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Muratsuchi Introduces AB 461 to Provide Student Loan Debt Relief

For immediate release:

(SACRAMENTO) – Today, Assemblymember Al Muratsuchi (D - Torrance) introduced Assembly Bill (AB) 461.  The proposed measure would exempt individuals from incurring a burdensome and unfair tax liability when their student loans are forgiven under federal repayment programs. Under current law, when an individual’s student loans are forgiven, the forgiven debt is viewed as taxable income.  Individuals who qualify for federal Pay As You Earn (PAYE) and Repay As You Earn (REPAYE) loan forgiveness programs usually have a partial financial hardship and do not possess the means to make full payments on these loans.

Assemblymember Muratsuchi noted, “Student loan debt is a growing concern in our state and nation.  Higher education is one of the essential pathways by which students pursue meaningful careers and find quality jobs that pay well.  However, it is becoming increasingly difficult for students and their families to afford college without taking out student loans.  If a student graduates and is unable to pay off their loans, the debt and impact on one’s credit can place a serious financial hardship on the student. Closing this gap in the law is a sensible solution that will greatly help those who are least able to pay their student loan debt.”

Current law provides various exclusions from gross income in determining tax liability, including certain forms of student loan indebtedness which has been repaid or forgiven, under federal law, relating to income based repayment.  AB 461 would expand these exclusions to include cancelled student loan debt, as well as additional repayment plans.

AB 461 will be heard in the spring.