JACKSON, Miss. – Student loan borrowers across the country could soon see up to $20,000 of their student loan debt forgiven in the huge handout announced by President Biden – but it may come at a cost. State tax may be charged on student loan funds. Tax laws vary from state to state. Former Mississippi College student Dee Stegall said he recently found out he qualifies for $20,000 of his student loans. “I was very relieved to hear that this relief was coming from the federal government,” Stegall said.
YOUR INDICATIVE $10,000,000-$20,000,000 STUDENT LOAN WITH TAXES? Students walking on a college campus. State tax may be charged on student loan funds. (Joy Addison/Fox News) But, he said the relief didn’t last. “Within 24 hours, those feelings become complicated, because then you realize that depending on the state you’re in — Mississippi — you might be paying taxes on it,” Stegall said. Steve Rhode, a consumer debt expert, explained why student loan handout money can be taxed. “The forgiven debt is taxed on your income tax return like its earned money,” Rhode said. Mississippi borrowers who take in less than $125,000 a year may have $10,000 in student loan debt — and may owe an additional $500 in taxes. (Joy Addison/Fox News) Mississippi borrowers who receive less than $125,000 a year may have $10,000 in student loan debt and may owe an additional $500 in taxes.
Pell grants are usually given to borrowers who need more financial assistance. These borrowers are eligible for $20,000 in student loan forgiveness and may owe an additional $1,000 in taxes.
“It feels in many ways like a tax on being poor,” Stegall said. EVIDENCE BIDEN’S STUDENT LOAN IS TAXING THE POOR AND POURING GAS ON THE FIRE OF INFLATION Seven states have confirmed plans to tax student loan funds. (Joy Addison/Fox News) So far, Mississippi, Minnesota, Wisconsin, Massachusetts, Arkansas, Indiana and North Carolina have announced plans to tax student loan funds. But if you file in Virginia, Idaho, New York, West Virginia, Pennsylvania, and Kentucky, don’t expect to be taxed. Six states have confirmed they do not plan to tax student loan funds. (Joy Addison/Fox News) Rhode pointed out that the amount that would be taxed would be small compared to the thousands of dollars being forgiven. BIDEN’S STUDENT LOAN FORGIVENESS: AMERICANS FRUSTRATED BY RISING COLLEGE COSTS BURDEN “If you’ve had to pay $1,000 in income tax in Mississippi or $20,000 plus interest over time, you know what a blessing a thousand-dollar tax is,” Rhode said. Stegall said the tax feels anything but a blessing. According to ZipRecruiter, the average college graduate in Mississippi earns just over $32,000 per year. CLICK HERE TO GET THE FOX NEWS APP “It’s not easy at all when you’re, you know, trying to make ends meet and trying to make a life for yourself as a young person,” Stegall said. Rhode noted that it’s early in the student loan forgiveness process and those laws could change. Joy Addison joined Fox News in 2022 as a media reporter in Houston.