The law, if passed, would apply to families after the death of their child, as well as, Americans who develop permanent disabilities.
A new bill is being introduced to alleviate a grieving section of people currently responsible for student loans. The reintroduced legislation by Sens. Chris Coons, D-Delaware; Angus King, I-Maine; and Rob Portman, R-Ohio, sets out to eliminate a student loan tax penalty. The law, if passed, would apply to families after the death of their child, as well as, Americans who develop permanent disabilities.
The federal government forgives certain federal student loans in these cases, however, the IRS treats the student loan forgiveness as income. When the average amount of debt that students have stacks up to $30,000 this can result in having to pay thousands of dollars in tax liability. The Stop Taxing Death and Disability Act would eliminate this tax. These two groups are already grieving and experiencing high costs for their unfortunate circumstances.
Congressmen Peter Roskam, R-Illinois; and Ron Kind, D-Wisconsin, are re-introducing a House companion bill. Sens. Johnny Isakson, R-Georgia; Debbie Stabenow, D-Michigan; John Hoeven, R-North Dakota; Patty Murray, D-Washington; Cory Gardner, R-Colorado; Tom Carper, D-Delaware; Susan Collins, R-Maine; Tim Kaine, D-Virginia; Richard Blumenthal, D-Connecticut; and Dianne Feinstein, D-California, also joined as original co-sponsors of the bill.
The bill was introduced originally April 14th, 2016. A summary of the bill says:
This bill amends the Internal Revenue Code to exclude from the gross income of an individual the discharge of student loans or private education loans due to the death or disability of the student.
The bill also amends the Higher Education Act of 1965 to require the Department of Education (ED) to discharge the liability on loans that parents received on behalf of a student who: (1) has become permanently and totally disabled, or (2) is unable to engage in any substantial gainful activity due to a physical or mental impairment that can be expected to result in death or has lasted or is expected to last continuously for at least 60 months. (Under current law, ED is required to discharge the loans to parents if the student dies.)
The bill has bipartisan support and has been reintroduced because of the increase in outreach from constituents around the country. Many individuals are shocked and blindsided by these extra charges they didn’t expect after experiencing a death in the family or injury resulting in permanent disability.
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