HARRISBURG (TNS) — The more than 1.7 million Pennsylvanians granted student loan forgiveness under President Joe Biden’s Student Debt Relief Plan will come away with up to $614 left in their pocket after paying their state taxes.
The plan’s loan forgiveness of up to $20,000 will not be treated as income subject to state taxes in Pennsylvania. It also is not subject to federal taxes.
“Student loan debt holds us all back. Individuals, families, and the commonwealth as a whole. President Biden’s Student Debt Relief Plan is a weight lifted off of shoulders and we will not burden Pennsylvanians who benefit from this relief with taxes at the state level,” Gov. Tom Wolf said in a statement issued on Friday.
“Congratulations to the 1.7 million Pennsylvanians eligible for this opportunity. I encourage everyone eligible to apply so that you can breathe easier and chase your dreams.”
Last December, some Democratic lawmakers raised a concern to the governor about the debt relief being provided through separate loan forgiveness programs, specifically the federal Public Service Loan Forgiveness Program and the Pennsylvania Student Loan Relief for Nurses Program.
}They asked Wolf to reexamine a 2009 bulletin that classified cancelled student loan debt as income. About the same time, the House Finance Committee approved a GOP-offered bill that would accomplish that goal. Seeing the bipartisan support for this idea, Wolf subsequently announced a tax code change making the cancelled student loan debt exempt from state taxes and since has extended this change to Biden’s latest loan forgiveness program.
The program announced in August promises to forgive up to $10,000 in student loan for borrowers making less than $125,000 a year or $250,000 for married couples. Students who received Pell Grants, which benefit lower-income students, are eligible for up to $20,000 in debt forgiveness. According to the Congressional Budget Office, this initiative will cost an estimated $400 billion over 30 years.
The application process for this student debt cancellation program is now open and can be accessed at studentaid.gov.
The program, however, has come under attack in court. Just this week, it survived two of several legal challenges filed by conservative attorneys general and advocacy groups who seek to put the plan on hold and challenge the president’s authority to institute it without congressional approval.
In Pennsylvania, there are 1,719,800 borrowers who are eligible for debt relief, including 988,800 who are eligible for $20,000 in debt relief, and 731,000 who will have their federal loans completely forgiven, according to the federal Department of Education.
