The current administration has forgiven more than 16 billion dollars in student loans. However, it turns out that there can be some unintended tax consequences as well.
According to Newsbreak, as proposed by President Biden, the latest bill will protect borrowers from what’s known as a tax bomb, which can dramatically increase the amount of taxes due or eliminate one’s refund altogether, causing additional debt.
An additional $10,000 in perceived income can result in a $50,000 cancellation of tax debt for a married couple earning $100,000 per year.
The Public Service Loan Forgiveness and Teacher Loan Forgiveness programs may not count towards federal income-based repayment plans until 2025, but this does not protect borrowers who use these programs.