Utah Doesn't Offer Student Loan Forgiveness — But There’s Hope

In an era of escalating college costs and mounting student debt, student loan forgiveness has become contentious.

In Utah, public opinion reveals a divide along political and educational lines. A recent poll by Dan Jones & Associates found that 55% of Utahns disapprove of the Biden administration’s plan for partial loan forgiveness.

The division is evident, with 77% of Democrats supporting the plan, while 66% of Republicans express strong opposition.

Among the critics of the federal proposal is Sen. Mitt Romney, R-Utah, who voiced concerns about the potential unfairness and inflationary impact of erasing substantial amounts of student debt.

Despite this, the state of Utah remains one of the few states without its own student loan forgiveness programs, revealing an interesting juxtaposition between public sentiment and state policy.

Ahead, we’ll dig into this dichotomy, examining federal forgiveness programs and discussing the implications of the state’s decision not to tax student loan forgiveness.

Related: State-Based Student Loan Forgiveness Programs

There’s good news for Utah residents carrying the weight of federal student loans. Several federal programs, brought to you by the U.S. Department of Education, offer relief based on your income or profession.

Public Service Loan Forgiveness Program

First up is the Public Service Loan Forgiveness (PSLF) Program.

You may qualify if you work full-time in a public service job (think government agencies, public schools, or nonprofits).

The goal: Make 120 qualifying student loan payments while employed full-time by the government, not-for-profit organization, or other qualifying employers, and say goodbye to your Direct Loans.

Income-Driven Repayment Plan Forgiveness Waiver

Next, there’s the Income-Driven Repayment Plan Forgiveness Waiver.

Starting in Spring 2023, if you’ve made monthly payments or been in forbearance or deferment for 20 years or more, you could see your remaining loan balance automatically wiped clean. This relief comes courtesy of an updated Income-Driven Repayment (IDR) account adjustment introduced in April 2022.

Note, if you have FFEL or Perkins Loans, you may need to consolidate into a Direct Consolidation Loan to qualify for the IDR Waiver.

But don’t worry — you can do this for free on the Federal Student Aid website, StudentAid.gov. Refinancing federal loans with private lenders eliminates your eligibility for this relief.

Teacher Loan Forgiveness Program

Are you a teacher? The Teacher Loan Forgiveness Program might be for you.

If you’ve worked full-time for five consecutive years in a low-income school or educational service agency, your federal Direct or Stafford Loans could be forgiven.

Forgiveness amounts can reach up to $17,500 for highly qualified math, science, and special education teachers and up to $5,000 for other eligible teachers.

Biden’s Student Loan Forgiveness Plan

Lastly, under President Biden’s debt relief program, a significant reduction in the remaining balance on education loans could be in the cards for many Utah residents.

This program could erase up to $20,000 of debt for Pell Grant recipients who meet certain income criteria and up to $10,000 for other qualifying borrowers with loans held by the federal government.

Bear in mind.

The application process is currently paused due to a Supreme Court challenge.

But rest assured.

The Biden administration has extended the pandemic-related payment pause and interest rate freeze on loan payments.

The Department of Education data shows a considerable number of Utahns stand to benefit from these federal student loan forgiveness programs.

The final decision now rests with the Supreme Court. So, while the outcome remains uncertain, these federal programs offer hope for substantial student loan relief for those in Utah.

While President Joe Biden’s Student Debt Relief Plan promises tax-exempt debt relief federally until 2026 as part of the American Rescue Plan Act, the implications for Utah residents differ. Utah’s tax laws follow the federal treatment, making the state one of those that will not tax student loan forgiveness.

Despite diverging views on the federal debt relief plan, Utah’s lawmakers have made clear that they won’t levy additional state income taxes on those benefitting from federal relief. The state’s decision offers added relief to Utah borrowers, ensuring they don’t face extra state tax burdens for forgiven loans.

Enforcing this tax relief presents less of a challenge in Utah than in other states, with the tax code designed to align with the federal provisions on loan forgiveness. This streamlined approach ensures Utah taxpayers aren’t burdened with additional tax-related paperwork when their student debt is forgiven.

In essence, while the federal loan relief program promises significant help to indebted students, Utah’s tax policy makes the prospect even more advantageous. Utah borrowers who qualify for federal relief can rest easy knowing they won’t face additional state taxes on their forgiven loans.

Unlike many states, Utah does not have a wide variety of student loan forgiveness programs. But two key programs exist under state law, even though their funding status may be uncertain.

The Rural Physician Loan Repayment Program (RPLRP) offers education loan repayment assistance to physicians who commit to work in a rural hospital for at least two years. Eligible physicians can receive up to $15,000 per year, reducing their loan burden while simultaneously addressing the issue of medical personnel shortages in rural areas.

Despite its existence, the current funding status of this program is unknown, which could potentially affect its practical implementation.

The second program, the Health Care Workforce Financial Assistance Program (HCWFAP), has been established to incentivize healthcare professionals to practice in underserved areas. But the program was not funded for 2023, raising questions about its future viability.

Despite the funding issue, HCWFAP continues to exist as a legal framework that could potentially be revived with the necessary financial backing.

While these programs could offer relief for medical professionals, they represent a narrow slice of the overall population. As it stands, many Utah students and graduates looking for broader loan forgiveness options will likely need to turn to federal programs.

Utah’s student loan forgiveness landscape may appear sparse, with only two state-specific programs designed for healthcare professionals. Despite this, the alignment of Utah’s tax law with federal provisions on loan forgiveness comes as a relief for many borrowers, shielding them from additional state taxes on federally forgiven loans.

Staying informed about the ongoing developments at both state and federal levels is paramount. Changes can occur, funding can be allocated, and new programs may be introduced. To ensure you don’t miss out on any potential opportunities for student loan forgiveness, consider subscribing to our newsletter. This way, you’ll have the most current insights at your fingertips, helping you make informed decisions on your path to financial freedom.