Student loans in Indiana: What to know about when payments resume, debt relief options
For millions of Americans, the pause on federal student loan debt repayments and interest have been crucial amid inflation and tight budgets.
Federal student loan payments have been paused for roughly 43.5 million borrowers since March 2020, at the onset of the COVID-19 pandemic.
From forgiveness to restarting payments, here's the latest on student loans in Indiana.
How much is the proposed student loan forgiveness
The Biden administration is attempting to cancel up to $10,000 in federal student loan debt for individuals making less than $125,000 per year, and couples making less than $250,000. Borrowers who used Pell Grants could receive up to $20,000 in student loan forgiveness.
Multiple lawsuits have challenged the plan, and the Supreme Court heard arguments earlier this year.
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When will student loan payments resume in Indiana
"The student loan payment pause is extended until the U.S. Department of Education is permitted to implement the debt relief program or the litigation is resolved," the Department of Education says on its website.
"Payments will restart 60 days later. If the debt relief program has not been implemented and the litigation has not been resolved by June 30, 2023 — payments will resume 60 days after that. We will notify borrowers before payments restart."
So, the latest they could resume is the end of August, but it's possible that could happen much sooner.
Locally, the Indiana Department of Revenue (DOR) says, "DOR will not provide updates based on legislation until after the governor signs the applicable bill into law and DOR has studied the impact on the agency and taxpayers. You can keep current with proposed legislation on the Indiana General Assembly's website."
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Could lawsuits change when student loan payments begin
Loan refinancing company SoFi sued the administration in March, and the New Civil Liberties Alliance filed suit in April on behalf of the Mackinac Center, a free market think tank.
According to the NCLA lawsuit, the moratorium, during which borrowers have not accrued interest, has cost taxpayers more than $150 billion.
The Education Department has defended the moratorium and officials have said they intend to fight the lawsuits and continue with the debt forgiveness plan if allowed by the Supreme Court.
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Other student loan relief plans
One way borrowers have looked for relief in the past is through Public Service Loan Forgiveness (PSLF), where certain state or public service jobs allowed debt to be cleared after a set time in the position.
On Oct. 25, 2022, the Education Department announced new regulations to program requirements for PSLF which will go into effect on July 1, 2023. The agency says they will keep borrowers updated on the details of the new laws here.
Loans may also be forgiven in cases of school closures, disability, bankruptcy (though rare), and certain teaching positions. See the full list here.
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Taxes in Indiana if student loan is forgiven
The Indiana DOR points out that the amount discharged due to the one-time debt relief provided by the plan is taxable as income.
According to the DOR, Indiana’s 2022 income tax rate is 3.23%, which means Hoosiers will owe Indiana income tax of:
$323 for $10,000 of student loan forgiveness and
$646 for $20,000 forgiven
Several other factors can impact those taxes, and other county and local taxes may apply.
USA TODAY reporters Alia Wong and Medora Lee contributed to this report.
This article originally appeared on Indianapolis Star: Where student loan debt relief stands as Supreme Court decision looms
