Will I be taxed for my student loan repayment?

(NEXSTAR) – Millions of federal student loan borrowers will soon receive thousands in debt relief under a new plan revealed Wednesday by the Biden administration.

Although many aspects of the plan remain unclear, we can answer a few questions. One of them is whether the rebate will be considered taxable income.

This is a reasonable concern – the maximum relief available of $10,000 or $20,000 (depending on whether you received a Pell Grant while in school) could be enough to move some borrowers into a different tax bracket if considered as taxable income.

Fortunately, according to the White House, any relief you receive will not be treated as taxable income for federal income tax purposes.

This is due to the American rescue plan.

When Congress passed the US bailout shortly after President Biden took office in 2021, it eliminated taxes on loan forgiveness through 2025.

Here are three more things you need to know about Biden’s plan to write off millions of dollars in student loan debt.

Pause payment until the end

If your entire loan balance won’t be cleared – which is likely for some 23 million borrowers – President Biden has extended the payment break until the end of the year.

But, on January 1, 2023, interest will begin to accrue again and regular payments will resume. He indicated that the break would no longer be extended.

Payments made? You can get a refund

If you have voluntarily made payments since March 2020, when payments were suspended, you can request a refund for those payments, according to the Federal Office for Student Aid.

Contact your loan officer to request a refund.

When will you see the relief?

When and how the student loan forgiveness will be distributed has not yet been specified.

According to the US Department of Education, nearly 8 million borrowers are automatically eligible for relief based on income data the department already has. If the Department of Education doesn’t have your earnings data, or you’re not sure if the agency has it, there’s not much you can do at this time.

Instead, you’ll have to wait for the Biden administration to launch an application process, which will be available “in the coming weeks.” The app will be available before the end of the student loan repayment break on December 31.

You can sign up to be notified when the app is available through the Department of Education by completing this form.

The Associated Press contributed to this report.

Dorothy H. Lewis