In addition to lowering monthly student loan payments, IBR forgives any remaining debt — including interest — after 25 years of payments. Most borrowers will pay off their debt before then, but under current law, if there’s anything left after 25 years, the amount forgiven would be taxed as income to the borrower.

A bipartisan bill in the U.S. House of Representatives, H.R.2492, would prevent debt forgiven through IBR from being taxed as income. Loan forgiveness is supposed to wipe the slate clean for responsible borrowers, not create a new financial obligation.

Many of you have already taken action, helping to persuade over 20 Members of Congress to sign on in support of the bill. We need your help to bring more on board! If you haven’t already, please take a moment to urge your representative to support H.R. 2492.

If you are interested in taking action (and I really hope that you DO choose to take action), you can click over to the IBR website and use their pre-formatted web page to send a message to your Representative. Please do so and help fix a bogus loophole in this Bill!

There is a national organization called the Project on Student Debt who is really the leader in this field. They’ve helped advocate for so many beneficial new programs for student loan borrowers, not the least of which is the new public service forgiveness program that will help thousands of high debt graduates. One of the initiatives that they publicly advocate for on their website is the possibility of making student loan interest a federal tax credit as opposed to an income tax deduction; coupled with this is increasing the amount that could be credited from the current $2,500 to up to $4,000.

I recently asked the good folks over at the Project on Student Debt for an update on this initiative and this is their reply:

I’m not aware of any major progress on this. Congress is pretty focused on the budget process right now, which includes a different tax credit (for tuition). We’ll keep our email subscribers updated if anything changes, but right now I’m not aware of a legislative vehicle in the works that could move this forward in the short-term.

First and foremost, if you are interested in getting updates on student loan legislation, I encourage you to sign-up for their e-mail list (which you can do by clicking here). Second, it is a real shame that the federal tax credit for student loan interest has no champion in the Congress right now. This could be a crucial piece of legislation that has the potential to ease some of the burden that many high debt student loan borrowers are faced with due to their education.

If this initiative ever gained steam and passed Congress, it would save many high debt student loan borrowers (*cough* like me *cough*) a great deal of money in the long-term. Personally, I’d like to see the total amount of student loan interest that could be credited increased to a higher dollar amount like $10,000 per year. At that level, almost all student loan borrowers would fall within the program’s guidelines.