Editor's Note: This post was updated to reflect President Biden enacting federal student loan forgiveness on Aug. 24, 2022.
The Laurel Road Student Loan is no longer available to new applicants.
Since President Joe Biden's first day in office, federal student loan borrowers have been eager to see if and when he will follow through on his campaign promise to cancel $10,000 of loans per borrower as part of his Emergency Action Plan amid the ongoing pandemic. On Aug. 24, 2022, he enacted federal student loan forgiveness for up to $20,000 per borrower.
So how does this affect your taxes come next year?
Below, we break down the latest on President Biden's sweeping student loan forgiveness, plus more on the implications of student loan forgiveness on borrowers' taxes.
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Where Biden's student loan forgiveness currently stands
On Aug. 24, 2022, President Biden announced widespread federal student loan forgiveness for millions of borrowers. Eligible borrowers fall below the income levels of $125,000 for individuals and $250,000 for families and can receive the following:
- Up to $20,000 of student debt cancellation for Pell grant recipients
- Up to $10,000 of student debt cancellation for most other non-Pell borrowers
This also includes extended forbearance (i.e. the repayment freeze) until the end of 2022, so those who still have federal student loan payments after accounting for the forgiveness will not have to make payments until the beginning of 2023.
This move also includes a revamp of the income-driven repayment plan system for undergraduate loans. Monthly payments are being reduced from 10% of monthly income to 5%, along with other tweaks that will lower payments for those on income-driven repayment plans.
However, forgiveness and forbearance doesn't affect any private student loans that are outstanding. If you do have a private student loans, consider refinancing with a lender like SoFi or Laurel Road to get a lower interest rate and better payment terms.
- 0.25% autopay interest rate discount
- 0.125% SoFi Plus discount
- No origination fees, no late fees and no insufficient fund fees
- Private loans, which means you lose federal loan benefits
- $5,000 minimum loan amount
Fixed rates range from 3.99% APR to 9.99% APR with 0.25% autopay discount and 0.125% SoFi Plus discount. Variable rates range from 5.74% APR to 9.99% APR with 0.25% autopay discount and 0.125% SoFi Plus discount. Unless required to be lower to comply with applicable law, Variable Interest rates will never exceed 13.95% (the maximum rate for these loans). SoFi rate ranges are current as of 5/6/26 and are subject to change at any time. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. You may pay more interest over the life of the loan if you refinance with an extended term. Autopay Discount: The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly payments as outlined in your loan agreement by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. When the autopay interest rate deduction is added or removed, the next time the loan is re-amortized (quarterly for fixed rate loans; monthly for variable rate loans),the principal balance of your loan will be spread over the remaining loan term, and your monthly payment amount will change. This benefit is suspended during periods of deferment, grace period, or forbearance. Autopay is not required to receive a loan from SoFi. Member Rate Discount: To be eligible for an additional 0.125% interest rate reduction on a Student Loan Refinancing, you must, within 31 days of loan funding, either (1) be a SoFi Plus subscriber, (2) receive an Eligible Direct Deposit into a SoFi Checking or Savings account, or (3) receive at least $5,000 in Qualifying Deposits into a SoFi Checking or Savings account. You must continue to meet at least one of the above eligibility criteria every 31 days to maintain the discount. See the SoFi Plus terms for details on SoFi Plus subscription. For more details on Eligible Direct Deposit or Qualifying Deposits, please see https://www.sofi.com/legal/banking-rate-sheet. Once you become eligible during the initial period, the discount will be removed or reinstated depending on whether the criteria have been met. Each time your loan is re-amortized, your monthly payment amount will change based upon the interest rate that was in place. SoFi reserves the right to modify or terminate this offer at any time for unenrolled participants. You are not required to meet these criteria to be approved for a loan. SoFi Plus Discount: To be eligible to receive an additional (0.125%) interest rate reduction on your Student Loan Refinancing (your "Loan") for enrolling in SoFi Plus, you must enroll in SoFi Plus within 30 days of Loan funding, either by receiving an Eligible Direct Deposit to your SoFi Checking and Savings account, or by paying the SoFi Plus Subscription Fee. Once eligible, you will receive this discount during periods in which you have received Eligible Direct Deposit to your SoFi Checking and Savings Account, or during periods in which SoFi successfully receives payment of the SoFi Plus Subscription Fee. This discount lowers your interest rate but does not change the amount of your regular monthly payment. This discount will be removed during periods in which SoFi determines you have turned off Eligible Direct Deposit to your Checking and Savings account or in which you have not paid the SoFi Plus Subscription Fee. SoFi reserves the right to change or terminate this interest rate reduction offer for unenrolled participants at any time without notice. You are not required to enroll in Eligible Direct Deposit or to pay the SoFi Plus Subscription Fee to be eligible for Loan approval. See what qualifies as an Eligible Direct Deposit here: www.sofi.com/terms-of-use/#slr-discount
