Mississippi confirms it will tax forgiven student loan debt

Student loan forgiveness plan
Student loan forgiveness plan(CNN)
Published: Aug. 31, 2022 at 3:07 PM CDT
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MISSISSIPPI (WLOX) - Many former college students across Mississippi will see relief on their student loans after President Joe Biden’s recent announcement.

However, those Mississippi residents who did get part of their debt forgiven will still be taxed on it, according to a recent Bloomberg article.

Biden’s student loan debt relief plan includes forgiveness of up to $10,000 for federal borrowers or $20,000 for those who received Pell Grants.

Thanks to a line in last year’s American Rescue Plan, relieved student loan borrowers won’t get saddled with a big tax bill. From 2021 to 2025, forgiven student loans won’t be included as part of gross income in consideration for federal taxes.

“Typically, loan forgiveness is treated as taxable income. This makes sense from a big-picture tax policy perspective,” John Buhl, an analyst at the Tax Policy Center, wrote in an email to Insider. “But for someone getting $10,000 or $20,000 in forgiveness, that could equate to a year-end tax bill well into the four figures.”

However, the forgiveness could still be subject to state taxes in the Magnolia State.

Mississippi’s Department of Finance & Administration did not immediately respond to Insider’s request for comment on the decision made outside of normal working hours.

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