Tag Archives: Legislation

Bill to Terminate Department of Education

The first question that went through my mind when I saw in the news that there is a bill pending in Congress to terminate the Department of Education:

What will happen to my student loans?

Here is a link to the bill that was introduced by Representative Thomas Massie (R-Kentucky).  The Congress.gov website does not have the text of the bill available yet.  But, a local news outlet reported that this Republican sponsored bill proposes termination of the Department of Education on December 31, 2018.  The article goes further to explain the past history of legislators trying to dismantle the Department of Education with little success.

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Impending Tax Bomb of Student Loans

I posted about this last year, but I think it bears repeating.  Back in 2015, law professor Gregory Crespi coined the term “tax bomb” in reference to student loans.  A “tax bomb” is oftentimes unexpected and seen when a taxpayer has surprise income that will be taxed.  It can blow up a taxpayer’s taxes and result in money owed to the IRS.  This concept of a “tax bomb” is also seen in retirement planning.

In the context of student loans, a “tax bomb” can be when a taxpayer has student loan debt that gets forgiven either through the Public Service Loan Forgiveness Program (PSLF) or Income Based Repayment (IBR).  But, it becomes a bomb when the cancellation of student debt is viewed as income under 26 U.S.C. sec. 108(f) which results in a tax and requires payment to the federal government.  However, in Professor John Brooks’ Tax Notes article, he confirmed that current interpretation allows an exception for PSLF, but not IBR.  This means that if you have student loans forgiven under the PSLF program, then you will presumably not have to pay taxes.  But, if you have student loans forgiven under IBR, then you may be stuck with a tax bill.  The Treasury Department issued guidance on the issue in Rev. Proc. 2015-57.  Brooks’ article does a great job explaining the nuances.  Check it out here.

On a happier note, Senator Bob Menendez (D-NJ), Senator Elizabeth Warren (D-MA), Senator Ron Wyden (D-OR), Senator Debbie Stabenow (D-MI), and Senator Cory Booker (D-NJ) introduced the Student Loan Tax Relief Act which would exclude income created from the cancellation of student debt or student loan forgiveness.  The bill is available here.

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New Bill Addressing the Tax Liability for Student Loan Debt Forgiveness

One of the biggest technicalities to student loan debt forgiveness is the taxability of the forgiven debt.  This means that a person could work in public interest for 10 years or have a low salary for 25 years and get all their consolidated student loan debt forgiven (and have affordable payments through out the repayment period), but the forgiven debt will be treated as taxable income.

Depending on how big that forgiven debt is, the tax liability may be completely unaffordable to the student loan borrower.  Thus, this is one of the big potential flaws or big red flags to student loan debt forgiveness.

Recently, Senator Jeff Merkley (D-Ohio) introduced a bill called the Income-Based Repayment Debt Forgiveness Act.  Most importantly, the Act “would ensure that students are not taxed on debt that is forgiven at the end of this process” under Merkley’s new repayment system.

Merkley goes further to explain that under the Income-Based Repayment Debt Forgiveness Act and his proposed Access to Fair Financial Options for Repaying Debt (AFFORD) Act, there would be a two type repayment system.  The two type system has some similarities to the current student loan loan repayment system and the same premise as an income based repayment plan, but it would get rid of the public service loan forgiveness program and removes some of the other repayment plans.

Merkley describes the AFFORD Act in a press release on August 5, 2015 excerpted below.

“One would be the traditional fixed repayment plan, in which borrowers pay the same amount each month over a set period of time to pay off the full balance and interest on the loan. 

The other would be an income-based repayment plan modeled on the current Pay As You Earn (PAYE) model. Under the PAYE model, the borrower would pay 10% of his or her discretionary income and have any remaining debt forgiven after 20 years.”

The full text of the bill is available here.

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Invest in Legal Aid

My five seconds of fame is in this video about legal aid in Massachusetts.

The clip was created by the talented Gary Yordan, who is CEO of the Zachary Group, and Pat Swansey, who is the graceful, eloquent, and miracle-worker Program Director at Massachusetts Legal Assistance Corporation.  It was truly a pleasure working with these two amazing individuals!

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Legal Aid Legislative Briefings at the Massachusetts State House

Earlier this week on Monday, February 10th, I spent the morning at the Massachusetts State House for the 13th Annual Civil Legal Aid Constituent Services Briefing.  Legal aid advocates from across the state spoke to leaders, aides, and state house staffers about issues that impact people.  Specifically, the Massachusetts Legal Assistance Corporation brought in attorneys to focus on unemployment, the impact of the American Care Act on health care, housing, foreclosures, homelessness, domestic violence, and government benefits.  I have included a few pictures from the morning below.

Weyonnoh Nelson-Davies, Mehda Makhlouf, and I answering questions at the Community Legal Aid table at the State House.

Weayonnoh Nelson-Davies, Mehda Makhlouf, and I answering questions at the Community Legal Aid table at the State House.

Mehda Makhlouf talking about Medicare, Medicaid, MassHealth, Commonwealth Connector, and other health care items.

Mehda Makhlouf talking about Medicare, Medicaid, MassHealth, Commonwealth Connector, and other health care items.

Marc Potvin, from Neighborhood Legal Services, informing others about foreclosure law.

Marc Potvin, from Neighborhood Legal Services, informing others about foreclosure law.

Weayonnoh Nelson-Davies speaking about government benefits.

Weayonnoh Nelson-Davies speaking about government benefits.

In addition to meeting legislative staffers from offices based out of Worcester and Hampden County, I met Christine Lee who is a reporter for Channel 22 News.  I would just like to note that she was a lawyer before she became a journalist.  Follow her on Twitter at @christinenews .

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New Proposed Legislation Would Require Warrants for Email Searches

The Senate Judiciary Committee is pushing legislation that would require police officers to obtain a warrant before accessing emails.  The Senator from Vermont who is supporting the bill, Senator Patrick Leahy (D-Vt), has secured a strong democratic vote and is currently pushing for republican favor in order to fast track the bill.  Read more about this new privacy bill from The Hill article available here.

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Massachusetts Foreclosure Bill (Senate)

On Thursday, June 7, 2012, the Massachusetts Senate passed a bill “designed to prevent unnecessary foreclosures.”  Boston.com posted a brief article on the bill here.

Unlike the House’s version of the foreclosure bill, the Senate’s version of the bill included a mandatory mediation program for borrowers facing a foreclosure.  Because of the differences between the House and Senate bills, the two foreclosure bills will be sent to Conference Committee.

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Massachusetts Foreclosure Bill (House)

The public, government, banks, and majority of residents have acknowledged that the foreclosure crisis has gotten out of hand in Massachusetts.  In an attempt to manage the foreclosure crisis, legislation was written and a bill is now pending in the House.  The bill, number is HB1219 (HD1447) for the 2011-2012 session, is primarily sponsored by Representative Steven M. Walsh (D).

Massachusetts Attorney General Martha Coakley wrote a Boston Globe opinion piece regarding the foreclosure crisis, the HomeCorps program (to be established), loan modifications, principle reduction, and the pending legislation.  The article titled, “Two-part cure for unnecessary foreclosures,” is available here.  Specifically, AG Coakley wrote:

Despite agreement on these principles, loan modifications currently do not occur on the scale necessary. Our office met one homeowner in East Boston who purchased his condominium using a $147,000 loan. He lost his job and contacted the bank to request a modification that would require him to make monthly payments equivalent to a loan of $90,000. The bank refused, foreclosed on his property, and later resold that property at just $40,000, well below the value of an affordable revised loan. It made no economic sense for the bank to put this borrower out on the street. Unfortunately, his story is one of many.

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