WASHINGTON, D.C. –Congressional Progressive Caucus Co-Chairs Rep. Raúl M. Grijalva (D-AZ) and Rep. Keith Ellison (D-MN), and Rep. Marcia Fudge (D-OH) sent a letter today to Secretary of the Treasury, Jacob J. Lew, concerning disabled students, and their eligibility to have student loans forgiven. To read the full letter, see below and the attached file.
December 16, 2016
The Honorable Jacob J. Lew
Secretary of the Treasury
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Dear Secretary Lew:
We write to urge the Treasury Department to take immediate action to clarify that loans forgiven as a result of total and permanent disability do not qualify as taxable income. We commend the Obama administration’s actions to alleviate the crushing burden of student debt for many Americans and ask Treasury to act accordingly with these efforts.
We appreciate efforts to proactively identify and assist federal student loan borrowers who are eligible for relief as the result of total and permanent disability. The Department of Education (ED) and the Social Security Administration (SSA) identified nearly a half million Americans who are eligible to have their loans canceled through the total and permanent disability discharge process. Unfortunately, the good work of the ED and the SSA will be of little help if the Treasury Department does not issue guidance to ensure that the total amount of federal student loan debt cancelled for these individuals does not result in taxable income.
Without action, recipients of total and permanent discharge will be issued 1099-Cs, stating that they have taxable income for the total amount of the forgiven loan. Additionally, this could trigger garnishment of Social Security disability benefits or other federal benefits, despite the fact that many individuals whose loans are forgiven will almost certainly not owe federal income taxes. Reports suggest eighty-four percent of those whom ED and SSA have identified as eligible for loan cancellation have no annual earnings. Without Treasury’s guidance, these vulnerable individuals will have to file complicated returns despite not having any other taxable event.
The Government and affected individuals can avoid unnecessary paperwork and hardship by the issuance of guidance. Moreover, Treasury has already provided this guidance in other cases of this type. In December, 2015, for example, when widespread fraud was found within the Corinthian Colleges, Inc., for-profit colleges, the Treasury Department issued a blanket waiver clarifying that forgiven loans from those institutions did not result in taxable income.
The Department of the Treasury has the obligation to issue a similar waiver to assist people with total and permanent disabilities. We urge that this action be taken immediately to fully protect individuals with disabilities from an inappropriate tax burden.
Thank you for your attention to this important matter.
Member of Congress
Raúl M. Grijalva
Member of Congress
Member of Congress
The Congressional Progressive Caucus (CPC) is the largest caucus within the House Democratic Caucus, with over 70 members standing up for progressive ideals in Washington and throughout the country. Since 1991, the CPC has advocated for progressive policies that prioritize working Americans over corporate interests, fight economic and social inequality, and promote civil liberties. The CPC champions progressive policy solutions like comprehensive immigration reform, a $15 national minimum wage, fair trade, gun violence reform, debt-free college, and making the federal government a Model Employer.