How Palos Verdes Residents Can Apply For Student Loan Forgiveness

PALOS VERDES, CA — Applications officially opened Monday to student loan borrowers nationwide, allowing millions to apply for thousands of dollars in forgiveness, according to President Joe Biden's administration.

Residents of California, the most populous state, have already begun submitting applications. Across the Golden State, nearly 10 percent of residents — some 3,823,700 — have student loan debt, according to an April report from the Education Data Initiative.

In Los Angeles County, graduates of University of Califonia, Los Angeles completed their degrees with an average of $20,305 in student loans in 2019-20. About 40 percent of students graduated with debt that year, according to a report from The Institute for College Access & Success.

Of the private and nonprofit schools listed on the institute’s report, University of La Verne in Los Angeles County had the highest average loan debt among graduates in 2019-20, $51,282.

In Palos Verdes, graduates of Marymount California University — which was recently purchased by UCLA after its closure — had an average of $42,018 in debt after completing their degrees in 2019-20. About 43 percent of students graduated with debt that year, according to a report from The Institute for College Access & Success.

Biden's plan will allow for borrowers to apply for up to $20,000. In California, 20.2 percent of borrowers owe $20,000 to $40,000, according to the Education Data Initiative.

Biden said the White House received nearly 10,000 letters from across the country regarding the loan forgiveness plan. One mentioned by the president came from the Golden State.

"A mom in California wrote how she received a Pell Grant to become a nurse. She just had her fourth child. And the stress of the pandemic pulls the weight of the student loans on her even more heavily, making everyday life really hard. But now she says that weight is lifted, making life easier for her," Biden said at a White House briefing on Monday.

Here's a breakdown of what we know from the process of applying to the possibility of taxation.

Will Californians Be Taxed?

It's complicated.

For those applying for loan forgiveness, it's important to understand how returned debt could impact taxes.

The $1.9 trillion American Rescue Act COVID package, passed last March, eliminated the federal government's ability to tax forgiven student loans through 2025, but this all depends where you live.

In California, forgiven loan debt can technically be taxed, but lawmakers have urged that residents will not be saddled with such taxes.

"We're not going to leave California's borrowers in the lurch," State Assemblyman Anthony Rendon tweeted last month.

But according to the California Franchise Tax board, technically any debt forgiven is considered gross income. Under some instances, student loan forgiveness is excluded, but it will depend on how the Department of Education administers repayment plans.

The state is still waiting on the department to confirm whether the forgiveness plan will meet the criteria to be tax-free, according to The Sacramento Bee.

"Rest assured, one way or another, California will not tax the federal student debt relief," Rendon said in a joint tweet with Senate President Pro Tem Toni Atkins.

Here's what the state Franchise Tax Board told The Sacramento Bee:

“Forgiveness of student loan debt is generally taxable unless it meets one of the exclusions in California Revenue and Taxation Code sections, which includes an exclusion for income-based repayments and loan cancellation under Section 1098e of the federal Education Code.

“In the case of the federal student loan debt forgiveness announced recently, it does not appear that the student loan forgiveness is occurring under Section 1098e; therefore, the student loan debt forgiveness would be taxable in California.”

How Can Californians Apply?

Biden's administration has touted the application process as a simple, straightforward application that should only take about five minutes.

Go to studentaid.gov and in the section on student loan debt relief, click "Apply Now."
Type in some basic personal information into the form, which asks for: name, Social Security number, date of birth, phone number and email address. It does not require documentation about your income or your student loans.

Next, review the eligibility rules and confirm that you're a match. For most people, that means attesting that they make less than $125,000 a year or that their household makes less than $250,000 a year. If you meet the eligibility rules, click the box confirming that everything you provided is true. Click "Submit."

After the form is submitted, the Biden administration says it should take four to six weeks to process. The Education Department will use its existing records to make sure your loans are eligible and to look for applicants who might exceed the income limits. Some will be asked to provide additional documentation to prove their incomes. The Education Department estimates that the verification application will take about half an hour, including time to review and upload tax documents.

Most borrowers who apply before mid-November should expect to get their debt canceled before Jan. 1 when payments on federal student loans are scheduled to restart after a pause during the pandemic.

Things could get more complicated, depending on the outcomes of several legal challenges. The Biden administration faces a growing number of lawsuits attempting to block the program, including one filed by six Republican-led states. A federal judge in St. Louis is currently weighing the states’ request for an injunction to halt the plan. Biden on Monday said he's confident that the suit will not upend the plan. “Our legal judgment is that it won’t," he said, “but they’re trying to stop it.”

The Associated Press contributed to this report.