On March 13, 2020, as a part of his emergency declaration for the coronavirus, Trump announced that he would be freezing/waiving student loan interest AND payments on student loans held by the federal . The waiver will run through January 31, 2021.
It’s important to notice that this is often pretty limited for borrowers. Loans held by the federal refers to “Direct” student loans and a few FFEL loans, not all FFEL loans, Perkins loans, or private loans. meaning if you’ve got FFEL loans or private loans, you do not qualify for this waiver of interest.
Also, any loans in collections will have collection activities suspended for the nonce .
Finally, if you are going for loan forgiveness programs like Public Service Loan Forgiveness, the payments “missed” during this pause will still count towards your eligible payments. This program is extremely helpful for borrowers trying to navigate the pandemic. By pausing student loan payments and interest, Trump has freed-up much needed spending in people’s budgets. Yes, there are other ways to assist , but this is often a simple solution to assist borrowers.
For borrowers losing work and income thanks to the coronavirus, it’s essential that you simply immediately update or apply for income-driven repayment with an income that reflects what you’re currently earning (especially if it’s $0). this is often the simplest course of action to not enter default your student loans after the Covid-19 student loan deferment ends.
Graduate Tuition Waivers Will Be Taxed
Graduate students usually get jobs at their university in exchange for a tuition waiver. These grads are usually managing on research, teaching in a classroom, and working to earn their graduate degree at the same time. The school will waive a part of their tuition, usually into the many thousands of dollars for their effort. The IRS does not view that tuition waiver as taxable income. For a graduate who makes a $25,000 tuition waiver and is in the 12% tax bracket, this would end in a tax bill of $3,000 dollars, while they may not even have an actual income. These are students working full time to get that waiver but may not have any actual income.
Private Student Loan Consolidation
Private student loan consolidation is available through various banks we work with to combine all your student loans into one new loan. Private student loan consolidation requires a good credit score and will often have better rates than the federal student loan.
American Opportunity Tax Credit Improved
The American Opportunity Tax Credit has been renewed by the Tax Cuts & Job Act. This is one of the major big deductions for student loans that allows up to a $2,500 deduction for fitted education costs for the first 4 years of higher education. The IRS reports show that 9m Americans used for this tax credit last year. The Tax Cuts & Jobs Act has raised the allowable deduction time to five years rather than four, except the fifth year is at a decreased $1,250 deduction. The deduction is measured as being 100% of the costs incurred up to the first $2,000, and then it’s 25% of the next $2,000 for a maximum of $2,500.
Lifetime Learning Credit Being Axed
This turns into a deduction of up to $2,000, which could be done for many years as you had education expenses. The big separation between the American Opportunity Tax Credit & the Lifetime Learning Credit is the latter allows for deductions based on vocational costs. By eliminating this tax credit it is harming those who want to develop their skill and gain valuable hands-on training in a field that may not be available at a traditional university
What should borrowers do, if Trump & DeVos would take Public Service Loan Forgiveness away?
For borrowers who are suited for PSLF, instantly guarantee that your loans are in the Direct Loan Program (consolidate your loans as important)
If you are in the Direct program (and suitable for PSLF) verify your employment status instantly.
These moves alone will not ensure that borrowers will get PSLF, but being in the program prior to any law reforms is expected to develop your chances of getting it considerably.