A plan to erase student debt has generated a buzz in Nebraska, but college students and graduates say they have questions and concerns.
The debt relief plan is now is even murkier since a federal judge temporarily halted it last week. As a result of the ruling, the U.S. Education Department has stopped taking applications until the issue is resolved in the courts.
Nebraskans alone owe up to $8.3 billion in student debt, which affects about 300,000 students statewide. The student loan forgiveness plan is expected to completely wipe out student debt for nearly 82,000 Nebraskans.
University of Nebraska-Kearney alumna Jessie Hicks, who was originally from Iowa and has since moved back home, was most curious about whether she would even qualify for the loan relief. She graduated in 2021 and is considering applying for graduate school. She said she had overheard some of her friends talking about it, but that was the first she had heard of it.
“I just haven’t actually looked into it for myself yet,” she said. “How do I know if I qualify?”
According to the guidelines, singles who qualify need to earn less than $125,000 in 2020 or 2021. Married couples need to have earned less than $250,000 during the same years, according to this factsheet on the White House website.
In terms of the dollar amount available, people who have received a Pell Grant can receive up to $20,000 in forgiveness, while students who have not received a Pell Grant are eligible for up to $10,000, according to the Associated Press.
University of Nebraska-Lincoln graduate Max Aden, who also graduated in 2021, said he wasn’t sure how much the forgiveness would actually help him. The digital project manager at Omaha Symphony said racked up over $38,000 in student debt to get a journalism degree.
Aden expressed his concern about the funds available to him.
“Even if I receive the full ten grand, I will still owe over $25,000,” he said. “College is just ridiculously expensive. Don’t get me wrong, I would be incredibly grateful for any help I can get but something about the school system just doesn’t seem right.”
But Aden’s mother thinks this relief plan would be a big boost for his future.
“Ten thousand dollars is a lot of money,” Tammy Aden said. “I think that would help him out a lot in terms of saving up for his future. We are tight with money right now so this would be a big help for not only Max but our whole family.”
Hicks, with the help of her family, said she did a better job than most when it came to taking out loans for college. She walked away only owing about $15,000. Since she received a Pell Grant while in school she qualifies for the $20,000, which would completely wipe away her debt. She was ecstatic when hearing that possibility.
“I thought I was going to be in debt for quite some time, but now I might be able to actually put some money away to save up for my future,” Hicks said.
How taxes are handled under the debt relief plan is another concern for some students and graduates.
Seven states are considering the student loan forgiveness as income and taxing it at their state’s regular income tax rates. Nebraska, however, is not one of those currently considering taxing participants.
While people in those states might see a higher tax bill, it is unlikely to send them into the higher tax rate, according to Experian.
For now, Nebraskans shouldn’t worry about that, but that has not stopped the concern of some students. University of Nebraska-Omaha senior Brooklyn Riley is hesitant about applying for relief.
“With where I am currently financially, I cannot afford to pay an outrageous tax, so until I can guarantee I won’t be taxed I am going to hold off on filling out my application,” Riley said.
Riley still has a few years of school left to become a certified OT so she knows how crucial it would be to be able to erase some of her undergraduate debt.
“If I can erase some of my undergrad debt, it would put me in a really good spot to finish up school and be a step ahead when I get out into the real world,” Riley said. “It’s scary enough out there as is. My student debt makes it even scarier.”
Certified public accountant Kent Urban of Tax Help Omaha was clear in his message to students about applying for student loan forgiveness.
“It should not deter anyone from taking it because it will be a minimal tax for the amount of money that could be received,” Urban said. “I think all students who are considering applying need to apply, the worst that can happen is they say no and they are in the same boat as before.”
Although applications for debt relief have been paused, U.S. Secretary of Education Miguel Cardona said the administration is seeking to overturn the ruling.
“We believe strongly that the Biden-Harris Student Debt Relief Plan is lawful and necessary to give borrowers and working families breathing room as they recover from the pandemic and to ensure they succeed when repayment restarts,” Cardona said in a statement on the department’s website.
