Tax Policy – House Companion Bill Introduced to Stop Taxation of Forgiven Student Loan Debt Due to Disability or Death

Last week, Reps. Peter Roskam (R-IL), Ron Kind (D-WI), Ryan Costello (R-PA), and Chellie Pingree (D-ME) introduced H.R. 5204, the Stop Taxing Death and Disability Act. H.R. 5204 is the House companion bill to S. 2800,introduced in April 2016 by Senators Chris Coons (D-DE), Angus King (I-ME), and Rob Portman (R-OH). The bills would end federal taxation of discharged federal student loans under the “Total and Permanent Disability(TPD)” standard or in the event of the death of a borrower. Under current law, federal student loan debt forgiven in these situations is considered income for tax purposes. As a result, borrowers who have their federal student loan debt forgiven due to a qualifying disability, and families of borrowers who die, can be charged tens of thousands of dollars in taxes. The Arc supports H.R. 5204 and S. 2800, which will end this unnecessary and harmful tax provision. H.R. 5204 was referred to the Committee on Education and the Workforce and the Committee on Ways and Means.

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