Washington Senator Patty Murray and Oregon Senator Ron Wyden, both Democrats, asked the IRS and Treasury Department in a letter this week to clarify that student loan relief issued to former Corinthian Colleges students should not be taxed.
The Department of Education has issued loan forgiveness to thousands of borrowers who attended the now defunct for-profit college chain. An additional settlement between the Consumer Financial Protection Bureau and Aequitas Capital Management cleared the private student loan debt of former Corinthian students.
But data from CFPB showed 47,000 Corinthian borrowers in tax year 2017 received 1099-C forms, which are required to report canceled debt as taxable income.
"Students should not be stuck with a tax bill when predatory for-profit colleges and corporations provide false or misleading information that leaves their borrowers with high levels of debt, poor job prospects, useless degrees and credentials, and in many cases, no degree at all," Murray and Wyden wrote. "And, Treasury and IRS should seek to avoid imposing substantial and unnecessary costs on taxpayers through case-by-case adjudication."