Latest news with #U.S.DepartmentofEducation
CNBC
4 hours ago
- Business
- CNBC
Student loan forgiveness may soon be taxed again — here's how much borrowers could owe
President Donald Trump's "big beautiful bill," which Congress passed earlier this month, has tax implications for people who receive student loan forgiveness. Here's what borrowers expecting the loan relief should know. The American Rescue Plan Act of 2021 made student loan forgiveness tax-free at the federal level through the end of 2025. Trump's "big beautiful bill," while making other specific kinds of student loan relief tax-free, did not extend or make permanent that broader provision. In theory, lawmakers could move to protect the relief from taxes before the end of the year, but borrowers shouldn't count on it, experts say. "Republicans do not like [student loan] forgiveness, and are unlikely to make it tax-free," said higher education expert Mark Kantrowitz. Without action from Congress, student loan borrowers who get their debt forgiven under the U.S. Department of Education's income-driven repayment plans, or IDRs, would face a federal tax bill again starting in 2026. (IDR plans cap people's monthly payments at a share of their discretionary income and cancel any remaining debt after a certain period, typically 20 years or 25 years.) That tax bill at the end of repayment could be significant — the IRS typically counts forgiven debt as income, Kantrowitz said. More from Personal Finance:Trump's 'big beautiful bill' slashes CFPB funding78% say Trump's tariffs will make it harder to deal with debtTax changes under Trump's 'big beautiful bill' — in one chart The average loan balance for borrowers enrolled in an IDR plan is around $57,000, Kantrowitz said. For those in the 22% tax bracket, having that amount wiped out would trigger a tax burden of over $12,000, Kantrowitz estimates. Lower earners, or those in the 12% tax bracket, would still owe around $7,000. Borrowers could also be on the hook for state taxes following their student loan forgiveness. (Many states mirror the federal government's tax policy on student loans, meaning more states may start to levy the aid next year as well, experts say.) Consumer advocates have long criticized the practice of taxing borrowers on their student loan forgiveness. They say that borrowers who enroll in IDR plans tend to struggle to keep up with their bills, and that the government's policy often wipes away one's student debt just to saddle them with a tax debt. "Forcing borrowers to remain drowning in debt is cruel," said Persis Yu, deputy executive director and managing counsel at the Student Borrower Protection Center. The "big beautiful bill" did permanently make it so that student loan forgiveness in cases of death or disability are tax-free, Kantrowitz said. Employees who receive help from their company paying down their debt also won't owe any taxes in the future on that relief, due to the legislation, he added. The current allowable annual tax-free contribution from firms is $5,250, but that amount will increase with inflation. Public Service Loan Forgiveness has always been, and will continue to be, tax-free on the federal level, under its terms. (It's possible your state will tax you on the aid). That program allows government and certain non-profit workers to get their debt excused after a decade of payments.
Miami Herald
2 days ago
- Politics
- Miami Herald
Florida PTA sues for frozen federal education funds. What that means for Miami-Dade
School districts across the country have filed different lawsuits to try to get the U.S. Department of Education to release funds that had been frozen by the Trump administration. On Monday, Florida finally became a party to one of the cases. The Florida Parent Teacher Association and the Florida Education Association joined a national lawsuit to reverse the U.S. Department of Education's decision to block $396 million in federal education funding. Miami-Dade County Public Schools, the state's largest district, currently has about $35 million in federal funds frozen. Broward County has about $30 million on hold. The freeze had districts scrambling to try to find a path forward just weeks before the start of the school year. Last week in a committee meeting, Miami-Dade schools superintendent Jose L. Dotres told board members that he had no plans for the school district to join as a party to a lawsuit, preferring instead to lobby lawmakers in Tallahassee and Washington, D.C. In a school board meeting on Wednesday, board member Luisa Santos expressed her thanks to the Florida Parent Teacher Association for their initiative. The lawsuit, filed in Rhode Island federal court, seeks a preliminary injunction to immediately reinstate the funds, which had previously been approved by Congress. The case was brought by several school districts, parent teacher organizations and teacher's unions from Rhode Island, Texas, Ohio, Illinois, California and Pennsylvania along with the two Florida organizations. Programs at risk of losing funding include teacher training, English language learner (ELL) services, migrant education, after-school tutoring partnerships with groups like the Boys & Girls Clubs, and food assistance initiatives that help feed low-income students and families. During Wednesday's school board meeting in Miami-Dade, Santos said the frozen funds pay for at least 1,000 employee positions within the district and affect the district's almost 83,000 English language learners. Superintendent José Dotres told the board he is working on creating clearer documentation to show how each federal grant is used, in an effort to raise awareness about the importance of the funding. Many of these enrichment dollars are used to support bilingual education and help students understand emerging technologies such as artificial intelligence. Read more: Miami-Dade schools superintendent presses lawmakers for $35M in frozen funds Board member Roberto Alonso emphasized the importance of federally funded teacher preparation and training programs. Jude Bruno, president-elect of the Florida PTA, told the Herald that the organization moved forward with the lawsuit because there is currently no legislative session underway to address the issue. 'With the start of school just days away, we thought this was our only option,' Bruno said. He added that he's concerned about a shortfall in personnel and school districts' ability to purchase new textbooks and supplies for the upcoming school year. Other affected districts include Orange County ($22 million), Leon County ($12.5 million), and Pinellas County ($9 million). 'Districts are being forced to make last-minute decisions that threaten student support, staffing, and stability. These are not abstract concerns. The impact will be felt immediately in classrooms, particularly in schools that serve the highest-need communities,' said Maxine Ann-Marie Lewers, president of the Florida PTA, in a statement.
