Minnesotans react to student loan forgiveness being subject to state taxes
MOORHEAD, Minn. (Valley News Live) - 8 million Americans could soon be relieved of $10,000 to $20,000 of student loan debt.
The announcement of the Biden Administration’s student loan forgiveness plan has received mixed reviews among Americans.
“I think for some people it’s needed,” said Josephine Pinnella, a student at Minnesota State University-Moorhead and a resident of Minnesota.
Another Minnesota resident, Jeff Heisler added, “I’m a little torn because I have a son that could benefit from it, but as a former student myself, I had to pay off my student loan.”
The overall intent is to relieve borrowers of their crushing debt, but in some states like Minnesota, that relief is subject to state taxes.
“Still a pretty good deal, but you need to realize it’s coming,” said Jared Walczak, the vice president of state projects with the Tax Foundation.
In Minnesota, that money could be added to your regular income.
Borrowers could face a tax bill of up to more than $950 for $10,000 in relief.
“The $10,000 doesn’t appear in your bank account. It’s the amount you don’t have to pay back over a course of years,” said Walczak.
Pinnella, a student loan borrower, says she understands why that money would be taxable.
“It does make sense because money, in general, is taxed, no matter how you get it,” Pinnella said. “You’re not having to pay that very large amount, you are paying a fraction.”
Some Minnesota legislators and Governor Tim Walz say they support creating a way to make student loans exempt from state taxes, which could happen by the 2023 session.
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