Student Life

Making Sense of Self-Certification of Income for Student Loan Forgiveness

Even though the application for Biden’s one-time student loan forgiveness program has only been available for two weeks, more than twenty million borrowers have already signed up.

Completing the form is incredibly easy.

However, one aspect of the application may give borrowers and taxpayers cause for concern: self-certification of income.

Borrowers are not required to submit pay stubs or tax records. Instead, they must affirm under penalty of perjury that they do not earn more than the income limits.

What are the Income Limits for Biden’s One-Time Forgiveness Program?

Individuals must be below $125,000 in income for either 2020 or 2021. For couples, the number jumps to $250,000.

Notably, the income requirement is based on your AGI from either year’s tax return.

Borrowers must certify that they meet the income requirement under penalty of perjury. They must also agree to submit proof of income if asked by the Department of Education.

Under Penalty of Perjury

Most people understand that perjury is a crime committed when a witness lies under oath in a court proceeding. However, the crime of perjury can happen in many other situations.

Rather than jumping into the nuance of the crime of perjury, the important detail for people applying for forgiveness is that written certifications can qualify as perjury.

The federal statutes listed on the forgiveness application indicate that falsification could result in a federal prison sentence of up to five years.

Will People Lie and Cost Taxpayers Extra Money?

Fraud concerns are worth exploring.

Borrowers can submit a 5-minute application and get $20,000 of loan forgiveness without presenting any documentation.

Given that the recent Paycheck Protection Program saw fraud rates estimated at between 10% and 15%, this concern seems valid.

However, there are a few significant differences between the PPP program and the one-time forgiveness program.

  • Under the Paycheck Protection Program, people received funds deposited directly into their bank accounts. One-time forgiveness is focused on erasing existing debt.
  • Forgivable PPP loans could be hundreds of thousands of dollars or more. One-time forgiveness is capped at $20,000.
  • It is much easier to fake a business under the PPP rules than it is to fake an existing student loan account with the Department of Education.

Nonetheless, some borrowers who earn above the income limitations may try to use self-certification as an opportunity to cheat the system.

Catching Borrowers who Cheat

Lying under penalty of perjury for student loan forgiveness would be very stupid.

For starters, the risk-reward math doesn’t add up. If you made above $125k for 2020 and 2021, you are a high earner. $10,000 of forgiveness represents less than 10% of your income in a single year. Risking five years of jail time doesn’t seem worth it.

Additionally, the Biden Administration will ask between one and five million borrowers to document their income. If these requests show abuse, they may ask even more borrowers to submit proof of income.

Don’t Hesitate to Apply if Eligible

While the risks and consequences are steep for those who cheat, eligible borrowers shouldn’t hesitate to apply for the one-time forgiveness they deserve.

Even if you are asked to provide proof of income, getting the necessary documents from the IRS is quite easy.

The entire process is designed to make it simple for eligible borrowers to obtain relief and ensure that ineligible borrowers do not. We will soon find out whether or not the Department of Education was able to hit this mark.

Source link