The President released his proposed budget yesterday, which included a number of items related to student loans. We are pleased to see that for the first time, the President’s budget proposes to eliminate the taxation of all loans forgiven or canceled due to a Department of Education program, including disability and death discharges. (See page 124 of the “Green Book.”) The National Consumer Law Center has been writing on behalf of its low-income clients about the wrongheadedness of taxing disability discharges for many years (see here, here, and here). These borrowers deserve relief from this ridiculous tax burden imposed on individuals who have already demonstrated that their disability prevents them from supporting themselves economically. While this is far from a sure thing, it is great to see the administration give this issue the attention it deserves. Now it is time for Congress to fix this problem once and for all.
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