It’s time for another student loan update! Let’s look at the cycle between August and September. Plus, I’m going to share with everyone 2 big student loan news that I believe is very crucial to those who plan to get their balances cancelled.
EdFinancial
This update is going to be short due to the fact that I’ve only made 1 payment to my balance since my last update. For my previous update, I had a balance of $748.91 on EdFinancial. With only 1 payment of $225 made to that account, my balance had dropped to $523.91. And that’s pretty much it!
Check my last update and my new payoff strategy! But basically, I’ve decided to stop paying and wait for more updates about the cancellation. Once the cancellation happens, I could get up to $20,000 in forgiveness due to me being a Pell grant recipient back in the day, and being under their income limitations stated in the cancellation guidelines.
Since I’ve stopped paying my student loans, making any updates regarding my student loan at the moment is pointless. So, this will be the last update until the next one, where I fully clear my balance because of the forgiveness.
I still encourage you to follow along, so you’ll know when that will happen and what are the steps I took to actually pay off my student loans BEFORE the student loan forgiveness announcement. I continued paying my student loans throughout the pandemic despite not getting any guarantees for a cancellation. And the lessons I’ve learned throughout that journey might be helpful to those who will not be included in Biden’s student loan forgiveness.
So, let’s go straight to these 2 big news that I believe is so important for those of us who plan to cancel their student loans. I say “plan” because this forgiveness isn’t automatic. Being eligible for it is automatic, but getting our balance forgiven currently requires us to fill out an application coming early October.
Student Loan News
AUTOMATIC REFUNDS
The first news has something to do with one strategy that many borrowers have thought of doing since the announcement was made. This was the strategy I’ve also followed and this news coming meant such a big deal to me, and I hope it will be for you too!
This update didn’t come as an official announcement or anything like that, but as a quiet addition to the main debt relief announcement.
Under the Frequently Asked Questions about refund eligibility, borrowers are eligible for a refund and it will be made automatically under certain conditions.
So there you go, automatic refunds for those who qualify is a good way for us borrowers to really maximize the forgiveness.
RESOURCE ► https://studentaid.gov/debt-relief-announcement/one-time-cancellation
TAX IMPLICATIONS
Another big news borrowers need to know about, especially with getting forgiveness like this is its tax implications. Now, I’m not a tax specialist, so make sure to consult one if you want more information about it.
But from what I’ve read, Biden’s student loan forgiveness IS NOT taxable in the Federal level. But State and Local taxes may vary.
This is big because you could get slapped with a tax bill on this and you’ve already used your refund for something else. If you’re not getting any eligible refunds on your student loans, that tax bill is something you’ll have to consider come tax season.
I live in California and there are various reports on this subject. Some say that the state will tax it, some say the state won’t.
Regardless of that, I’m going to plan ahead. I’m thinking of saving at least 40% of the refund I’ll get for tax purposes. This is just to give myself a buffer in case things don’t go as I had planned.
I highly recommend you look up or call someone regarding state and local taxes and how your student loan forgiveness could affect your taxes.