(#DIW Podcast) #Education, Loan Forgiveness, and #Disability (Or why we need S.2800 the Stop Taxing Death and Disability Act)

This is a Day in Washington #Disability #Policy Podcast.

Audio File: (forthcoming)

PriceofEducationStudentDebt

Price of Education = Student Debt Image: Student with Ball and Chain labelled Debt

Hello and welcome to Day in Washington, your disability policy podcast. I’m your host Day Al-Mohamed working to make sure you stay informed.  Today, I want to talk about the President’s Student Aid Bill of Rights, and Senate Bill 2800, the Stop Taxing Death and Disability Act.

One of the areas where there has been significant policy attention in the last couple of years has been the cost of higher education and the crushing amount of debt that students are graduating with.

So last year, the President signed a memorandum to make it a little bit easier young people to pay off their educational loans and promoted a Student Aid Bill of Rights. (You can find out more about it in the links).

One of the key parts of that was that student loan borrowers who are totally and permanently disabled (i.e. receiving disability payments from Social Security) are eligible to have their student loans completely discharged.

If you think about it, basically, it is kind of stupid to have money coming from the government, via Social Security insurance payment, just be used to pay off another part of government, Educational loans, especially to the detriment of people with disabilities. (And as many people know, living off of Social Security insurance payments is difficult at best.)

So since December of last year the Department of Education and the Social Security Administration have been trying to match up their databases. ED sent the records of more than excess of 42 million borrowers to SSA. So far about 387,000 people have been tagged as being eligible for this program.

DebtErasedPencil

Image: The word debt being erased by a pencil

The first notices were sent out on April 18.

This is all a fine idea. In fact, it makes a lot of sense, but there is one big, bad “gotcha” that needs to be addressed.

Because you’re basically getting a monetary “windfall,” the cancellation of a loan is considered as income by the Internal Revenue service. That means thousands of dollars you owe in taxes…all at once. You’ve basically swapped out one bill for another.

If you can’t afford to pay off your educational loans because of a disability, you certainly can’t afford to pay off the thousands of dollars in taxes off of those loans if they are cancelled.

Thus was born the Stop Taxing Death and Disability Act (S.2800) from Senators Coons (D-Del.), King (I-Maine), and Portman (R-Ohio). The legislation:

  • Exempts from income tax federal and private student loans that are discharged due to the death of a child or total and permanent disability.
  • Allows a parent whose child develops a total and permanent disability to qualify for student loan discharge.

Section 108(f) of the Internal Revenue Code Congress already exempts certain cancelled student loans from income taxes so this is just adding a couple of additional categories.

Note, that the legislation isn’t just about disability, but Death and Disability. Part of that is from the story of Donald and Nora Brennen, a couple from Maine. Their son Keegan graduated cum laude from the New Hampshire Institute of Art and like most young people, he had taken out several loans to pay for school. Sadly, 6 months after graduating, Keegan died. The Department of Education forgave his loans. And then the IRS called the Brennens. They now owed more than $30,000 in federal and state taxes.

That’s the reason the Department of Education can’t just “cancel” the debt. Because of the potential taxes that would then make people with disabilities liable to the IRS. If S.2800, the Stop Taxing Death and Disability Act passes, then they could discharge the loans immediately. Boom. Gone.

Sounds like a good idea to me.

As always, I encourage you to read more and come to your own opinion.  Links are available in the comments. This is Day Al-Mohamed, hoping you continue to be well, and be informed.

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Day in Washington is a product of the Lead On Network. Comments and opinions expressed in this podcast should in no way be considered representative of opinions, statements or policies of any organizations, affiliations, or employers connected with the host. Audio production provided by Chris Wright of Wright Media.  Music is “If by Force” courtesy of the Podsafe Music Network and Twenty Twelve Records.

 

Resources

Loan Forgiveness for Permanent Disability (via Department of Education) – https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/disability-discharge or https://disabilitydischarge.com

White House Fact Sheet on Student Aid Bill of Rights: https://www.whitehouse.gov/the-press-office/2015/03/10/fact-sheet-student-aid-bill-rights-taking-action-ensure-strong-consumer-

Total and Permanent Disability Discharge for Federal Student Loan Borrowers –  https://www.aucd.org/docs/Total%20and%20Permanent%20Disability%20Discharge%20for%20Student%20Loan%20Borrowers.pdf

From the Congressional Record: Statements on Introduced Bills and Joint Resolutions – https://www.congress.gov/crec/2016/04/14/modified/CREC-2016-04-14-pt1-PgS2100.htm