PORTLAND, Maine — Maine Sen. Angus King is among a group of lawmakers backing a proposal to eliminate a tax penalty that is currently levied on student loans forgiven for families after the death or disability of the borrower.
King, an independent, says the federal government forgives some student loans in the case of death or disability, but the IRS treats the cancelled debt as income. That can result in tens of thousands of dollars in tax liability.
King, Republican Sen. Rob Portman of Ohio and Democratic Sen. Chris Coons of Delaware want to change that via enacting the Stop Taxing Death and Disability Act. They say the current rule “serves no public policy purpose.”
Congressmen are also re-introducing a House companion bill to the senate proposal.