Do We Have To Tax Student Debt Forgiveness?

Student debt forgiveness is gaining traction among Democrats, with Senate Minority Leader Chuck Schumer calling on Joe Biden to forgive $50,000 of student debt via executive action during the first 100 days of his Presidency — that is, to adopt Senator Warren's plan from the primary.

Last night, Jason Furman—one of President Obama's top economists—tweeted that he opposed student debt forgiveness largely because debt forgiveness could be taxable income, undermining its goals. But, as others pointed out, Biden's Treasury Department would have authority over whether or not debt cancellation would be taxable income. Treasury has already provided a safe harbor for student loans that are cancelled through lawsuits or borrower defense to repayment (like when students were defrauded by predatory, for-profit colleges). You can read a paper by Georgetown Law Professor John R. Brooks arguing that Treasury has the statutory authority to exclude student debt cancellation from taxable income here.

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