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I.R.S. Exempts Some Forgiven Student Loans From Taxes

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In a decision that will bring relief to tens of thousands of student loan borrowers, the Internal Revenue Service has expanded the pool of people who will not have to pay taxes on the balance of their forgiven loans.

The I.R.S. said its ruling would provide “appropriate” relief to borrowers by waiving taxes on both federal and private loans that are forgiven because their schools misled them or closed abruptly. Such borrowers could otherwise be left with cripplingly high tax bills.

The decision announced Wednesday expands an exemption that was granted to borrowers at Corinthian Colleges and the American Career Institute, two failed for-profit schools that stranded their students with incomplete degrees and credits that were hard to transfer. In those circumstances, the Education Department allows borrowers to have their federal loan debts eliminated through its Closed School Discharge program.

That program was flooded with new applicants after the sudden closure of more than 40 campuses operated by Dream Center Education Holdings, which imploded last year. The schools failed after Dream Center improperly withheld millions of dollars in federal aid money that was owed to students and used the cash to cover operating expenses. More than 25,000 students were affected by the closure.



Source Site> NewYorkTimes

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Genre: news

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