We hope your Valentine’s Day was filled with love and special moments. But if Cupid missed his mark this year, fear not—because we’ve got a different kind of affection coming your way. Say hello to our student loan Valentines, wrapped in the form of potential tax savings and additional relief courtesy of the Biden administration. Love may be complicated, but managing your student loan debt doesn’t have to be. Let’s dive into the latest updates and strategies to make your financial heart flutter.
Student Loan Tax Tips
Forest and Jenny, movies and popcorn, coffee and donuts. Some things just go together, and for those with student debt, you probably already have Student Loans and Taxes on that list. If you’re utilizing an Income Driven Repayment (IDR) plan or pursuing loan forgiveness, your tax returns have a huge impact on your payment amount and forgiveness options. The key to maximizing savings is all in the strategy. This is especially true for those who are married, as the optimal tax set up for you and your loan payment may not be best for your spouse. There are also variables like dependents and state-specific rules about community property that some of you will need to factor in. Don’t fret, however, because we’ve got your back. We’ve updated all of our tax tips and tricks from over the years and posted them here for your reading pleasure. While that’s a great place to start this tax season, we always recommend married couples consult with a CPA at least once to ensure you’ve covered all your bases to reduce your tax liability and maximize your savings.
What’s that, more tax tips?
Tax strategies are not limited to student loan borrowers! In fact, student loans are just the tip of the iceberg when it comes to limiting your tax exposure in both the short and long-term. Our friends at Larson Financial Group and Larson Tax Partners have helped physicians and other graduate health professionals with their financial and tax planning for many years. With major tax law changes in the last few years, we thought you might benefit from a recent article they published. And if you need a Financial Advisor and/or CPA who understands student loan dynamics, consider engaging them for any financial planning or tax advisory services.
Biden’s Plan C?
Let’s face it, you can’t make everyone happy. The relief efforts from the recent negotiated rulemaking sessions (which aren’t even finalized yet) were not enough to appease everyone seeking loan relief for borrowers. So, negotiators will be back at it on Feb 22nd to redefine the term “hardship” as it pertains to student loan policy. In plain English, they want to squeeze out more relief for borrowers. I suspect we’ll see another big student loan announcement coming from Biden in March.
I will add I find this a bit surprising. Negotiators must remember that SCOTUS is a huge presence lurking in the background of these negotiations. The conservative-leaning justices have already expressed their beliefs on the topic of loan forgiveness in a very clear way. If Biden is too generous with loan forgiveness, this whole thing could end up back in the hands of SCOTUS once again. Whatever relief is proposed must come across as reasonable and “justifiable” to those who want to limit debt relief, while also helpful and meaningful for those who seek loan relief. And I thought getting my two kids to agree on a movie was difficult! These negotiators have their hands full, and we’ll make sure to keep you posted!
Two more student loan companies bow out!
January saw two major loan companies exit the student loan business. Discover announced it would no longer offer student loan products, and Navient disclosed they were handing the remainder of their student loan portfolio over to Mohela for servicing. This may seem like a nothingburger at first, as neither of these companies are currently major servicers for Federal Direct loans. However, Navient used to be major Title IV servicer, and Discover was a heavy hitter in the private loan space.
I cringe a bit every time I hear of a private company getting out of the student loan business. The lack of competition concerns me more than anything. Like most things in our economy, we see a back and forth with private vs. Federal loan solutions. Federal loans dominated in the COVID years with the payment pause and 0% interest. And now they look pretty good in this high interest rate economy. But many borrowers were able to enjoy great refinancing solutions prior to COVID, and I suspect that cycle will come back around soon. Additionally, many new schools are popping up who don’t even offer Federal loans. And students at these institutions need a good selection of private lending options. So, I think a wide selection of private loan solutions and a strong Federal loan program are both important for borrowers.
With that, I’ll let you get back to your post-Valentine’s Day discounted candy shopping and trying to remember your Turbo tax login from last year. We hope your February is filled with chocolates, tax refunds, and student loan relief!
Brandon Barfield is the President and Co-Founder of Student Loan Professor, and is nationally known as student loan expert for graduate health professions. Since 2011, Brandon has given hundreds of loan repayment presentations for schools, hospitals, and medical conferences across the country. With his diverse background in financial aid, financial planning and student loan advisory, Brandon has a broad understanding of the intricacies surrounding student loans, loan repayment strategies, and how they should be considered when graduates make other financial decisions.
