Senate COVID relief bill paves way for student debt forgiveness through executive action
The Senate version of the $1.9 trillion COVID-19 relief package, which cleared the chamber Saturday, was amended to remove taxes on forgiven student loan debt through 2025, the Wall Street Journal reports.
Why it matters: The provision, which was included by Democrats this week, paves the way for President Biden to forgive student debt without burdening thousands of Americans with a new tax. Biden has resisted calls from Democrats to do so via executive action, urging Congress to pass legislation instead.
- Federal law usually treats forgiven debt as taxable income. Biden's pledge to forgive up to $10,000 in debt per individual would have increased "the tax bills of many households by a larger amount than the monthly payments they would have paid on the debt for that year," former Obama administration official Adam Looney tells the Journal.
Where it stands: The House is now expected to pass the bill for President Biden to sign it into law.
- The government will lose some $44 million in revenue because of the provision, WSJ writes, citing the congressional Joint Committee on Taxation.
Details: All federal student loans are eligible, including state education loans, institutional loans, private student loans and private parent loans.
Editor's note: This story has been corrected to remove a reference to Biden promising to forgive student debt through executive action.