Bill Ends Student Loan Tax Penalty for Families Following Death/Disability

U.S. Senators Rob Portman (R-OH), Chris Coons (D-DE), and Angus King (I-ME) have re-introduced bipartisan legislation to eliminate a tax penalty levied on student loans forgiven for families after the death of their child.

The bill also includes Americans who develop permanent disabilities and allows a parent whos child develops a total and permanent disability to qualify for student loan discharge.

In a press release issued by Senator Portman’s office, officials acknowledge that the federal government forgives certain federal student loans in the case of death or disability of the borrower, but note the IRS treats the cancelled debt as income.

This means, families can then end up facing tens of thousands of dollars in immediate tax liability.

The Stop Taxing Death and Disability Act eliminates what proponents call an unfair tax.

“Families like the Carducci family of Stubenville, Ohio, who have a child who has become permanently and totally disabled are going through unimaginable grief,” Portman said. “Because of this tragic disability, they cannot afford a massive student loan bill.”

The bill has been endorsed by a more than 40 organizations including: The American Legion; Student Veterans of America; American Council on Education; National Association of Student Financial Aid Administrators; the American Federation of Teachers; National Council of Higher Education Resources; Autistic Self Advocacy Network; Justice in Aging; United Spinal Association and the National Disability Rights Network.

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