# Plain Language Summary: Students and Families Empowerment Act

This bill makes three main changes to help people dealing with student loan debt. First, it significantly increases the student loan interest deduction on your taxes. Currently, you can only deduct up to $2,500 in student loan interest per year, and this deduction phases out if you earn too much money. This bill removes those income limits and raises the total amount of student loans you can claim interest deductions on to $750,000 (or $1.5 million if you're married filing jointly). That means if you've borrowed a lot for school, you could deduct much more of your interest payments from your taxable income, which lowers the taxes you owe.

Second, the bill makes student loan forgiveness tax-free in certain situations. When you have your student loans forgiven through income-based repayment plans—where your monthly payment is based on what you earn—you currently have to pay taxes on the forgiven amount as if it were income. This bill eliminates that tax burden, so if your remaining loan balance is forgiven after 20 or 25 years of payments, you won't face a surprise tax bill. It also protects people who work in public service jobs and have their loans forgiven through that program.

Finally, the bill extends the grace period after graduation before you have to start repaying federal student loans from six months to twelve months. During this extended grace period, interest won't accrue on unsubsidized loans, meaning your debt won't grow while you're getting settled into your first job. This same 12-month grace period and interest freeze would apply to PLUS loans taken out by parents or graduate students.

Students and Families Empowerment Act

Rice, Kathleen M.

Students and Families Empowerment Act This bill expands tax deductions and grace periods that apply to student loan payments. The bill modifies the tax deduction for interest on education loans to replace the dollar limitation and the limitation based on modified adjusted gross income with a $750,000 limit ($1.5 million in the case of a joint return) on the aggregate amount of qualified education loans that may be taken into account for the deduction. The bill excludes from gross income the discharge of any student loan debt pursuant to income contingent and income-based repayment plans under the Higher Education Act of 1965. The bill extends from 6 months to 12 months (1) the grace period before payment must begin on Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans after the student ceases to carry at least one-half of the normal full-time academic workload, and (2) the deferment periods for parent borrowers and graduate or professional student borrowers with Federal Direct PLUS Loans. The bill prohibits interest from accruing on a Federal Direct Unsubsidized Stafford Loan or a Federal Direct PLUS Loan during the 12-month extension or deferral period.