Details of Public Law 117-2, section 9675 , Modification of Treatment of Student Loan Forgiveness

California law generally conforms to the federal income tax rules relating to the cancellation of student loans as of the specified date. In addition, the state has stand-alone sections for which no similar federal sections exist.

California allows an exclusion from gross income for student loan debt that is cancelled or repaid under the income-based repayment programs administered by the U.S. Department of Education. This exclusion applies to discharges of indebtedness occurring on or after 1/1/2014 (Revenue and Taxation Code (RTC) section 17132.11(a)).

Existing state law also excludes from gross income student loan debt that is cancelled or repaid under the Income Contingent Repayment plan, the Pay As You Earn Repayment plan, and the Revised Pay As You Earn Repayment plan as administered by the U.S. Department of Education (Title 20, U.S.C. section 1087e(e)). This exclusion applies to cancellation or repayments, beginning on or after 1/1/2017, and before 1/1/2022 (RTC 17132.11(b)).

For discharges of indebtedness occurring on or after 1/1/2015, and before 1/1/2020, existing state law excluded from an eligible individual’s gross income amounts that would otherwise result from a student loan forgiven as a result of the closure of Corinthian Colleges and similar closures (RTC section 17144.7). This section was repealed on 12/1/2020.

California provides an exclusion from gross income for the discharge of a student loan of an eligible individual (RTC section 17144.6) for taxable years beginning on and after 1/1/2019, and before 1/1/2024. An individual would be eligible for the exclusion if any of the following apply:

Is granted a discharge of any student loan because the individual successfully asserts that the school did something wrong or failed to do something that it should have done or because the individual could not complete a program of study due to the school closing.

Attended a Brightwood College school on or before 12/5/2018, and is granted a discharge of any student loan made in connection with attending that school.

Attended a location of The Art Institute of California and is granted a discharge of any student loan made in connection with attending that school.