December 9, 2023

Student loan forgiveness 20 to 25 years out of the repayment plan often makes people think, “I’m going to wash my hands,” says financial planner Adrienne Davis.

Adrienne Davis, Zenith Wealth Partners
Adrienne Davis is a Financial Planner with Zenith Wealth Partners, a registered investment advisory firm based in Philadelphia.

Powerful wealth partner

“But that’s not the case,” said Philadelphia’s Davis Powerful wealth partner. Instead, as she and other financial advisors have warned clients who do not qualify for certain temporary or occupation-based exemptions from the notorious “student loan tax bombTied to income-based repayments, they could face a waiver amount for unexpected Uncle Sam payments.

The tax complexities of these plans, as well as other strategic complexities surrounding student loan debt, include questions about interest payments, 529 plans, and employee benefit deduction eligibility.with more than 43 million Americans holds more than $1.77 trillion student loan debt Set up a monthly bill for restarts due in OctoberTax professionals and planners guide clients through a myriad of issues beyond the burden of budgeting and portfolios.

Legislative “sunsets” in particular could have significant tax implications within a few years.

Catherine Franco-Cicero
Catalina Franco-Cicero is a Wealth Advisor with Tobias Financial Advisors, a registered investment advisory firm based in Plantation, Florida.

Tobias Financial Advisor

“Paying off debt is one thing, but you have to really understand cash flow,” says Catalina Franco-Cicero, a certified financial planner in Plantation, Florida. Tobias Financial Advisor. “If we’re really going to serve these younger generations, we have to start thinking, ‘Hey, they’re going to come with these loans, and we have to be ready to train them.'”

Rupa Pereira, an IRS-certified registered agent, said college admissions, higher education costs, tuition and student loans are “connected to taxes like never before.” founder Located in Raleigh, North Carolina FWJ planning.

She added that when filling out the Free Application for Federal Student Aid for the 2024-25 school year, taxpayer information can be transferred directly from the IRS to Portfolio of topics proposed to clients.Many clients are postponing retirement or withdraw funds from their savings Pay for college tuition.

With federal student loans, a borrower’s adjusted growth income and application status determine the size of their payment and how to ensure their family is in the “best position to maximize cash flow while minimizing the debt burden,” Pereira said in an email. “Cash flow planning is becoming a key factor for families taking out student loans, and tax preparers or loan servicers may not be able to help.”

Emily Stead, founder of Phoenix-based ByMethod Financial Collective, said clients should understand that the type of loan they receive often determines their eligibility for various tax breaks and credits, as well as refinancing and repayment plans. Cetera Investor Office. In an email interview, she noted that their best options may look different than the courses a friend has taken, and advised borrowers with complex tax situations to first consult with a CPA or registered agent.

“The most effective way to ensure you’re making the best financial decision is to gather all the information about your current loan from your current loan servicer, then talk to a licensed tax professional for information about your current tax situation and advice on potential deductions and credits,” Stead said. “From there, you can talk to a financial planner who can help you understand which options are best for you and your goals, and create a plan that works based on your overall financial situation.”

Scroll down the slideshow for the seven tax subjects planners like Stead recommend clients consider when paying off student loans. To see a list of three potential strategies in response to the recent Supreme Court decision to block the Biden administration’s student loan forgiveness program, Click here.and click on these links to find Advisors Reflect on College Costs as a parent and discuss how and when start talking to family about higher education.