Senate Adopts Student Loan Tax Incentive Bill – “Will It Pave the Way” for Student Loan Cancellation?



The Senate on Saturday approved a $ 1.9 trillion stimulus package signed by President Biden, including student loan tax breaks, which defenders say are a critical first step towards writing off student debt.

The package’s biggest provisions include direct payments of $ 1,400 on taxpayer income of less than $ 75,000 per year, extended federal unemployment benefits of $ 300 per week through September, $ 170 billion for school openings, $ 100 billion to expand vaccine distribution; and an Extended Child Tax Credit, which can provide up to $ 3,600 per child in financial support.

Small tax reserves can have significant benefits for student loan borrowers. The legislation exempts all forgiven student loans from tax until January 1, 2026. The tax exemption is broad and covers government federal student loans, federally guaranteed student loans under the FFEL program, and private student loans.

Debt cancellation, including student loan debt, is often a taxable event for a borrower. Congress has made some exceptions, such as the forgiveness of government service loans and disability layoffs. But in other cases, debt cancellation can leave the borrower with significant (and sometimes unaffordable) tax liabilities, which reduces the financial benefits.

It was unclear whether the student loan tax break clause would survive the chaotic Senate vote, when any senator could propose amendments to the package and get a vote for or against. The Democrats in the Senate, with a minimal majority, had to maintain unity to keep most of the legislation intact. But for the most part, they did, and the provision for tax breaks on student loans was included in the final bill.

Senators Elizabeth Warren, Massachusetts and Bob Menendez, New Jersey, who supported the student loan tax clause, praised its inclusion in the final stimulus package.

“I am delighted that my bill with Senator Menendez for a tax exemption for forgiving student loans has been included in the COVID relief bill,” Senator Warren said in a tweet. “This paves the way for President Biden to #CancelStudentDebt without burdening student borrowers with thousands of dollars in unforeseen taxes. “

“I hope this will pave the way for President Biden to provide the real debt relief that many student borrowers need so badly and will give our economy a boost that benefits everyone,” Senator Menendez said in a statement.

“Student loan borrowers are desperate for help – but in addition to reducing the amount owed by borrowers, we also need to make sure we don’t burden them with an unexpected tax bill if their loans are forgiven,” said Sen. Patti Murray. (D-WA) who also supported this position. Student loan forgiveness should be tax-exempt – period – and that’s what the American Bailout Plan fulfills. “

The bill is now being sent back to the House of Representatives for a final vote, which could take place as early as Tuesday. President Biden is expected to sign the law within a week.

Advocates for student loan borrowers and progressive lawmakers are lobbying the Biden administration to accept widespread write-off of student debt through executive action. Biden indicated that he would have preferred Congress to pass a decision to ease student loan, including some level of student loan forgiveness for borrowers. Biden has supported the forgiveness of $ 10,000 student loans, but recently came out against $ 50,000 in the student loan forgiveness proposed by Democratic lawmakers and progressive activists.

In the meantime, Biden extended the current pause in the payment of most federal student loans, interest and fees until September 30, 2021. And he instructed the Department of Justice to verify the legality of writing off student debt through enforcement action.

Further reading

Here’s everyone who wants Biden to cancel student loan debt (that’s a big list)

17 state attorneys general push Biden to cancel $ 50,000 student loans, intensifying pressure campaign

Whether Biden cancels student debt will depend on these three things

Biden: I Support Cancellation of $ 10,000 Student Debt and “Interest Charge”

Biden opposes the forgiveness of the $ 50,000 student loan, but instead supports that amount

Could these student loan borrowers be excluded from Biden’s pardon?

Can Biden Cancel Private Student Loans? 3 options


Source link