STUDENT LOAN FORGIVENESS CHANGES UNDER PRESIDENT TRUMP:
DO YOU QUALIFY?
President Trump’s Tax Cuts and Jobs Act implemented a number of changes, including alterations that affect student loan borrowers.
Here’s what you need to know about how the new act modifies student loan discharge:
What Changes were made?
- As of January 1st, 2018, Death and Disability student loan discharges are now tax-free. This new tax law completely changes the landscape and affects individuals and families dealing with a death or permanent disability.
Who does this affect and what are the benefits who those who qualify?
Disabled Student Loan Borrowers
- Disabled student loan borrowers often receive federal and state benefits that are income-driven.
Let’s say a disabled borrowers’ loan is $350,000. Before, if this disabled borrower’s loan was discharged due to disability, the terms of the loan changed and would be considered taxable income. Based on how large of a loan this is, it often disqualified disabled student loan borrowers from receiving aid, negatively impacting their well-being.
- That the tax-free change has been put into action, disabled student loan borrowers do not have to worry about the terms of their loan changing.
No terrifying tax bills due at the end of the year = relief
Parent PLUS Student Loan Borrowers Affected By Death
- Parent’s dealing with the heartbreak of losing a child would also have to deal with the financial stress of continuing to pay up on Parent PLUS student loans.Death did not offer any student loan forgiveness and Parent Plus borrowers still had to pay the taxable income on these PLUS student loans.
- Parent PLUS loans are discharged upon death and no longer need to be paid off.
This change is a win for borrowers. While it might not effect many, it at least takes the burden and risk off some borrowers. The new Tax Cuts and Jobs Act legislation has changed and revised several parts of the tax code. Parts of it that are still being finalized today. If you have any questions please don’t hesitate to contact us!
-Keith Boyer, CPA