2023-31: Supreme Court strikes down student loan forgiveness

The Supreme Court held today that President Biden’s student debt relief program does not comply with federal law. (Biden v. Nebraska (June 30, 2023) Case No. 22-506, ___ U.S. ___) This means that no student loans will be forgiven under this program, and tax practitioners no longer have to worry about how that forgiven debt will affect their clients’ tax returns.

The President’s Student Loan Debt Relief Plan originally announced on August 24, 2022, would have authorized the Department of Education to forgive up to $20,000 of federal student loan debt for borrowers who have received Pell Grants and $10,000 for all others. The American Rescue Plan Act expanded the student loan COD exclusion to apply to all student loans forgiven during the 2021–2025 tax years, so this forgiveness would not have been taxed as COD income for federal purposes, though some states could have taxed the income.

The President has already announced that he will find a new path to student loan relief, so it is likely that we will be discussing this issue again in the near future.

Sign up for Spidell’s 2023/24 Federal and California Tax Update and join the 18,000 tax pros who trust us to help them get ready for tax season. Click here for details.

Sign up for Spidell’s Flash E-mail — Get breaking news delivered to your inbox, plus other free analysis and information for tax professionals. Join our community and stay at the top of your game. Click here to sign up.