State might tax canceled student loan debt

by Jeff Della Rosa (JDellaRosa@nwabj.com)

Arkansas is one of seven states in which canceled student loan debt may be treated as taxable income, but whether it is, student loan forgiveness is expected to create a tax burden shift from the borrowers.

Recently, President Joe Biden announced plans to cancel up to $20,000 in student loan debt, depending on borrowers’ income. Pell Grant recipients qualify for up to the total amount in relief, while other borrowers can cancel up to $10,000 in student loan debt. Eligible borrowers must have an annual income of less than $125,000 or $250,000 for married couples or heads of households.

According to Federal Student Aid, an office of the U.S. Department of Education, nearly 8 million borrowers may be eligible for relief automatically because the agency already has relevant income data. By early October, an online application is expected to become available at studentaid.gov, allowing borrowers to apply for the relief. The application deadline will be Dec. 31, 2023.

https://talkbusiness.net/2022/09/state-might-tax-canceled-student-loan-debt/