Subscribe to our mailing list

X

15 Seconds of Positive News About Student Loans and Congress

By on February 15, 2018

In a rare moment of bipartisanship at the end of 2017, a bill was introduced and signed into law that finally deals with the issue of tax liability for forgiven student federal and private student loan debt from the death of the student or disability.

Rob Portman (R-OH) introduced the legislation with Senators Chris Coons (D-DE) and Angus King (I-ME). It was titled The Stop Taxing Death and Disability Act.

While the federal government forgives certain federal student loans in the case of the death or disability of the borrower, the IRS treats this canceled debt as income, which can result in tens of thousands of dollars in immediate tax liability. The Stop Taxing Death and Disability Act eliminated this unfair tax, which simply replaces one financial burden with another and serves no public policy purpose.

The Stop Taxing Death and Disability Act:

Exempts from income tax federal and private student loans that are discharged due to the death of a child or total and permanent disability. Congress already exempts certain discharged federal student loans from income taxes.

Allows a parent whose child develops a total and permanent disability to qualify for student loan discharge. The bill resolves an inconsistency in statute by authorizing the Department of Education to discharge federal loans owed by a parent of a child who becomes totally and permanently disabled. Currently parents are allowed to discharge federal student loans if they develop a total and permanent disability, or if their child dies, but not if their child develops a total and permanent disability. The bill also exempts this new type of discharge from income tax.

While Congress still has not tackled the bigger issue of forgiven student loan debt from income-driven repayment plans at least they’ve death and disability to a short list of tax-free forgiveness situations: Public Service Loan Forgiveness and tax-exempt forgiveness of student loans due to the closure of a borrower’s school.

Last step, fill out the information below or call us for Priority Assistance.

What problems are you having with your report?

Your first name is required. Your first name is required to be at least 2 characters. Your first name cannot be longer than 50 characters.
Your last name is required. Your last name is required to be at least 2 characters. Your last name cannot be longer than 50 characters.
Your email is required.
Your phone is required. Your 10 digit phone number is required.
Your state is required.
Your age is required. Your age must be greater than 18. Your age must be less than 100.

By clicking on the "Contact Me" button above, you consent, acknowledge, and agree to the following: Our Terms of Use and Privacy Policy and to receive electronic communications. We take your privacy seriously. That you are providing express "written" consent for Debt.com or appropriate service provider(s) to call you (including through automated means; e.g. autodialing, text and pre-recorded messaging) via telephone, mobile device (including SMS and MMS - charges may apply), even if your telephone number is currently listed on any internal, corporate, state or federal Do-Not-Call list. Consent is not required as a condition to utilize Debt.com services and you are under no obligation to purchase anything.

By clicking on the “Contact me” button above, you consent, acknowledge, and agree to the following: (1)That you are providing express “written” consent for Lexington Law Firm, Debt.com or appropriate service provider(s) to call you (including through automated means; e.g. autodialing, text and pre-recorded messaging) via telephone, mobile device (including SMS and MMS – charges may apply), or dialed manually, at my residential or cellular number, even if your telephone number is currently listed on any internal, corporate, state or federal Do-Not-Call list; and (2)Lexington Law’s Privacy Policy and Terms of Use and Debt.com’s Terms of Use and Privacy Policy. Consent is not required as a condition to utilize Lexington Law or Debt.com services and you are under no obligation to purchase anything.

About Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

2 Comments

  1. Bob

    February 15, 2018 at 12:54 pm

    My friend Pam may be one of the 1st persons to benefit from this legislation! She was awarded a TPD January 19th, 2018. She is in the window of opportunity to also NOT have to pat income tax on her $26,000.00 discharged student loans! I wrote about her miracles on my blog: http://www.unduehardship-povertyrequired.com Check it out and my other articles about student loan discharges!

    • Steve Rhode

      February 15, 2018 at 3:57 pm

      The law says “shall apply to discharges of indebtedness after December 31, 2016” so she should ask her tax advisor about this if she gets a 1099-C.

Share a Comment / Leave a Reply

%d bloggers like this: