Pingree bill would ease tax burden on forgiven loans

7:50 PM, Feb 25, 2014   |    comments
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SCARBOROUGH, Maine (NEWS CENTER) -- When someone becomes permanently disabled or dies, their federal student loans can be forgiven. But that forgiveness can actually work against families, because of the taxes they have to pay on the forgiven debt.

Congresswoman Chellie Pingree has introduced a bill to ease that tax burden. Currently, when someone's federal student loans are forgiven, the IRS considers those loans to be income, so the family is left with a tax bill on that income that has to be repaid within one year.

It happened to Mark Sangillo of Scarborough. His wife Deb took out loans to get her teaching degree as a second career, but was diagnosed with early onset Alzheimer's and was never able to become a teacher. When her loans were forgiven, Mark received a tax bill for the loan.

"It's quite a traumatic thing when you're in the middle of a crisis," Sangillo said. "I mean obviously, if you have a disability you're facing some sort of crisis. And then to find out all of a sudden you have this surprise, and education loans are usually not small."

The bill would allow the taxes to be paid over the course of fifteen years. It would also exclude the forgiven loans from calculations for federal benefits like SNAP.



















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