Time to End an Unfair Tax on Grieving Families, People with Disabilities

 It simply defies all common-sense that families who lose a loved one or that a person who becomes permanently disabled would be forced to reach into their pocket and pay the IRS taxes on student loans that have already been forgiven as the result of such a life-changing event. But not only is that current law, it’s also the exact situation that hundreds of thousands of people across the country find themselves in today – including a family in Maine who first made me aware of this terrible problem. 

Donald and Nora Brennen are Topsham residents and Navy veterans. Their son, Keegan, passed away unexpectedly in 2012 from a non-traumatic brain aneurysm. Keegan was a promising young artist who had recently graduated from the New Hampshire Institute of Art, and had used federal and private student loans to finance his education. And while both the federal government and the private lender forgave the outstanding balances on Keegan’s loans, as is often common practice now, the IRS notified the Brennens that the federal tax code treats their forgiven debt as taxable income. 

 As a result, the IRS presented the Brennens with a tax bill totaling in the thousands of dollars. This shocking burden presented a devastating financial blow to the family while they were already grieving the loss of their son. The Brennens are now on a repayment plan with the IRS and have had to dip into their 401(k), and I think it’s simply unconscionable that they’ve had to go through this nightmare while dealing with the loss of their son. That’s why it’s time for this tax to go.

 Earlier this spring, I joined together with a bipartisan group of my colleagues – including Senators Rob Portman (R-Ohio) and Chris Coons (D-Del.) – to introduce the Stop Taxing Death and Disability Act. Our bill would prevent forgiven federal student loans, such as those forgiven following the death of a child or onset of a permanent disability, from being counted as taxable income by the IRS, thus saving parents like the Brennens from an additional burden during an already trying time. The legislation would also expand the existing circumstances that qualify someone for loan forgiveness, allowing parents whose child becomes permanently disabled to have loans that they cosigned forgiven by the government as well. 

 

If there is any silver lining here, it’s that the Brennens have been able to raise awareness and help inspire federal legislation to address the problem. Fixing this unfair tax policy is not only common sense, it’s just the right thing to do. I hope we can act on this bill soon so that no one else in Maine or across the country has to go through this senseless – and useless – pain.