Real Loan Forgiveness

Both the Income-Based Repayment (IBR) and the Income Contingent Repayment (ICR) programs allow borrowers with federal student loans to make affordable monthly payments over an extended period of time, and any outstanding balance after up to 25 years of responsible repayment is forgiven. Under current law, though, the balance forgiven is treated as taxable income to the borrower, creating a tax liability that most qualifying borrowers will be unable to afford. Student loans forgiven under other programs, including Public Service Loan Forgiveness and TEACH Grants, are not treated as taxable income.

Bipartisan legislation introduced in the 111th Congress (H.R. 2492) would ensure that federal student loan debt forgiven under IBR and ICR is not taxed as income. Introduced by Representatives Sander Levin (D-MI) and Pat Tiberi (R-OH) and supported by the Obama Administration, this legislation gained 47 cosponsors in the House and was endorsed by more than 20 higher education associations, student and consumer advocates, lenders and think tanks.  TICAS is looking forward to seeing this legislation reintroduced and passed into law.  

For more information on Income-Based Repayment, see, a comprehensive resource for consumers that explains the program (as well as Public Service Loan Forgiveness), answers frequently asked questions, and has a place to sign up for email updates about important developments.

There is more to be done to tackle rising student debt. See our policy agenda for more information, and join our mailing list for future updates.