The American Rescue Plan & Student Loans | Everything you need to know!

Last Wednesday we saw the house pass one of the largest economic relief bills in American history: The American Rescue Plan (ARP). Some of the biggest parts of the bill include $1400 direct payments to taxpayers who earned less than $75,000 per year, millions for schools and vaccine distribution, along with benefits for student loan borrowers. This article will look into the changes with student loans as well as the changes that some anticipated but did not occur.

The first significant thing to note with the student loan changes is that there is no new student loan forgiveness. This is not a total surprise as President Biden did not call for student loan forgiveness, there was speculation that it might be added to the America Rescue Plan but this is not the case. Instead, the Biden Administration has stated that student loan forgiveness legislation will be pushed through congress in the coming months.

A potentially huge provision for student loan borrowers that was included in the American Rescue Plan is that all student loan forgiveness is tax-exempt through January 1, 2026. This most directly helps individuals who are on an income-driven repayment plan for their student loans. Most notably this is beneficial to them in that they won’t have to pay taxes for their income and their student loans.

Another benefit for student loan borrowers is the tax-free stimulus benefits that are a part of the ARP. The $1400 direct payments, extended federal unemployment benefits, along with expanded child tax credit will all help student loan borrowers. Because most of these benefits are not considered taxable income, they will not affect student loan borrowers who are on an income-driven repayment plan.

Additionally, another benefit for students is the $170 billion dollars in stimulus towards US schools. From the $170 billion dollars, $35 billion of that is dedicated to American public universities as well as HBCUs and MSIs (Minority Serving Institutions). It is reasonable that some of the money these schools receive will go towards student aid.

Lastly, small business relief was a part of the ARP and there is a recent easing of restrictions that now benefits those that have defaulted on student loans. There are $7.25 billion dollars in additional funding dedicated to the Paycheck Protection Program to help small businesses. Due to restrictions being eased by the new administration, business owners with defaulted or delinquent student loans may now obtain PPP relief.

If you are interested to learn more about financial planning. Visit our website at www.WealthManagementForward.com