Student Loan Forgiveness May Come With a Heavy Tax Bill

Contributing sentiments towards policy:

53% : In August, the Biden Administration made news by announcing that it would forgive up to $10,000 in student debt for most borrowers and up to $20,000 for Pell Grant recipients.
53% : Tips on Managing Student Loans* Student loans can be the best, or the worst, decision you'll ever make.
50% : For extra assistance navigating the complicated terrain of taxes and student loan forgiveness, consider matching with a trusted financial advisor.Which States Tax Student Loan Forgiveness?Mississippi, North Carolina and Indiana have confirmed that they will consider the Biden student loan forgiveness program a form of taxable income, meaning that borrowers will have to report it on their annual income taxes for the year in which the debt is formally discharged.
50% : In the wake of Biden's plan to forgive up to $20,000 in student debt, some states have announced that they will treat this as taxable income.
49% : Politically, Republican officials have overwhelmingly opposed this plan, arguing that it will disproportionately help high-income borrowers such as doctors and lawyers who take out the majority of student loans.
47% : Absent any other circumstances, student debt is treated no differently.
45% : Those borrowers then owe taxes on the entire amount discharged.
44% : With the average worker paying about 13% of income in taxes, $10,000 worth of student loans forgiveness will increase the average graduate's taxes by $1,300.
43% : This would eliminate student debt entirely for approximately 20 million borrowers, primarily among low-income households, and would reduce the average bachelor's degree debt by about one-third.
43% : Uncertainty Around Taxes on Student Loan ForgivenessMany states have passed laws adopting the American Rescue Plan's tax suspension.
41% : Others already treat student loans differently from the IRS, or in some cases have no income tax at all.
37% : While only three states have confirmed that they will collect taxes on the Biden loan forgiveness plan, an analysis by the Tax Foundation suggests that several others might do so under existing law.
34% : Student Loan Forgiveness Taxes as Political FootballIncome taxes are the latest in a series of controversies surrounding Biden's loan forgiveness plan.
33% : The federal government will not tax Biden's loan forgiveness proposal, because the American Rescue Plan suspended taxes on student debt forgiveness through 2025.
18% : However political leaders in both states have also made public statements indicating that they will not collect taxes on the Biden loan forgiveness, creating a potentially confusing situation in which taxpayers are faced with government statements potentially at odds with existing policy.

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