Last week, Rep. Sander Levin (D-MI) introduced H.R. 7098, a bill to amend the tax laws to exclude loan forgiveness granted through the Income Based Repayment (IBR) and Income Contingent Repayment (ICR) plans from borrowers' adjusted gross income (AGI). Reps. George Miller (D-CA), chairman of the House Education Committee, and Jim Ramstad (R-MN) signed onto the bill as cosponsors.

Because the IRS treats most forgiveness debt as taxable income, student loan forgiveness would be included in the AGI of borrowers. H.R. 7098 would ensure that borrowers who receive loan forgiveness through the IBR and ICR plans would not have to count loan forgiveness as taxable income. Under both IBR and ICR, the Secretary forgives any outstanding loan balance after 25 years of repayment.

Levin introduced H.R. 7098 after receiving a letter from the Department of Treasury stating that forgiveness through the IBR and ICR programs would have to be included in borrowers' AGI under current IRS rules. The letter does confirm that loan forgiveness in the Teacher Loan Forgiveness and Public Service Loan Forgiveness programs, as well as death and disability and closed school and false certification discharges, should already be excluded from the AGI under existing law.

The bill has been referred to the House Ways and Means Committee for further debate. NASFAA has signed onto a letter of support for H.R. 7098 that was sent to the Ways and Means Committee last week.

By Justin Draeger
NASFAA Associate Director for Communications

Posted 10/02/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.