Millions of borrowers may be relieved of their crippling debt thanks to President Joe Biden’s plan to reduce/cancel student loans but in some places, the state may want a share of the relief.
Because some jurisdictions treat debt forgiveness as income, borrowers who take advantage of the forgiveness may need to pay taxes on as much as $10,000 or $20,000 depending on what was subtracted from their balance. According to a report by the Tax Foundation, a Washington, D.C.-based think tank, forgiven student loans will be subject to state income taxes in some
states. Mississippi, Minnesota, Wisconsin, Indiana, Arkansas, West Virginia, and North Carolina are places where borrowers may want to put aside money for the tax deadline unless those states change their laws to comply with a federal tax exemption for student loans.
This information is not final. Taxing loan forgiveness could be politically unpopular,
and some states are still deciding what they are going to do.