Saturday, March 6, 2021

College debt forgiveness will be tax-free under the Senate Covid relief bill.

A new Covid relief package is set to be voted on by the Senate today. A clause in the bill will allow student loan repayment granted between December 31, 2020, and January 1, 2026, tax-free.

Although the bill does not specifically mention student debt relief, the clause stands out as a possible indicator that debt forgiveness is a high priority on the horizon.

For example, a borrower who had $10,000 in student loans forgiven would not be taxed as if they had received $10,000 more that year.

Democrats in the House and Senate have consistently encouraged Biden to use executive order to “broadly” repay up to $50,000 in federal debt, a path that Senate majority leader Chuck Schumer has emphasized Biden should pursue during his first 100 days in office.

However, Biden has consistently dismissed the concept of student debt forgiveness of up to $50,000, stating that he would only accept debt forgiveness of up to $10,000 and that he would prefer Congress to draft the legislation.


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