President Biden Signs Executive Order Extending Student Loan Payment Freeze
The latest statistics suggest that 45 million people in the United States owe approximately $1.6 trillion in student loan debt. In one of his first actions as president, Joe Biden directed the Department of Education to extend the nearly yearlong pause on student loan payments through September 30.
Since March, all federal student loan payments have been suspended as part of the federal government's COVID-19 response. An extension of the grace period was included in early drafts of December's stimulus package but was cut in final negotiations. Prior to Biden's executive action, payments were scheduled to resume at the end of January. The September extension is projected to be the last one as experts believe the coronavirus pandemic will be curbed by late September with most taxpayers returning to normalcy.
On average, student loan borrowers owe between $200 and $299 every month. Unfortunately, according to the U.S Department of Education, most people cannot afford the payments in a COVID world as prior to the freeze, one in five borrowers were in default. The Department of Education predicts chaos for when repayments are set to begin as the number of borrowers that are unable to pay is likely continued to grow.
It should be noted, that the freeze only affects public student loans, not private student loans. For these taxpayers, payments must continue to be made monthly. However, these taxpayers should also take note of the student loan interest deduction available to most borrowers. The deduction allows a taxpayer to deduct up to $2,500 of the interest that was paid on a higher education loan. All college students should utilize other higher education tax credits such as the American Opportunity Tax Credit and the Lifetime Learning Credit. The professionals at The Center are more than knowledgeable in available deductions, tax credits, and other methods to lower your tax burden, for more information, please contact us at (618) 997-3436.