New Jersey Senate Bill SR41

New Jersey 2024-2025 Regular Session

• Introduced: 1/9/24
• Refer: 1/9/24

Caption

Urges Congress to amend tax code to exclude all forms of discharged student loans from federal income tax.

Impact

This resolution addresses disparities in the tax treatment of discharged student loans, specifically noting that while some forms of discharge, such as those granted due to death or disability, are exempt from taxation if forgiven within a specified timeline (between December 31, 2017 and January 1, 2026), many borrowers are still left liable for taxes on amounts forgiven through programs like Income-Driven Repayment-Plans. By urging Congress to make tax exemptions permanent for all student loan discharges, the resolution aims to alleviate the financial burden on individuals who have their loans discharged.

Summary

Senate Resolution No. 41, introduced in the New Jersey Legislature, urges Congress to amend the federal tax code to exclude all forms of discharged student loans from federal income taxation. The resolution highlights that current federal law subjects discharged student loans to income tax under certain circumstances, unless specified exemptions apply. For example, loans forgiven for teachers and public service workers under particular conditions are exempt from taxation, as defined by the Teacher Loan Forgiveness and Public Service Loan Forgiveness programs.

Contention

The primary contention surrounding SR41 lies in the implications of the federal tax burden on borrowers with discharged student loans. Supporters argue that eliminating the tax liability on discharged loans would significantly benefit those in financial need, transforming student loan forgiveness into meaningful financial relief. However, opponents may argue about the potential cost to federal revenues and whether such tax exemptions could lead to unintended consequences within the broader financial aid and education funding framework.