When it comes to the government, especially the Internal Revenue Service (IRS), there are always strings attached.
To young people who are currently overpaying for rent, gas, groceries—all while trying to support themselves off of their gender studies and art history degrees they definitely overpaid for—forgiving student loan debt sounds like a phenomenal policy. The politicians promoting such policy are real people who understand students’ struggles and genuinely care, right?
Not so fast.
Typically speaking, you will receive an official letter in the mail confirming the forgiven debt. It is what the IRS calls a “Form 1099-C, Cancellation of Debt”. But a 1099 form is how you record income that is subject to taxation… oh.
The IRS explains that “in general, if you have cancellation of debt income because your debt is canceled, forgiven, or discharged for less than the amount you must pay, the amount of the canceled debt is taxable and you must report the canceled debt on your tax return for the year the cancellation occurs”. In other words: unless the Biden administration specifically outlines that the cancelled debt may be excluded from your gross income, then it is taxable.
Y’all really thought the government was going to let you skate away with ten grand?
It is a brilliant policy from a governmental perspective: hoodwink the youth into thinking the administration truly cares about them and their financial woes. Then BAM, happy April 15th!
Nothing is ever as good as it seems, particularly when the government appears uncharacteristically generous. Always read the footnotes on policy; do not take politicians at their word. No matter how many times they claim to have your best interests at heart, they probably do not.