Stimulus Bill Would Make It Easier To Forgive Student Loan Debt From Harlem To Hawaii

March 12, 2021

The final $1.9 trillion stimulus bill being taken up by the House of Representatives doesn’t forgive any student loan debt.

But one of its provisions would make forgiving that debt less costly to borrowers.

First off, how does student loan debt forgiveness work?

Currently, student loan debt is most commonly forgiven through occupational relief or with a student loan forgiveness program.

But, under the bill, if and when the government decides to forgive a portion of student loan debt, the forgiven debt would not be taxable.

Assuming the House passes the measure and President Biden signs it into law — which are pretty safe assumptions at this point — any student debt discharged through the end of 2025 wouldn’t be taxable.

The provision was added to the stimulus legislation by Sen. Elizabeth Warren (D-Mass.) and Sen. Bob Menendez (D-N.J.).


The lawmakers say the average student borrower who earns $50,000 in income would save approximately $2,200 in taxes for every $10,000 of forgiven student loans.

The lawmakers say the average student borrower who earns $50,000 in income would save approximately $2,200 in taxes for every $10,000 of forgiven student loans.

“Now, when student loan borrowers get relief, they will not be burdened with thousands of dollars in unexpected taxes,” Warren said. “This change clears the way for President Biden to use his authority to cancel $50,000 in student debt to provide a massive stimulus to our economy, help narrow the racial wealth gap, and lift this impossible burden off of tens of millions of families.”

Unclear how much debt will be forgiven

While Warren and other progressives have pushed for the $50,000 figure, Biden has yet to express support for forgiving that level of student loan debt.

At the moment, the administration appears to support writing off up to $10,000 in debt.

At the moment, the administration appears to support writing off up to $10,000 in debt.

It’s unclear whether Biden is prepared to forgive student loan debt through an executive order, which Warren says he can do.

White House News Secretary Jen Psaki, when pressed on the issue last month, said the White House would welcome Congress accomplishing that legislatively.

Such a move would involve another round of massive government spending — on top of the $1.9 trillion bill about to be signed into law — since the U.S. government would essentially pay the “forgiven” loans.

Such a move would involve another round of massive government spending — on top of the $1.9 trillion bill about to be signed into law — since the U.S. government would essentially pay the “forgiven” loans.

According to Warren, more than 43 million Americans hold a combined $1.6 trillion in federal student loan debt, and she says many were struggling to make payments even before the current pandemic brought the economy to a halt.


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