Eligible Direct Deposit means regularly recurring deposit of regular income to an Automated Clearing House ("ACH") Network during a 30-Day Evaluation Period (as defined below). Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not generate payments that are detectable by our system. So qualifying direct deposits are those where the student loan refinance discount rate is applied automatically for each month where you have an Eligible Direct Deposit of at least $1,000 per 30-day Evaluation Period. Eligible Direct Deposit does not include transfers between accounts you own, refunds, rebates, reimbursements, stimulus payments, merchant refunds, or payments from person-to-person payment services (such as Venmo). To qualify for the 0.25% interest rate reduction, the direct deposit must be recurring and paid directly into a SoFi Checking or Savings account. For the avoidance of doubt, deposits made via check, cash, or mobile check deposit are not eligible. Direct Deposit eligibility is determined by SoFi's sole discretion. The 30-Day Evaluation Period refers to the period starting on the "Start Date" and ending on the "End Date" set forth on the App Details page of your account, which comprises a period of 30 calendar days (the "30-Day Evaluation Period"). You can access the APV Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking → Checking → APV or (ii) Banking → Checking → APV Details. If you do not qualify for the discount during the initial 30-Day Evaluation Period, your loan will not be eligible for a discount unless you re-qualify in a later 30-Day Evaluation Period. If you qualify during the 30-Day Evaluation Period, the discount will be applied on a going-forward basis only. SoFi Bank determines eligibility. If you have a joint account, each account holder receives Eligible Direct Deposits into your SoFi Checking and Savings account, then you will be eligible for all SoFi Plus benefits, including on accounts you hold in your own name. Federal Loan Disclosure: Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELiIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligiblity. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
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What Biden's student loan forgiveness would mean for borrowers' taxes
In March 2021, Biden signed the American Rescue Plan into law, which included a provision that all student loan forgiveness is tax-free.
While there may not be any applicable federal income taxes to student debt wiped away from forgiveness, there is still the potential to owe income tax to your state based on your forgiven balance. If that is the case, you may consider putting some money away for tax season.
But in other cases, forgiven debt is typically taxable.
"Generally, when a debt is forgiven, student loans or otherwise, the amount forgiven represents taxable income in the year it is written off," Steven Rossman, CPA and shareholder at Drucker & Scaccetti, a Philadelphia-based accounting firm focusing on taxation, tells Select.
As an example, Rossman shows how federal student loan forgiveness of $10,000 would have traditionally been taxed prior to Biden's tax update.
Say as a federal student loan borrower, you have $10,000 of your loans canceled in 2022. This means that $10,000 would be added to your taxable income, under what's called "Cancellation of Debt (COD)" income, and you would presumably receive a Form 1099-C for 2021 as documentation.
Then, when you go to file your 2022 tax return (in April of 2023), you will have $10,000 to report as COD income. If you are, for example, in the 20% federal tax bracket, this will result in an additional tax of $2,000 ($10,000 x 20%), which will be due in April of 2023 when 2022 taxes are filed. (Tax rates will vary by individual.)
"The good news is that the borrower doesn't have to pay back $10,000, but the bad news is that they would owe $2,000 for taxes," Rossman says.
When student loan forgiveness is tax-free
Before Biden signed the American Rescue Plan into law, there were only certain exceptions that apply as to whether or not student loan forgiveness can be taxed. Finaid.org says that the forgiveness may be excluded from taxable income if it is contingent upon the borrower working for a specific period of time in a certain profession, such as with Public Service Loan Forgiveness (PSLF). Additional exceptions to taxable canceled debt can be found on the IRS website.
Rossman had speculated prior to Biden's tax update that the unprecedented circumstance of the pandemic may have meant that student loan borrowers would see additional exceptions set in place.
"As we've seen from loan forgiveness in the Paycheck Protection Program (PPP), the loans forgiven under the PPP are not taxable to business owners, if the loans are used for eligible business expenses," he says. "Perhaps this will set precedent for the taxability of student loans that are forgiven."
Bottom line
Student loan forgiveness in 2022 will not increase your federal taxable income, thanks to the latest American Rescue Plan that makes all student loan forgiveness tax-free. You may be on the hook for state tax, however.
Now that student loan forgiveness is underway, it's best to readjust your budget and allocate more towards your emergency fund, pay down other forms of debt and invest for the future.
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Fixed rates range from 3.99% APR to 9.99% APR with 0.25% autopay discount and 0.125% SoFi Plus discount. Variable rates range from 5.74% APR to 9.99% APR with 0.25% autopay discount and 0.125% SoFi Plus discount. Unless required to be lower to comply with applicable law, Variable Interest rates will never exceed 13.95% (the maximum rate for these loans). SoFi rate ranges are current as of 5/6/26 and are subject to change at any time. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. You may pay more interest over the life of the loan if you refinance with an extended term.