CNBC
2 days ago
- Business
- CNBC
Student loan forgiveness paused under a popular repayment plan. Here's what to know
The U.S. Department of Education has temporarily paused debt forgiveness under a popular repayment plan for student loan borrowers. In an FAQ on the department states that loan forgiveness for borrowers enrolled in the Income-Based Repayment plan is on hold while it responds to court orders. IBR is one of the department's income-driven repayment plans, also called IDRs. Congress created the first IDR plans back in the 1990s to make student loan borrowers' bills more affordable. The plans cap people's monthly payments at a share of their discretionary income and cancel any remaining debt after a certain period, typically 20 years or 25 years. More from Personal Finance:Trump's 'big beautiful bill' slashes CFPB funding78% say Trump's tariffs will make it harder to deal with debtTax changes under Trump's 'big beautiful bill' — in one chart IBR will be one of only a few repayment options left to millions of borrowers, after recent court actions and the passage by Congress of President Donald Trump's "big beautiful bill." That legislation phases out several income-driven repayment plans. Here's what to know about the delay in debt relief for IBR borrowers. Student loan forgiveness is paused for IBR borrowers because of court actions involving the Biden-administration-era SAVE, or Saving on a Valuable Education, plan, the department said. Former President Joe Biden touted SAVE as the most affordable income-driven repayment plan in history, but its generous terms soon became a point of controversy for Republicans. In February, the 8th U.S. Circuit Court of Appeals sided with GOP-led states that sued to block the SAVE plan rule, which had sweeping impacts on student loan repayment. For example, under the rule, certain periods during which borrowers postponed their payments would count toward their forgiveness timeline. With SAVE blocked, borrowers no longer get credit during those forbearances. "So the U.S. Department of Education will need to make changes to the qualifying payment counts," said higher education expert Mark Kantrowitz. Ellen Keast, deputy press secretary at the Education Dept., said IBR discharges would resume "as soon as the Department is able to establish the correct payment count." The hold on IBR discharges shouldn't impact student loan borrowers who are still years away from debt forgiveness, experts said. However, they may not receive credit for any periods during which their bills were paused. If you're pursuing debt erasure under IBR, your payments made under the plan (or another income-driven repayment plan) will still be bringing you closer to debt cancellation, as long as you are enrolled in IBR when you become entitled to that relief. If you expected your debt to be forgiven shortly, you should continue making payments, Kantrowitz said. You don't want to be flagged as late. "Any excess payments will be refunded," Kantrowitz said.
Axios
3 days ago
- Politics
- Axios
Trump administration releases portion of frozen North Carolina education funding
The U.S. Department of Education has released a portion of North Carolina's $165 million in education funding frozen by the Trump administration, the state's education department announced Monday night. Why it matters: The nearly $36 million in funding released will allow North Carolina's after-school and summer programs to continue operating. The programs, which served more than 10,000 K-12 students last year, "provide critical academic support and safe environments for students, particularly those in high-poverty areas," North Carolina's Department of Public Instruction said in a statement. Catch up quick: North Carolina Attorney General Jeff Jackson is one of a dozen attorneys general nationwide who are suing the U.S. Department of Education for withholding more than $6 billion in education funding nationwide. Those funds were expected to be accessible July 1. North Carolina's portion of that — more than $165 million — made up more than 10% of the state's federal education funding. The freeze comes amid what the Trump administration's Office of Management and Budget called an "ongoing programmatic review" and pointed to initial findings that they said "show that many of these grant programs have been grossly misused to subsidize a radical leftwing agenda," Axios' Avery Lotz reported earlier this month. Driving the news: Nearly 30 statewide full-time jobs would have been in jeopardy had the federal government not released $36 million as part of the 21st Century Community Learning Centers program, which supports academic enrichment during non-school hours, per data released by North Carolina's Department of Justice. Wake, Durham and Charlotte-Mecklenburg school districts had not been awarded any funding under that program, according to the data. State of play: Around $130 million in K-12 education funding remains frozen and under review, North Carolina's education department said. More than 900 jobs remain at risk. Those funds come from four programs, which support migrant children, help students learn English, ensure the "quality and effectiveness of educators," and improve school conditions and the use of technology to improve academic achievement, according to the Learning Policy Institute, which conducts research to improve education policies.
Axios
3 days ago
- Politics
- Axios
North Carolina sues over withheld education funding
North Carolina Attorney General Jeff Jackson said Monday he is suing the U.S. Department of Education for withholding more than $165 million for K-12 funding in the state. Jackson is joining attorneys general in more than a dozen states who are suing the Trump administration's decision to withhold more than $6 billion in education funding nationwide. Why it matters: At a press conference, Jackson said the withheld funds will affect mental health services, after-school programs and English-learning programs across the state, and potentially cut 1,000 jobs. These cuts affect rural school districts more on a per-pupil basis, Jackson added, specifically noting Graham, Ashe and Polk counties. Zoom in: The withheld funds include money for programs for migrant children, English-language proficiency and some after-school programs, according to the Learning Policy Institute, which conducts research to improve education policies. What they're saying: The Department of Education previously referred Axios' questions on the withheld funds to the Office of Management and Budget. An OMB spokesperson said no decisions have been made amid "an ongoing programmatic review of education funding." The spokesperson pointed to initial findings that they said "show that many of these grant programs have been grossly misused to subsidize a radical leftwing agenda." Jackson said in a statement that the Education Department was not following the Constitution. "It's unlawful and unconstitutional for the Department of Education to withhold money that Congress has appropriated," he said. "I'm going to court to get this money for our students, our schools, and North Carolina families."
