TOPSHAM — Keegan Brennen had overcome so much in his 22 years – from nearly fatal health problems to learning disabilities – to get to the point where the newly minted college graduate was living on his own with other “starving artist” friends.
“He was at a point in his life that he was very excited,” Keegan’s mother, Nora Brennen, remembered recently at the family’s Topsham home.
But just six months after earning his bachelor’s degree, Keegan Brennen suffered a fatal brain aneurysm. And it was a few short months later that his parents were billed more than $33,000 in taxes under a federal policy that is supposed to help but that members of Maine’s congressional delegation say further penalizes families facing grievous losses.
Under a little-known federal law, the U.S. Department of Education as well as private lenders can forgive student loan debts whenever a person becomes “totally and permanently disabled.” The same debt-forgiveness policy is available to parents who took out or co-signed student loans for a child who dies before he or she has a chance to pay off the debt.
But there’s a costly catch: The forgiven debts are considered “taxable income” to the Internal Revenue Service. So when it came time for the Brennens to file their tax return for 2012, the couple essentially owed back taxes on an additional $78,000 of “income” from the forgiven student debt – to the tune of more than $27,000 owed to the federal government and more than $6,300 to the state.
“It just takes away from the relief they are trying to provide,” said Don Brennen, Keegan’s father.
U.S. Sen. Angus King, I-Maine, agrees.
After hearing about the Brennens’ case, King introduced a proposal recently that would eliminate what he views as an “unintended and frankly unsupportable policy” of treating loan forgiveness for the death of a child as taxable income.
“It makes no sense from the point of view of policy,” King said in a speech on the Senate floor last month. “It is the opposite of compassion. It is literally adding insult, in this case, to tragic injury.”
It is unclear exactly how many people the policy affects, although King said that in 2011 the Department of Education forgave about 100,000 loans for death or disability.
The number eligible for disability-related loan discharges could be significantly higher, however. A recent Department of Education survey determined there were 387,000 living borrowers also receiving Social Security Disability payments who would likely qualify for a student loan debt discharge because their medical conditions are not expected to improve.
Eliminating the taxable income tax obligations on forgiven federal loans – not including loans from private lenders – was estimated to cost $38 million over a 10-year period. King said in an interview that $38 million, in terms of the total federal budget, is “a fairly modest cost for a change that we think is eminently justified and reasonable.”
King isn’t the only member of Maine’s delegation to take up the case of the Brennens and other families affected by the tax policy. Democratic U.S. Rep. Chellie Pingree of the 1st District introduced a bill in 2014 that would allow families to pay back that income tax obligation over a 15-year period interest-free. The bill never made it out of committee, however.
The policy doesn’t only affect parents who lose a child. In another Maine case on which Pingree’s office worked, a husband was billed tens of thousands of dollars in taxes on the forgiven loans of his wife, who was diagnosed with early-onset Alzheimer’s disease soon after she had received her master’s degree to begin a second career as a teacher.
“I plan to introduce a new version of my previous legislation in this Congress, and am eager to get my colleagues in both parties and from around the country to join me,” Pingree said in a statement. “I am sure every member of Congress has had constituents affected by this IRS rule and will agree it needs some common sense reform.”
‘A VERY MATURE KID FOR HIS AGE’
For Don and Nora Brennen – both Navy veterans who settled in the Brunswick area after Don retired from the service – the personal and financial stress caused by the more than $30,000 tax IOU has only added to the emotional difficulties of losing their son.
Keegan was born in July 1990. He was quickly diagnosed with a type of immunodeficiency that would have meant certain death throughout much of history – or enclosure in a germ-free “bubble” in the more recent past. Although more treatable today, immunodeficiency disorders still required Keegan to undergo regular IV treatment up until his late teens.
When his immune system finally began functioning naturally with age, he was diagnosed with organ failure. Bright and sweet-natured, Keegan also struggled with learning disabilities that required him to receive special education assistance. But when he did receive help, his mother added, he received A’s in school.
By the time he graduated from Topsham’s Mt. Ararat High School in 2008, he had received his class’s award for the most dramatic improvement in academics and attitude. He also earned the Excellence in Visual Arts Award for being the school’s outstanding art student, according to a profile of Keegan published in the Portland Press Herald.
Principal Craig King described Keegan at that time as “a talented and dedicated artist who during his high school years has overcome multiple obstacles, any one of which could have discouraged most students.”
He went on to enroll at the New Hampshire Institute of Art, graduating cum laude in May 2012 with a fine arts degree. Although the school was costly and required loans, both parents said art was likely the only career that their son could have pursued to support himself.
“I remember he said to me, ‘Mom, the only thing I want is to be able to take care of myself when I am older,’ ” his mother recalled while standing near the tulip-poplar tree planted for her son in the family’s front yard.
“He was a very mature kid for his age,” Don added.
An aspiring artist, Keegan had recently secured a gig to display his artwork at an oxygen bar near his home in Manchester, New Hampshire, and was looking for work when he suffered the aneurysm.
‘THAT PUNCH IN THE FACE’
Don and Nora Brennen did not have any trouble receiving loan forgiveness for either the federal or private loans for Keegan.
“Their reasoning was Keegan was not able to use his education because he died in November,” just six months after graduating, Nora Brennen said.
The couple appealed for forgiveness of the income tax as well, but to no avail. At many times, both felt like they were being treated like tax scofflaws by the tax agency representatives they dealt with, particularly those from Maine.
They have since negotiated with the federal government to arrange a long-term plan that allows them to pay roughly $400 a month. And they point out that they never missed any payments or defaulted on any obligations. In fact, Don Brennen dipped into his 401(k) to pay off the $6,300-plus bill – just two months after Keegan’s death – after it quickly became clear that Maine would not forgive the tax obligation.
King has since gained several co-sponsors from both sides of the political aisle. And while he said there are no guarantees of success in Congress these days, he was feeling “reasonably optimistic that this is one we will be able to get fixed.”
Standing outside of their modest home where Keegan lived from age 4 until he attended college, the couple said they hope King’s bill will help other families avoid similar experiences in the future.
“We don’t expect it to be retroactive,” Don Brennen said. “But I don’t want another parent to have that punch in the face. They are dealing with enough.”