The resolution urges Congress to amend the tax code to permanently exclude all forms of discharged student loans from federal income taxation. Currently, federal law mandates that income from discharged debt is taxable unless specific exceptions apply. While certain student loans forgiven through programs like Teacher Loan Forgiveness and Public Service Loan Forgiveness are exempt, other forms of discharge, such as those resulting from Income-Driven Repayment Plans after 20 or 25 years, remain subject to taxation. Additionally, the discharge of student loans due to death or disability is only exempt from tax for a limited period, specifically from December 31, 2017, to January 1, 2026.

The resolution highlights the financial burden placed on borrowers who have their student loans forgiven but are still required to pay federal income tax on the forgiven amount. It argues that eliminating this tax liability would significantly benefit those in need of debt relief. Therefore, the Senate of New Jersey calls on Congress to reassess the tax treatment of discharged student loans and to make the current exemptions permanent, thereby alleviating the tax burden on borrowers. Copies of the resolution will be sent to relevant congressional representatives and federal officials.