Bill could eliminate hidden tax on student loan debt


Bill could eliminate hidden tax on student loan debt

4:17 p.m. PDT July 21, 2016

The Student Loan Tax Relief Act was introduced in Washington, D.C., last week by Senator Rob Wyden and fellow sponsors. Should it pass, it would eliminate hidden tax on forgiven student loan debt.

“Congress has to do more to help families and students get a good education without also facing debilitating student loan debt,” Wyden said in a statement.  “Most don’t even realize that if they are in a position to have their student loans forgiven, the tax code looks at this as phantom income and throws a hefty tax bill their way.

“This bill aims to end this nasty unexpected tax, better positioning students to save for retirement or buy their first home after school.”

The bill amends the Internal Revenue Code of 1986 to exempt student loans discharged for any reason from being taxed as income, including through participation in the federal income-based repayment (IBR) and income-contingent repayment (ICR) loan forgiveness programs; through death or disability of the recipient; or due to fraud by an institution of higher education, known as “borrower defense to repayment,” according to the bill.

The IRS currently taxes federal student loan amounts that are forgiven through such means.

“With outstanding student debt in the United States eclipsing $1.2 trillion and slowing the economy, taxing forgiven loans defeats the purpose of alleviating the burden and further exacerbates the nation’s student debt crisis,” according to a recent press release.

The amendments made by the bill would apply to discharges of loans after December 31, 2016.

Contact Natalie Pate at, 503-399-6745 or follow on Twitter @Nataliempate or


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Natalie Pate

Natalie Pate is the education reporter for the Statesman Journal in Salem, Oregon. Natalie has previously worked for organizations and publications such as Direct Relief International, Waging Non-Violence, and Amnesty International USA. She has had stories published with USA Today, Associated Press and Ozy, among others. Natalie earned her B.A. in Politics and French and Francophone Studies (FFS) from Willamette University. During her studies, she wrote a Politics thesis titled, "No One is Dying: How and Why the U.S. Federal Government Avoids Executing Prisoners on Federal Death Row" and an FFS thesis, in French, on cannibalism in the 16th and 17th centuries. Natalie is a journalist, performer, traveler, fiction writer and more. She is working to publish her dystopian novella, "Choice," which follows a man during 24 hours in solitary confinement for allegedly committing murder. For more information on Natalie visit, like her on Facebook at, or follow Natalie on Twitter (@Nataliempate) or Tumblr (Nataliempate blog "In the Shoes of a Journalist"). Her reporting with the Statesman Journal can also be found at

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