Indiana Student Loan Forgiveness Programs

Indiana ranks 17th in the nation for student loan debt, totaling a staggering $29.8 billion. With an average debt of $32,874 per borrower, more than 906,500 residents, or 13.32% of the state’s population, are grappling with this financial burden.

Fortunately, several federal and state forgiveness programs are available to Indiana borrowers. One such program is President Biden’s debt cancellation plan, potentially eliminating up to $20,000 of federal student loan debt for many residents. This plan is currently awaiting a Supreme Court decision.

Indiana borrowers can take advantage of other federal forgiveness programs and state-based initiatives regardless of the outcome.

Ahead we’ll walk you through the student loan forgiveness options available to Indiana residents, helping you make the most of these opportunities.

Related: State-Based Student Loan Forgiveness Programs

Before exploring Indiana-specific programs, let’s discuss the federal student loan forgiveness programs the Department of Education offers to all Americans, including Indiana residents.

These programs provide relief for federal student loans based on factors such as your profession or income.

The Public Service Loan Forgiveness Program

PSLF is designed for individuals with Direct Loans working in qualifying public service jobs. To be eligible, borrowers must make 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer, such as a government agency, public school, or nonprofit organization.

Income-Driven Repayment Plan Forgiveness Waiver

Starting in spring 2023, relief will be automatic for most borrowers who have been paying their federal student loans for 20 years or longer, allowing them to have the rest of their debt discharged. This change results from a new IDR account adjustment announced by the Biden administration in April 2022.

For a one-time-only account adjustment, nearly every month spent in student loan repayment or a long-term forbearance since leaving school will count toward forgiveness.

All federal student loans are eligible for this adjustment, including Parent PLUS Loans, Consolidation Loans, Federal Family Education Loans, and Perkins Loans. But some borrowers will need to consolidate to qualify.

The U.S. Department of Education and the White House estimate that the IDR Waiver will immediately eliminate federal student loan debt for over 40,000 borrowers and bring millions more at least three years closer to income-based repayment forgiveness.

President Joe Biden’s Broad Debt Cancellation Plan

This student debt relief program promises to wipe out up to $20,000 of debt for Pell Grant recipients who meet income criteria and up to $10,000 for other qualifying borrowers. Applications are on hold as the Supreme Court assesses the program’s legality.

In the meantime, the Biden administration has extended the pandemic-related payment pause and interest rate freeze, lasting 60 days after the Court decides on President Biden’s student loan cancellation plan or until June 30, whichever occurs first.

Indiana offers several student loan forgiveness programs for residents in specific professions, such as law and healthcare. These programs are designed to help those serving in underserved communities. Below, we highlight four notable programs grouped by career.

Legal Profession

Richard M. Givan Loan Repayment Assistance Program

This program provides student loan repayment assistance to law graduates employed by nonprofit organizations in Indiana. To be eligible, applicants must be licensed to practice law in Indiana, work for a qualifying civil legal aid employer, and have an annual salary of $70,000 or less.

Program Details: Indiana Bar Association – Richard M. Givan Loan Repayment Assistance Program

Terrence and Peggy Cody Loan Repayment Assistance Fund

Offered through the Indiana Bar Association, this program is designed for law graduates working for civil legal aid providers, county Department of Child Services offices, and county Public Defender’s offices in Indiana. Preference is given to individuals working for a qualifying employer in Floyd County, Indiana.

Program Details: Indiana Bar Association – J. Terrence and Peggy Cody Loan Repayment Assistance Fund

Indiana Law Loan Reduction Assistance Program

Provided by Indiana University’s Maurer School of Law, this program covers expenses outside of federal student aid related to passing the bar, including the bar review course, bar application fees, and living expenses while preparing for the bar. The program offers up to $4,000 total for qualified applicants.

Program Details: Indiana University Maurer School of Law – Indiana Law Loan Reduction Assistance Program

Healthcare Profession

Indiana Health Care Professional Recruitment and Retention Fund Program (IHCPRRF)

Eligible healthcare professionals can receive partial loan forgiveness through the IHCPRRF. To qualify, you must hold a license to practice medicine in an eligible healthcare profession and have completed at least one year of work in a qualifying shortage area or community, migrant health center, or maternal and child health clinic in a shortage area.

Program Details: Indiana State Department of Health – Indiana Health Care Professional Recruitment and Retention Fund Program

In Indiana, one-time student loan debt relief provided by the Biden-Harris Administration’s student loan forgiveness plan is currently taxable.

This occurs because Indiana’s adjusted gross income (AGI) computation starts with federal AGI, and the state has decoupled from the federal provision that excludes student loan discharge from federal income tax during the legislative session.

Exceptions to Indiana State Tax on Loan Forgiveness

Certain loan forgiveness programs, such as Public Service Loan Forgiveness, Teacher Loan Forgiveness, and National Health Service Corps Loan Repayment Program, are not subject to Indiana income tax.

Impact on Borrowers’ Financial Aid and Loan Balance

Indiana’s taxation of student loan payments under Biden’s plan can impact financial aid received by borrowers and may increase the loan balance owed in state taxes.

Stay informed about your lender’s policies and any changes to state tax regulations during the legislative session, as these can affect the tax amount owed on forgiven loans.

Estimating Tax Amounts Owed on Student Loan Forgiveness

The tax amount owed on student loan forgiveness depends on the amount forgiven and the state and county income tax rates for the tax year when the forgiveness is received.

For example, Indiana’s 2022 income tax rate is 3.23%, meaning residents will owe:

• $323 on $10,000 of student loan forgiveness

• $646 on $20,000 of student loan forgiveness

provided through the Biden-Harris Administration’s student relief plan in 2022. Indiana’s individual income tax rate will decrease to 3.15% in 2023. Additionally, county tax rates can change.

Adjusting Payroll Tax Withholding

If you’re worried about insufficient payroll tax withholding to cover a balance due, consider adjusting your W-4 with your employer or making an estimated payment during the year when the debt is forgiven or discharged.

In Indiana, various state-specific student loan forgiveness programs are available to taxpayers and professionals in essential fields such as teaching, dentistry, and public service. These programs offer crucial financial relief and support to those who qualify and are dedicated to serving their communities.

While the outcome of Biden’s debt forgiveness plan for millions of federal student loan borrowers is still unclear, it’s important to remember that these state-specific programs remain accessible to eligible borrowers in Indiana.

Stay up-to-date with the latest developments in debt cancellation, both in Indiana and at the federal level, and seize the opportunities available. Enhance your understanding of these programs and make informed decisions by subscribing to our newsletter today.