Student Loan Forgiveness, Not Taxable Income, Pennsylvania

Pennsylvania Public Workers No Longer Will Have to Pay Taxes on Forgiven Student Loans

Pennsylvania public staff now not must pay state revenue taxes on forgiven student loans beneath two main packages, Governor Tom Wolf’s administration introduced Friday.

Public-sector staff and nurses taking part within the federal Public Service Loan Forgiveness Program, which supplies debt reduction to lecturers, social staff, navy members and different public staff, and the Pennsylvania Student Loan Relief for Nurses Program, which forgives a most of $7,500 in student loan debt for state-licensed nurses, will likely be affected.

“The point of student loan forgiveness programs for public servants is that these are people who have chosen jobs, often in lower-paying fields, because they want to make a difference,” Wolf mentioned in a press launch issued by his workplace. “It’s wrong to take what should be a blessing and turn it into just another burden.

“Ensuring that student loan forgiveness by way of the PSLF and SLRN packages isn’t thought of taxable revenue will take away another barrier for Pennsylvanians who’re working to make a distinction in our communities.”

Most other states and the federal government do not tax student loan forgiveness, but Pennsylvania lawmakers who advocated for the change said the state Department of Revenue deemed canceled students loans to be taxable income.

“Pennsylvanians have a few of the highest student loan debt within the nation – and when these students are lastly eligible to see a few of their loan forgiven by way of public service, they shouldn’t be burdened with a shock tax invoice,” state Senator Katie Muth said in the release. “I admire that the Administration and Department of Revenue took swift motion to make this important change to our state tax rules.

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Student Loan Forgiveness, Not Taxable Income, Pennsylvania
Pennsylvania public staff now not must pay state revenue taxes on forgiven student loans beneath two main packages, Governor Tom Wolf’s administration introduced Friday. Above, Wolf speaks on stage in the course of the Pennsylvania Conference For Women on the Pennsylvania Convention Center on November 19, 2015, in Philadelphia.
Marla Aufmuth/Getty Images for Pennsylvania Conference for Women

The Department of Revenue despatched a bulletin on Friday to make clear that student loan forgiveness by way of the 2 packages wouldn’t be topic to state taxes.

Created in 2007, the Public Service Loan Forgiveness Program guarantees that school graduates who take jobs in public service or who work for nonprofit organizations can have their federal student debt forgiven after making 10 years of month-to-month funds. The Biden administration not too long ago eased eligibility guidelines after this system was criticized for rejecting greater than 90 p.c of functions.

The Associated Press contributed to this report.