Will President Biden Really Get Rid of Your Student Loan Debt?

There’s more rumor than news right now, but here’s what Biden can legally do and what he can’t — and maybe shouldn’t.

By Joe Pye

When Joe Biden is sworn on Wednesday as the nation’s 46th president, he’ll be on the clock for all his campaign promises. One of those was about wiping out student loan balances for thousands — or was it millions? — of Americans.

“It’s holding people up,” Biden said on the campaign trail. “They’re in real trouble. They’re having to make choices between paying their student loans and paying their rent, those kinds of decisions.”

Now Biden has to make some tough decisions. On the campaign, he promised to forgive…

• $10,000 of federal student loan debt for all borrowers.
• The balance of borrowers who attended public colleges or Historically Black Colleges and Universities earning less than $125,000 a year.

Biden’s latest was left out the latest economic stimulus plan, despite the fact he’s still in favor of it. Before moving forward with student loan forgiveness, he needs to consider these complications.

Will student loan debt become tax debt?

Forgiving student loans is easy compared to figuring out the tax implications. That’s because the IRS considers any forgiven debt to be “earned income” — which means it’s taxable.

How much? Forbes reported that you could owe 20 percent of your forgiven student loans.[1]

Biden has said he’ll fight to amend the current tax codes, saying, “Americans shouldn’t have to take out a loan to pay their taxes when they are finally free from their student loans.”[2] But rewriting complex tax codes takes time — and Congress needs to approve them. What are the odds of that happening in our current partisan climate?