President Joe Biden's Student Loan Debt Relief Plan has provided much-needed relief for tens of millions of borrowers. But in some states, that forgiveness could saddle payees with bigger tax bills.
The Associated Press reported on Sunday that "in Mississippi, Minnesota, Wisconsin, Arkansas and North Carolina, forgiven student loans will be subject to state income taxes unless they change their laws to conform with a federal tax exemption for student loans, according to a tally by the Tax Foundation, a Washington, D.C.-based think tank."
AP noted that it will be up to state legislatures to determine whether or not to levy income taxes on eliminated student debt.
The outlet added that "spokespeople for tax agencies in several states — including Virginia, Idaho, New York, West Virginia, Pennsylvania and Kentucky — told The Associated Press that their states definitely won't tax student loans forgiven under Biden's program. Revenue officials in a few other states said they needed to do more research to know."
Biden's August 24th executive order "will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education, and up to $10,000 in debt cancellation to non-Pell Grant recipients. Borrowers are eligible for this relief if their individual income is less than $125,000 ($250,000 for married couples). No high-income individual or high-income household – in the top 5% of incomes – will benefit from this action."