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 specified exceptions apply. While certain student loans forgiven under 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 calls for a reassessment of the tax implications surrounding discharged student loans, advocating for a more equitable approach that would alleviate the tax burden on those in need. The Senate of New Jersey seeks to communicate this position to Congress, the Secretary of the U.S. Treasury, and the Commissioner of Internal Revenue, emphasizing the importance of making these tax exclusions permanent.