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House Co-Sponsorship Memoranda
House of Representatives
Session of 2021 - 2022
Regular Session
MEMORANDUM
| Posted: | August 30, 2022 02:28 PM |
|---|---|
| From: | Representative Jennifer O'Mara |
| To: | All House members |
| Subject: | Student loan forgiveness tax exemption |
| Current and former college students in the U.S. have taken out approximately $1.75 trillion in student loans. Pennsylvania is a state where borrowers struggle with student loans more than most. Our borrowers have an average of $39,375 in debt, making us the state with the third-highest average student loan debt. The cost of both public and private four-year colleges has tripled since 1980, even when accounting for inflation, contributing to the need for students to take out more loans. As you know, on Wednesday, August 24, 2022, President Joe Biden took an important step toward alleviating the burden of student loan debt by announcing $10,000 in student loan forgiveness for borrowers with incomes less than $125,000. Borrowers are eligible to receive $20,000 in student loan forgiveness if they are Pell Grant recipients. Under Pennsylvania law, student loan forgiveness is not specifically exempted from being considered income for purposes of the personal income tax. As such, I plan to introduce legislation that would codify such an exemption into the state Tax Code. I applaud the Wolf Administration for attempting to provide administrative assurance that student loan forgiveness under President Biden’s plan would not be subject to the tax. However, my legislation would leave no doubt as to whether student loan forgiven under President Biden’s plan would be exempt from the personal income tax. Further, as any potential tax on student loan forgiveness would be paid during 2023, my legislation would ensure that Pennsylvania borrowers do not have to pay tax under President Biden’s plan no matter who is in the Governor’s office next year by enshrining its tax-free status in law. Please join me in making sure that Pennsylvania borrowers who receive much-needed student loan forgiveness are not later handed a tax bill. |