Updated March 16, 2021
The American Rescue Plan includes a temporary provision that provides tax-free treatment of forgiven debt for qualified loans discharged between December 31, 2020 to January 1, 2026. Qualified loans generally include those guaranteed by the federal government. Regulations from the IRS will be forthcoming and will provide specific clarification on how this provision will impact veterinary borrowers, especially those in income-based repayment (IBR) programs. This provision would also apply to debt forgiveness through future legislation, administration action, or action by educational institutions within the specified time frame.
Currently, student loan repayment requirements and interest accrual on federal student loans have been suspended until September 30, 2021, due to COVID-19. The federal government's COVID-19 relief measures also include other supports for higher education.
Here's what you should know:
- Automatic interest suspension: Interest on federal loans is automatically suspended from March 13, 2020, until at least September 30, 2021. Interest rates are automatically set to 0% on federal student loans. The DOE guidance notes that some loans are owned by institutions or campuses, and these are not eligible.
- Suspension of federal student loan payments. Payments required on qualified student loans will automatically stop, and there is currently no specified end date. Borrowers do not need to take any action.
- Incentive for employers to provide student loan support: The COVID-19 relief allows employer contributions to an employee's educational loans to be considered tax-free until December 31, 2025. The benefit is capped at $5,250 a year.
- Funding for higher education and emergency student aid: The COVID-19 relief legislation created a Higher Education Emergency Relief Fund, which provides funding to be provided directly to institutions to defray expenses, including lost revenue and technology costs associated with distance learning. Veterinary students should contact their financial aid office to explore the emergency aid opportunity.
The Department of Education is expected to update its COVID-19 resource page as information becomes available.
Veterinarians and veterinary students are encouraged to contact their loan servicers to discuss the impact of these changes on their specific loan portfolio and to ensure their contact information is up to date. If you are not sure who your loan servicer is, you can find out here.