Coronavirus has significantly changed the way we currently live our lives. My wife is a professor at the University of Maryland and she’s seen first hand the impact it’s had on the university. Many of the classes are now online and students are adjusting to what this means for the second half of the academic year.
The government recently passed the CARES Act which, among other things, provided several areas of relief to current and recent students.
Federal Student Loans Relief
Most of the benefits for college students and graduates are around student loans. If you have a federally owned student loan, all loan and interest payments are deferred through September 30th without penalty. Technically your loan is automatically placed in “administrative forbearance,” which means you can stop making payments if you wish. Forbearance is typically offered during a time of hardship, which this certainly is, and in this case, your student loans will also have their interest rate dropped to zero.
If you made a payment between March 13th and September 30th, you can even request to have that payment refunded by contacting your loan servicer. Any payments you make during that period will be applied entirely to your balance and making a payment doesn’t take your loan out of the administrative forbearance status. Thus, you can make payments but you don’t have to.
The CARES Act also suspended the usage limits on federal loans if you were not able to complete the academic term because of school closures. Many loans have duration limits, which means you have to use those funds within a set period, but with schools being closed indefinitely, those limits have been suspended.
Work-Study Funds Become Grants
If you were receiving a work-study wage through the Federal Work-Study program but can’t earn them because your school is suspended, the CARES Act turned it into a supplemental grant that can be paid to you. The program is the Federal Supplemental Educational Opportunity Grants (FSEOG), and the CARES Act permits colleges to pay that out to you as emergency financial aid.
If the closures continue, the CARES Act permits colleges to continue paying Federal Work-Study students for up to a year even if the school is closed. The amount will be based on the scheduled hours, not previously worked hours, and can be disbursed in one payment or over a series of payments.
The CARES Act created a $1,200 stimulus check for most American taxpayers. How much you get is based on your filing status and your adjusted gross income reported on your latest tax filing (2018 or 2019). The IRS will issue your stimulus check based on information from your 2019 tax return if you’ve already filed, or your 2018 return, if you haven’t filed yet this year.
As a single filer, if you earn up to $75,000 a year then you should qualify for the full $1,200. If you have qualifying dependent children age 16 or younger, you get an additional $500 for each.
If you earn more than $75,000 a year, then your $1,200 benefit is reduced. If you are married filing jointly, the phaseout starts at $150,000. The stimulus payment completely phases out at $99,000 for single taxpayers, $136,500 for those filing as Head of Household and $198,000 for joint filers with no kids.
If you’re currently a student that is claimed as a dependent on your parents’ tax return, unfortunately, you do not qualify for the $1,200 stimulus payment. However, if you have not been considered a dependent college student (typically aged 19 to 24) and not claimed as a dependent on your parents’ taxes, you may be eligible for a stimulus payment.
If you worked part-time or full-time while going to college and were laid off, you may be eligible for expanded unemployment provided by the CARES Act. Unemployment was increased by $600 weekly for four months through July 31 and was even expanded to those who were previously not eligible for unemployment including part-time employees, freelancers, independent contractors, gig workers, and the self-employed.
Unfortunately, your college classes were most likely moved online during this time and you may be considering enrolling in summer school classes which will most likely also be online. Although you didn’t get to take advantage of all the amenities available on campus for the entire school year, don’t forget that when you file your taxes you may be eligible for education tax breaks for online college classes. You may be able to claim the American Opportunity Tax Credit worth up to $2,500 or the Lifetime Learning Credit worth up to $2,000.
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You can find the latest information on the tax changes and announcements in response to COVID-19, here.