COVID-19 Tax Relief for Student Loan Borrowers

Is there relief for student loan debt during COVID-19?

Individuals paying back federal student loan debt can defer payments through September 30, 2021. Interest payments are also suspended through September 30. Suspended payments will appear as regularly rescheduled payments by credit-reporting agencies.

These deferred payments don’t necessarily apply to private student loans. Check with your loan provider for information on relief for debt payment during the COVID-19 pandemic.

Also, due to the American Rescue Plan Act (ARP Act), any student loan forgiveness passed between Dec 31, 2020 and Jan 1, 2026 will be tax-free.

Do Federal Family Education Loans (FFEL Loans) qualify for aid?

Yes; as recently as March 30, 2021, emergency relief measures have been extended to FFEL loans in default. Any defaulted loan interest from your FFEL loan that’s accrued since March 13, 2020 will be removed. That means you can actually get a refund for any garnished wages or tax refunds seized since then, and you can get a refund for voluntary interest payments since that date, too.

If you defaulted on your privately-held FFEL Program loan since March 13, 2020, your loan will also be assigned to the US Education Department (ED) and returned to good standing, and your guaranty agency will request that your record of default be removed by credit bureaus. Best of all, you don’t have to take action--these changes are applied automatically.

Will my federal student loan debt be collected if I’ve defaulted?

Debt collection is suspended for borrowers who have defaulted on federal student loan debt through September 30, 2021. This means collectors will not take actions to collect payment, such as deducting from a tax refund or garnishing wages.

For those on a loan forgiveness program, suspended payments for these months will still count. An example of this would be the Public Service Loan Forgiveness (PSLF) program.

If you made any payments between March 13, 2020 and the September 30, 2021 end date, those can be refunded if you would like to receive that money back. You’ll need to contact your loan servicer to request a refund.

Can my employer help pay off my student loans?

Yes, employers can pay student loan payments, up to $5,250, tax-free through December 31, 2025.

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