly.
Whether you’re new to student loans or well into repayment, it’s wise to stay informed about how your student loan rates could change. As 2021 continues, more opportunities for cheaper loans or loan forgiveness could open up; keep an eye on this page for the latest news.