Following Requests from Murray, Wyden, Durbin: IRS, Treasury Expand Tax Relief for Defrauded Student Loan Borrowers

Broad guidance extends tax relief for defrauded student borrowers who took out federal and private loans to attend predatory colleges following multiple requests from Sens. Murray, Wyden and Durbin

Over 18,000 students across the country will receive tax relief for discharged loans taken out to attend predatory colleges

WASHINGTON – Today, U.S. Sen. Patty Murray, ranking member of the Senate Health, Education, Labor, and Pensions (HELP) Committee and Senator Ron Wyden (D-OR), ranking member of the Senate Finance Committee, and Senator Dick Durbin (D-IL) released the following statement after the Internal Revenue Service (IRS) and Department of the Treasury (Treasury) issued expanded tax relief guidance to defrauded student loan borrowers who have taken out federal and private student loans to attend predatory colleges, like ITT Tech. The broad guidance, which prevents borrowers from having to claim student loan discharges as income, was issued following multiple requests from Sens. Murray, Wyden, and Durbin for the IRS and Treasury to extend relief to prevent all cheated student loan borrowers from owing taxes on their debt relief.

“Students who have been cheated out of their savings and education by a predatory for-profit college have been through enough. It makes absolutely no sense to count these loans as taxable income, creating yet another financial burden for these students. Though it took far too long, I’m glad that the IRS and Treasury Department took this step to protect these defrauded student loan borrowers from paying yet another unnecessary bill,” said Senator Murray. “This is welcome news for those who have received a loan discharge, but there are still far too many cheated students stuck with a worthless degree still waiting for relief.”

“Students who have been defrauded by shuttered scam colleges should not be hit with massive tax bills when their loans are forgiven. I’ve long pushed for students to get the relief they deserve and am thrilled the Treasury Department has taken this step,” said Senator Wyden. “Students will finally be able to turn the page and build a better future without the threat of a tax bill that could run into the tens of thousands of dollars.”

“Today’s announcement is good news for around 500 Illinois ITT Tech borrowers who no longer have to worry about their loan discharge being taxed.  It also protects future borrowers receiving certain discharges from facing a surprise tax liability.  I appreciate the willingness of the IRS and Department of Treasury in working with us to solve this issue for students,” said Senator Durbin.

In September, 2018, Sens. Durbin and Wyden sent a letter to IRS and Treasury asking them to clarify that fraudulently issued student loan debt taken out by former ITT Tech students will not be considered income for federal tax purposes. In July, 2018, Sens. Murray and Wyden sent a letter to IRS and Treasury urging them to clarify that students who have been defrauded by the now-defunct Corinthian Colleges do not owe taxes on their debt relief. The IRS had already issued guidance that relief from federal student loans is not taxable, but Sens. Murray and Wyden urged the IRS to do the same for students with private loans.

###