ASSEMBLY HIGHER EDUCATION COMMITTEE

STATEMENT TO

ASSEMBLY RESOLUTION No. 95

with committee amendments

STATE OF NEW JERSEY

DATED:  JUNE 3, 2024

      The Assembly Higher Education Committee reports favorably Assembly Resolution No. 95, with committee amendments.

      As amended, this resolution urges Congress to permanently exclude all forms of discharged student loans from the federal income tax.  Federal law has traditionally required payment of the income tax on forgiven debt, except in certain circumstances.  For example, student loans forgiven for teachers and public service employees eligible for Teacher Loan Forgiveness and Public Service Loan Forgiveness programs have not been subject to the income tax.

      The federal “Tax Cuts and Jobs Act” provided that discharge of student debt on account of death or disability is also not subject to the income tax, but only if the debt is discharged between December 31, 2017 and January 1, 2026.  As a result of changes made through the federal “American Rescue Plan Act of 2021,” however, virtually all student loan debt is excluded from income tax, but only if the debt was forgiven during the time period beginning in 2021 and through the end of 2025. Beginning on January 1, 2026, borrowers receiving discharged student loans will be subject to income tax on amounts discharged after that date. The relief provided through this law has been instrumental in assisting borrowers, especially those disproportionately impacted by the economic effects of the COVID-19 pandemic. 

      This resolution therefore urges Congress to permanently exclude from the income tax all other forms of discharged student loans.

      This bill was pre-filed for introduction in the 2024-2025 session pending technical review.  As reported, the bill includes the changes required by technical review, which has been performed.

COMMITTEE AMENDMENTS:

      The committee amended the bill to reflect updates in federal tax law related to income tax treatment of discharged student loan debt, which were enacted as part of the “American Rescue Plan Act of 2021.”