TAXPAYERS QUALIFY FOR STUDENT LOAN RELIEF
January 28, 2020 - Douglas Myser
Taxpayers qualify for student loan relief. The IRS extended its safe harbor relief from recognizing cancellation of debt (COD) income for students whose loans were discharged either because their schools were closed or as a result of some type of fraud (Rev. Proc. 2010-11). This revenue procedure establishes a safe harbor extending the relief provided under Rev. Procedure 2015-57, 2015-51, 2017-24 and Rev, Procedure 2018-39, to additional taxpayers who took out Federal or private student loans to finance attendance at a nonprofit or for profit school. Relief is also extended to any creditor that is an applicable entity, as defined by section 6050P of the Internal Revenue Code and the IRS regulations thereunder, that otherwise would be required to file information returns and furnish payee statements pursuant to section 6050P of the Code for the discharge of any indebtedness within the scope of this revenue procedure. Taxpayers qualify for student loan relief.
Under the Higher Education Act of 1096, the Closed School discharge process allows the Department of Education to discharge a Federal student loan obtained by a student or by a parent on behalf of a student, who was attending a school at the time it closed or who withdrew form the school within a certain period of time it closed or upon the closing date. The IRS had earlier provided relief for students from the Corinthian College or American Career Institutes Inc. whose loans were discharged by the Education Department under the "Closed School", or "Defense to Repayment" discharge process. Rev. Procedure 2018-39 provided relief for students from those schools whose loans were discharged under a settlement of a legal cause of action resolving various allegations of unlawful business practices, including unfair, deceptive, and abusive acts and practices.
The IRS recognizes that many of these students would qualify for forgiveness from recognizing COD income under other Code provisions, such as the insolvency provision, but wants to make it easier for students to determine whether they qualify for exclusion.
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