Urges Congress to amend tax code to exclude all forms of discharged student loans from federal income tax.
Impact
If adopted, this resolution could lead to significant changes in how discharged student loans are treated under federal tax law. By advocating for the exclusion of discharged loans from taxable income, the resolution seeks to provide financial relief to borrowers who currently are taxed on their forgiven loans, particularly those who may benefit from long-term repayment plans or meet specific hardship criteria. It addresses the necessity for a uniform policy regarding student debt discharges, ensuring that all borrowers can benefit from relief irrespective of the type of discharge.
Summary
Assembly Resolution No. 105, introduced in the New Jersey legislature, aims to urge Congress to amend the federal tax code in a way that would exclude all forms of discharged student loans from being subject to federal income tax. The resolution emphasizes that while certain types of discharged student loans, such as those forgiven under specific programs for public service employees, are not taxed, many other forms still incur tax liabilities upon discharge. This inconsistency is seen as a burden for borrowers who find themselves in need of relief from educational debt.
Contention
Notably, the bill touches on existing exceptions in the tax code and seeks to expand them beyond the current framework. While some legislators and stakeholders may support the resolution as a means of enhancing financial relief for borrowers, others could argue about the potential impacts on federal tax revenues. It raises questions about fairness and equality for borrowers who do not qualify for current exemptions, and whether the federal government can afford to make such exemptions more widespread. Overall, the discussions surrounding this bill are likely to reflect a broader national conversation about student debt and tax policy.
Income tax; exclude forgiven, cancelled or discharged federal student loan debt under the Public Service Loan Forgiveness Program from the definition of "gross income".
Income tax; exclude forgiven, cancelled or discharged federal student loan debt under the Public Service Loan Forgiveness Program from the definition of "gross income".
Debt Cancellation Accountability Act of 2023 This bill prohibits the Department of Education from providing class-based loan forgiveness unless funds have been specifically requested and appropriated for this purpose. Class-based loan forgiveness refers to the cancellation, waiver, assumption, discharge, reduction, or other forgiveness of any obligation due on Federal Family Education Loans, Federal Direct Loans, or Federal Perkins Loans (1) on a class-wide basis and for a class of two or more loan borrowers, and (2) that totals more than $1 million. The prohibition does not apply to targeted loan forgiveness programs explicitly established under the Higher Education Act of 1965 and in effect before January 1, 2022, if the loan forgiveness is granted for a single borrower on a case-by-case basis.