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Families who've had student loans forgiven for death or disability can face a stiff tax bill.

A bipartisan bill introduced by Congresswoman Chellie Pingree to assist families who are dealing with the loss or sudden disability of a loved one passed the House Ways and Means Committee last night.  The bill, the Stop Taxing Death and Disability Act, would save families from big tax bills when federal student loans are forgiven after death or disability.  Passage by the Committee is a major step forward for the legislation, and Pingree says she hopes the full House will pass the bill by the end of the year.
 
Pingree introduced the bill with Representatives Peter Roskam (R-IL), Ron Kind (D-WI) and Ryan Costello (R-PA.)
 
Under the Higher Education Act, individuals and families can apply to have federal students loans forgiven if the recipient dies or becomes disabled to a high degree.  However, the forgiven debt is taxed as income—for many families, this can add tens of thousands of dollars in taxes. Not only are the taxes due the year the debt is forgiven, but the additional income can often bump families into a higher tax bracket, meaning that it’s taxed at a higher rate.  Pingree's bill would eliminate those taxes.
 
“This is an absolutely tragic situation.  You’re dealing with the loss of a child or your spouse becomes disabled, then all of a sudden you get a tax bill for tens of thousands of dollars," Pingree said.  “It’s just not right.  Having these student loans forgiven should offer some relief to these families, not put them in a financial hole for years to come.”
 
Pingree first introduced a bill in 2014 to provide relief for families in this situation in 2014 after hearing about the problem from the parents of Keegan Brennen of Topsham.  Keegan grew up in Maine and attended Mt. Ararat High School before studying illustration and creative writing at the New Hampshire Institute of Art, where he graduated in 2012.  The following November, he passed away suddenly at the age of 22.   His parents, Nora and Donald, suddenly owed over $25,000 in federal taxes and over $6,300 in state taxes after student loans they had co-signed for Keegan were forgiven. Donald and Nora Brennen are Navy veterans and have spent the last 3 1/2 years trying to fight this tax issue, while still trying to find space to mourn their son’s death.
 
“We are truly grateful to Congresswomen Pingree and Senator King for hearing our story. Keegan would have been proud of what is being done.  As veterans of the U.S. military, we feel that it is our duty to continue to fight to make things better for our country," Nora Brennan said.
 
The bill is a companion to legislation introduced by Senator Angus King earlier this year.