Good News About Public Service Loan Forgiveness

While the U.S. Department of Education finalizes its regulations for Income-Based Repayment (IBR) and Public Service Loan Forgiveness (PSLF), we've been active on other fronts to make sure that these programs really work for borrowers.  For example, because the IRS treats most forgiven debt as taxable income, we asked key Members of Congress to seek clarification about the tax status of debt forgiven after 10 years in PSLF or 25 years in IBR. Just last week the U.S. Department of Treasury confirmed that participating in PSLF will NOT create new income-tax liabilities for borrowers, which is great news.

In response, Congressman Sandy Levin (D-MI) -- who has been leading this effort -- introduced a bipartisan bill to ensure that debt forgiven through IBR and Income-Contingent Repayment (ICR) will get the same common-sense treatment.  Responsible borrowers with modest incomes should not be hit with potentially crippling tax bills because of forgiven student loans. 

Letter in support of H.R. 7098

H.R. 7098

Bankruptcy and the Bailout

The $700 billion bailout bill that Congress is negotiating currently includes a provision to enable the U.S. Treasury to buy troubled assets, including private loans, from student loan providers. In a letter to the leadership of the House and Senate banking committees, we joined 12 other organizations in urging that such a step not be taken without also including relief for struggling borrowers. If student loan providers get bailed out, student loan borrowers should not be treated so severely in bankruptcy.

If bankruptcy protection for private student loan borrowers is not ultimately included in the bailout bill, we will continue to fight for it in the next Congress.

Read the letter

(This message was sent to the Project on Student Debt mailing list on September 30, 2008.)