2022 was the year the White House embraced the idea of mass student-loan forgiveness, but 2023 will likely be the year when borrowers will find out whether the policy will actually impact their wallets.
The $10,000 or $20,000 student loan forgiveness has been working its way through the lower courts across America and now, sometime in the first few months of 2023, the US Supreme Court will take up the issue and rule on whether the Act will stand.
In either outcome, the government has frozen interest, payments and collections on most federal student loans since March 2020. Student borrowers will resume payments, interest and collections after the litigation surrounding the debt forgiveness wraps up or 60 days after June 30, 2023 whichever comes first.
If the high court rules the policy is lawful and it takes effect, the debt relief payments will be sent out during 2023. Those taxpayers who receive the student loan forgiveness payments should know that the IRS has ruled that the money received under the student loan forgiveness program will not be taxable income on the federal income taxes. Wisconsin and other states have rules that the money receive will be taxable income and must be included on the income tax returns. So those recipients should plan ahead and so they don't have an unexpected tax liability next year.