This letter from the New York Legal Assistance Group, the National Consumer Law Center, and the Education Debt Consumer Assistance Program calls on the U.S. Department of Education to clarify that all federal student loan discharges based on borrower disability that are approved before the end of 2025 are not subject to federal income tax, consistent with federal law temporarily exempting student loan discharges from federal tax consequences.
This issue is critical because the Department of Education’s disability discharge servicer, Nelnet, has been sending borrowers notices that they will receive 1099s after the end of a 3-year post-discharge monitoring period, which could expose borrowers who receive discharges in 2023, 2024, and 2025 to surprise tax liabilities in 2026, 2027, or 2028, absent further congressional intervention.