"The tax break on college debt cancellations in the COVID-19 relief package signed last week by President Joe Biden has removed a potential roadblock to forgiving student loan debt: taxes," NerdWallet reports.
"The provision won’t count any debt forgiven from Dec. 31, 2020, to Jan. 1, 2026, as income. Under one of the existing forgiveness programs (income-driven repayment), the amount forgiven is reported to the IRS as income and taxed according to the borrower’s current tax bracket.
... The tax measure was adapted from the Student Loan Tax Relief Act spearheaded by Sens. Bob Menendez, D-N.J., and Elizabeth Warren, D-Mass. On March 6, Warren tweeted, 'This clears the way for President Biden to #CancelStudentDebt without burdening student borrowers with thousands of dollars in unexpected taxes.'
Experts say the tax relief measure could do just that.
'Given the context and all the discussions about loan forgiveness, I think it’s likely that this is a nod from Congress to open up this door,' says Megan Coval, vice president of policy and federal relations at National Association of Student Financial Aid Administrators."
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Publication Date: 3/16/2021