By MADISON HIRNEISEN
THE CENTER SQUARE
(The Center Square) – Gov. Gavin Newsom is calling on the state Legislature to take early action to ensure the Biden administration’s student loan debt relief program is not subject to state taxes in California.
Gov. Newsom announced over the weekend that he wants to see a proposal included in the January budget to exempt federal student loan forgiveness from state taxes. The one-time loan forgiveness program wipes out up to $20,000 in debt if borrowers meet income limits. Individuals making less than $125,000 and joint filers making less than $250,000 can receive up to $10,000 in forgiveness, and Pell Grant recipients can receive up to $20,000 in forgiveness.
“Californians who get student debt relief shouldn’t be hit with taxes for it. This will provide up to $1.3 billion in tax relief for more than 3.5 million Californians,” Gov. Newsom said in a statement over the weekend. “I look forward to working closely with the Legislature to get this done through early action.”
The state has nearly 3.5 million eligible borrowers, of which more than 2.3 million were Pell recipients, according to the governor’s office.
Gov. Newsom’s call aligns with those of Democratic legislative leaders, who promised in September that they would ensure California did not tax the student debt relief.
The U.S. Department of Education began accepting applications for student loan forgiveness last month, but the program is currently being challenged in several courts by Republican officials and conservative groups.
The 8th Circuit Court of Appeals placed the program temporarily on hold in October, as previously reported by The Center Square. Thus far, the Supreme Court has rejected two requests to block the student debt relief program, as reported by CNBC.While the Department of Education is currently blocked from discharging debt relief, eligible borrowers are still encouraged to apply.