FORT WAYNE, Ind. (WANE) — Wednesday, the $1.9 trillion stimulus package passed the House. Once President Joe Biden signs the package it will give the third round of stimulus checks to $1,400 direct payments for taxpayers’ earnings less than $75,000 per year. Also in the package, student loan tax relief that financial experts say is the first step in canceling student debt.
“It’s looking like a real possibility,” student loan expert Andrew Pentis said. “The fact that it’s even being discussed within the Senate and the House of Representatives and obviously by the President himself, that’s really progressed.”
Andrew Pentis is a certified student loan counselor and a senior writer for Student Loan Hero by Lending Tree. His job is to help students and their families the best ways to pay for college or repay their college debt.
Since March of 2020, federal student loans are in a forbearance period which allows those with loans to temporarily stop making payments. The forbearance is scheduled to end on October 1.
Under the newest stimulus legislation, student debt is forgiven after December 31, 2020, and before January 1, 2026, won’t be taxed. The exemption covers all government-held federal student loans and private student loans. Currently, federal laws treat any forgiven debt as taxable income.
“On the one hand many borrowers we speak to are really concerned but they are optimists about the potential help they will get whether it’s student loan forgiveness or this extension of the student loan repayment freeze,” Pentis said.
Nearly a million Hoosiers in the state leave college with student loan debt. When debt for those students is around $30 thousand dollars. In Allen County, the average student loan balance is above the state average at $36,034.
But before you stop paying your loans, experts say to plan like they won’t be forgiven.
“The best thing you can do during this current repayment freeze on student loans is to set a path forward for repayment,” Pentis said. “Figure out what’s the next best thing you can do for your loans whether that’s adjusting your repayment plan or asking your lender or loan services for some type of break.”
As of now, Biden is in support of $10,000 in student loan forgiveness but he is advocating to eliminate and cancel up to $50,000 per borrower. However, if Biden comes through with forgiving student loan debt, the borrower would have to have the balance at the time of cancelation.
For those looking to attend college in the fall, there are tips to help reduce the number of loans you would take out.
- Make a budget and stick with it
- Consider attending a two year college and then transferring credits later
- Apply for scholarships and state grants
- Get a summer job to reduce the cost you will have to borrow.
To learn more about Indiana student loan debt click here.