Forgiven loans will be tax free thanks to Pascrell championed legislation
Tags: Education
U.S. Rep. Bill Pascrell, Jr. (D-NJ-09), New Jersey’s only member of the tax-writing House Ways and Means Committee, today praised President Biden’s historic executive action to forgive up to $20,000 of student debt for millions of young Americans. The forgiven loans will not be subject to income tax thanks to the Student Loan Tax Relief Act (H.R. 1546), legislation co-led by Rep. Pascrell which was included in the American Rescue Plan signed into law by President Biden in March 2021. Pascrell had also called on President Biden to extend the federal student loan payment pause in July.
"Our government exists to improve and do good in Americans' lives," said Rep. Pascrell. "For tens of millions of Americans carrying debts to pay for their educations, the burden can be crippling. This a watershed, historic action by our President. I was proud to lay the foundation for freeing student borrowers from the weight of heavy taxes that comes with this relief and push for an extended student loan payment pause. We are today giving millions of Americans the opportunity to continue life with a cleaner slate. I thank my colleagues Senator Bob Menendez and Representative Jimmy Gomez for their leadership. This is not about handouts like the other side says. This is about empowering young Americans so they can invest in their futures. So many lives can be changed for the better through today’s announcement and our plan to make loan forgiveness tax-free."
Under previous law, most student loan forgiveness, including forgiveness through federal income-driven repayment plans, is treated as additional taxable income. This often pushes borrowers into higher tax brackets and leaves them saddled with a crippling tax payment on their forgiven loans. The Pascrell-Gomez-Menendez bill excluded the full or partial forgiveness of any college loan between December 31, 2020 and January 1, 2026 from a borrower’s income. This relief applies to public, private, and institutional loans.
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