Newsom Opposes California Taxing Biden-Forgiven Fed Student Loans

At least one attempt has been made in U.S. courts to stop the forgiveness program, which Biden implemented by executive order, on the argument that former student will face hardship in now having to pay the tax.

  • Newsom, a Democrat, on Saturday called on the California Legislature to act quickly to prevent student loan borrowers from having to pay state income taxes on up to $20,000 in federal debt forgiveness.
  • The Biden administration in August announced in August a one-time loan forgiveness program that would eliminate thousands of dollars in federal direct loan debt.
  • Borrowers who meet the program’s income limits will have up to $10,000 in debt forgiven, or up to $20,000 if they received a federal Pell Grant.
  • However, tax authorities in many cases consider forgiven debt as income. Under federal law, the amounts forgiven through the Biden initiative will be ignored by the Internal Revenue Service. But under current California law, analysts say, the forgiven debt will be treated as taxable income.
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