By WVUA 23 Digital Reporter Shanaya Daughtrey
TUSCALOOSA, AL– When President Joe Biden signed the COVID-19 relief package earlier this month, the tax break on college debt cancellations potentially removed a blockage to forgiving student loan debt.
The COVID-19 tax break provision will not count any debt forgiven from Dec. 31, 2020, to Jan. 1, 2026, as income.
According to an article published by ABC News, under one of the existing forgiveness programs, the amount forgiven is reported to the IRS as income and taxed according to the borrower’s current tax bracket.
For instance, in an example presented by Mark Kantrowitz, if a student had $48,000 in student debt canceled by the government, they would only have to write the IRS a check of $11, 520.
“While the news does not personally affect me, I know many people with college debt appreciate any type of relief during this pandemic,” said University of Alabama senior Madison Flores. “On top of the stress of completing a degree online college students were excluded from the first two stimulus packages which meant they’ve gone almost a whole year of the pandemic with no direct aid.”
The tax measure was adapted from the Student Loan Tax Relief Act, a provision that would make any college loan forgiveness tax-free, assuring borrowers that they will not be burdened with thousands of dollars in surprise taxes.
With 43 million Americans having a combined total of $1.6 trillion in federal student loan debt, this tax provisional will help aid those struggling to make payments.
This student loan tax relief legislation, that was introduced by Sen. Elizabeth Warren, D-Mass. and Sen. Bob Mendez, D- N.J., opens the door for President Biden to cancel at least $50,000 in federal student loan debt.
Legislation of this magnitude will assist in ensuring that student loan debt borrowers are able to access loan relief without worrying about an unfair tax penalty.
“Biden’s relief package and specifically the tax break on college debt will allow the students the time to get back on their feet after this unprecedented year,” said Flores.