Student Loans – Pandemic Bill Tees Up Student Loan Debt Tax Relief Boost Zoom Fintech
href = “https://www.law360.com/tax-authority/articles/1362534/#”> Alan K. Ota
A vote expected in the House this week to erase President Joe Biden’s $ 1.9 trillion pandemic response plan would launch a campaign by Democrats to offer a mix of tax breaks and other aid to help young people workers settle their student loan debts.
Senate Majority Leader Chuck Schumer, DN.Y., spoke on Saturday after the Senate passed pandemic response legislation that included tax relief for federal debt relief on loans students. (AP Photo / J. Scott Applewhite)
A temporary provision to ease the tax burden of student debt passed the Senate 50-49 Saturday as part of HR 1319, the 2021 tax reconciliation bill that contains Biden’s US bailout. The House is expected to follow suit this week and send the bill to the president’s office. The provision would allow a taxpayer to exclude from gross income the effects of measures taken by the government to cancel or reduce federal student loan debts until 2025.
Key players on both sides said enacting the proposed tax exclusion for recipients of any potential federal student loan debt forgiveness would pave the way for a fight between the parties. There are competing proposals to help the 44 million borrowers facing more than $ 1.5 trillion in student loan debt, according to a study by the Federal Reserve Bank of New York.
As Democrats advocate for a mix of debt cancellation and tax breaks to help workers with student loans, Republicans have called for a focus on incentives designed to encourage full repayment of the debt. The two sides also disagree on other elements of the pandemic response program, including a tax hike for multinationals, incentives to undocumented workers with individual tax identification numbers and a temporary extension for one year of the child tax credit, with periodic installments.
Senator Chris Coons, D-Del., A close ally of Biden, said the administration was sure to prioritize the president campaign pledge for $ 10,000 in student loan remission. But he said there could be delays before the administration makes tough choices about whether to move towards a higher student loan debt cancellation goal of $ 50,000 per borrower set. by some liberals, and to provide such assistance through executive action or legislation.
He said the administration’s strategy to help student loan borrowers may require more time to consider ideas and for negotiations. Measures to help student loan borrowers could be on the table for possible inclusion in a possible 2022 tax reconciliation bill for Biden’s new Build Back Better plan for economic recovery or in other regular laws.
“There are some things the administration can do to both cancel and alleviate the debt. But we need to look at more immediate relief issues today, ”Coons told Law360.
As the administration weighs different options, Senate Majority Leader Chuck Schumer, DN.Y., said he hopes this will speed up the decision to write off or write off student loan debts so that young workers can take full advantage of the tax relief contained in the pandemic response plan.
“It shows that we can do taxes to focus on student loans. It probably lets the White House know how much we care about this, ”Schumer told Law360.
“I’d rather the president do it himself,” he said, referring to the forgiveness of part of the federal student loan debt.
A White House spokesperson did not respond to a request for comment on the administration’s plans.
While Schumer has promoted a resolution with 15 co-sponsors calling for executive action to write off up to $ 50,000 in federal student debt per borrower, other Senate Democrats have said they are undecided. For example, Senator Joe Manchin, DW.Va., who helped block a deal on Biden’s proposal for an hourly minimum wage of $ 15, said he had no position, as of yet, on specific ideas for student loan relief.
” I will watch it. I want to help the students, ”Manchin told Law360.
It remains unclear whether the administration would try to settle a split within the party over the scope of student loan relief by taking executive action, or by submitting the decision to Congress. A filibuster-proof reconciliation bill with student loan debt cancellation would require the support of all 50 Democratic caucus members as well as an eventual decisive vote from Vice President Kamala Harris.
In the House, Ways and Means Committee Chairman Richard Neal, D-Mass., Said he leaned in favor of Biden’s original plan to give out $ 10,000 in loan forgiveness and clarified that it could be provided for in legislation, if necessary.
“My take on this is close to President Biden’s $ 10,000 figure,” Neal told Law360.
He underlined the passed last year a similar proposal to write off the $ 10,000 student loan debt that the Congressional Budget Office said would cost $ 45 billion over 10 years – plus $ 15 billion for a tax exemption for such assistance – in a response plan to the pandemic that died in the Senate.
As Democrats try to settle disputes over student loan debt relief, Neal said they will continue to review tax proposals to help borrowers cope with debt and counter COVID fallout. -19, respiratory disease caused by the novel coronavirus.
For their part, some Republicans in both chambers have called for a focus on measures to encourage student loan holders to repay them.
Senator John Cornyn, R-Texas, a member of the Senate Finance Committee and former GOP whip, said he and other Republicans feared the tax relief in the pandemic response bill would applies to all student loan borrowers, including young professionals with the ability to repay debts.
“Forgiving student loan debt to people who can afford it and are contractually obligated to do so is a bad idea,” Cornyn told Law360.
Despite the deep partisan division over student loan debt cancellation, Sen. Rick Scott, R-Fla., Chairman of the National Republican Senate Committee, said he was open to proposals to encourage borrowers to use their loans. own financial resources to repay student loans.
“I’m fine as long as they’re using their own money,” Scott told Law360.
Several lawmakers on both sides have said they are exploring ways to expand other incentives to help student loan borrowers.
For example, Representative David Cicilline, DR.I., said he plans to push through a proposal to increase the limit on deductions for interest payments on student loans to $ 7,500 from $ 2,500. The plan would also increase the modified adjusted gross income limit to $ 100,000, from about $ 85,000, to qualify for deductions.
But Senator Rand Paul, R-Ky., Said he hoped to revive a more ambitious proposal to simply remove the cap on deductions for interest payments on student loans.
“It would make the college tax deductible,” Paul told Law360.
Senatorial Minority Whip John Thune, RS.D., and Senator Mark Warner, D-Va., Said there could be a bipartisan push to build on a provision in the Consolidated Appropriations Act continue until 2025 a temporary expansion of the tax-exempt education assistance allowance by employers, to allow payments of up to $ 5,250 on the principal and interest of student loans.
Thune and Warner, who are members of the finance committee, said they were both studying whether to increase the limit on an employer’s student loan payments on behalf of an employee, which was on board adopted in march as a one-year temporary inducement in the Coronavirus Aid, Relief and Economic Security Act.
“Nowadays, with what it costs to go to college, I’d be open to that,” Thune told Law360.
As the two sides consider different ideas to help student loan borrowers, Ways and Means Representative Brendan Boyle, PA, urged Democrats to come up with a pragmatic plan with measures that can garner broad support. He predicted that student loan relief would be granted through executive action to avoid obstacles in the Senate and said the move should be promoted in tandem with other incentives for workers designed to gain broad support. and counter the GOP’s efforts to “label us as elitists”.
“It would be wise of us to marry this with a larger proposal to also help workers, who do not have the benefit of having a higher education,” Boyle told Law360.
–Edited by Robert Rudinger and Neil Cohen.
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