Some Student Loan Borrowers Paying Up to $12,000 More on Federal Tax Bills
Summary
A report from the nonprofit Protect Borrowers estimates that some people whose federal student loans are forgiven through income-driven repayment plans could owe thousands of dollars more in federal taxes once a temporary tax exemption expires. Its modeled scenarios estimate additional costs of about $6,000 to nearly $12,000, depending on income and family size.Key Facts
- The temporary federal exemption for many forms of canceled student debt covered discharges after December 31, 2020, and before January 1, 2026.
- The article says the exemption was not extended for income-driven repayment forgiveness beyond 2025.
- Income-driven repayment plans set monthly payments partly based on borrowers’ income and family size; eligible borrowers may receive remaining-balance forgiveness after 20 or 25 years of qualifying payments.
- Protect Borrowers estimates that 2 million to 3 million borrowers could become eligible for income-driven repayment cancellation over the coming decade and face possible federal tax bills.
- Nearly 13 million Americans are enrolled in income-driven repayment plans, according to the report.
- The report modeled scenarios using an average canceled balance of $49,697 and annual incomes of $40,000, $60,000, or $80,000.
- For a single borrower earning $60,000, the report estimates a $15,303 federal tax bill after modeled forgiveness, compared with $4,720 if the canceled debt were not taxed.
- At $80,000 in income, the report estimates additional costs ranging from $5,964 for a married borrower with two dependents to $11,641 for a single borrower without dependents.
Read the Full Article
This is a fact-based summary from The Actual News. Click below to read the complete story directly from the original source.
