Student Loan Relief Package

Loan Relief Photo by MD Duran on Unsplash

With 2020 being a pandemic year, the government understood that many individuals lost their jobs and couldn’t make payments to their loans. So they created a student loan relief package.

Last time we talked about the Low Down on Taxes and Student Loans, now we are going to talk more about the Student Loan Relief Package that was created to help out with repayment. As part of the relief package, all payments on student loans were suspended, collections deferred, as well as the interest stopped on those loans. If students were in a good financial position, then financial advisors encourage them to continue making payments, despite the suspension. This mindset provided students the option to pay down their loans with the funds going directly to the loan and not the interest. However, many people couldn’t afford to make extra payments. Currently, this relief suspension ends on September 30, 2021.

So what does that mean for many current and graduated students?

It means they need to be prepared for repayment options, possible collections, and debt consolidation. If you weren’t paying on your student loan, and they were in default, then the government can take any additional federal money you receive. A treasury offset is a huge possibility for many. A treasury offset means the government can garnish an individual’s tax return or any federal money in partial or full until the debt is paid. We previously talked about the child tax credit, where many families will be receiving extra funds each month. According to the treasury offset program, the child tax credit will not be used to pay off the government or state debts. However, if tax filing season comes around, and there are remaining funds from the child tax credit, then the government can take that money for debts. 

When the student loan relief package ends there are many repayment and forbearance plans based on income and other factors. We can help look at these options and provide the best financial advice.

Have any questions, give us a call here at Metro Tax & Financial Services.
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