Student debt relief & taxes

Submitted by AJmald t3_z8dqra in personalfinance

I was one of the few (I think) that was able to get a refund for my paid off student debt. Loans were paid off Oct '20 and was able to apply for debt refund for loan payments paid between March '20 till Oct when it was paid off. However, now that the Biden administration and student loan forgiveness is at war with everyone, I am assuming this money will come straight out of next yrs taxes which I will have to pay right back.

Is there anything I can do about this? What can I anticipate? Would anyone know how to prepare for this?

Thanks!

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themagicalpanda t1_iyb4nkz wrote

refunds for loan payments made during the covid forebearance was possible because of the CARES act. the student loan forgiveness that is currently being battled in the courts is completely separate from the CARES act and has no affect on it.

you do not have to worry about taxes for refunds on loan payments via the CARES act.

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AJmald OP t1_iyb5f23 wrote

Thank you for this!

So essentially my loan balance should be cleared even in the student loan forgiveness ends up being denied?

My worry is that I still show a balance and am wondering what to do.

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themagicalpanda t1_iyb5y2b wrote

well if you got a refund for payments that you made, then your loan balance goes back to what it was prior to those payments.

so say you had 10k in loans, you paid 4k which brings your balance down to 6k. you then requested a 4k refund as those payments were made during the CARES act, you still owe 10k on your loans. this is obviously not taken into accounts if you made no other payments during the forebearance. this is for illustrative purposes.

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AJmald OP t1_iyb6mr4 wrote

So I now have student loans that I paid off...that's great :/

Is there any possibility that these loans would be cleared?

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themagicalpanda t1_iyb702n wrote

technically they arent paid off since you requested a refund.

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AJmald OP t1_iyb870r wrote

I'm guessing this is a hard NO then...

And now my loan provider wins by collecting more interests on a new balance that magically appeared with the rise and fall of a relief plan.

Anyone know if this was a sly trick by the student loan lenders?

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themagicalpanda t1_iyb8nkd wrote

interest is still being deferred until june 2023

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AJmald OP t1_iyb941z wrote

Thanks for the info. It's just an inconvenience that this is how it turned out.

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Werewolfdad t1_iyb3plx wrote

I’m not sure what you’re asking.

The student loan payment refund and taxes are unrelated

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AJmald OP t1_iyb4tw2 wrote

Can anyone confirm this? I would imagine this is federal aid (similar to covid stimulus checks) maybe I'm just thinking about this in the wrong context but I am wondering what would happen if the relief does not go through? Essentially the balance on my loan had to be reinstated to apply for this relief. So would my student loans just start again come next yr?

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Werewolfdad t1_iyb56cp wrote

> I would imagine this is federal aid

Its not. You're student loan balance is just back to what it was.

>but I am wondering what would happen if the relief does not go through?

You pay back your student loans like your original plan was.

>So would my student loans just start again come next yr?

yes

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