And now the loophole — student loan recipients in certain states to get slapped with TAX

There’s an old saying that what the government gives with one hand, it takes away with the other and for some, student loan debt forgiveness may fall into this category.

The Democratic administration under President Joe Biden was in a hurry to offer up student loan debt relief ahead of the midterm elections, in large part because left-wing zealots like U.S. Rep. Alexandria Ocasio-Cortez, D-N.Y., twisted their arms by suggesting the younger generation would vote against Democrats in November if there was no movement on the issue.

“Some say if President Joe Biden doesn’t cancel student loans for borrowers, it would be the biggest mistake that could cost Democrats congressional seats in the midterm elections on November 8, 2022,” Forbes reported in January, citing AOC.

And while Biden delivered somewhat — many felt he didn’t go far enough — the plan comes with a loophole of sorts.

“Student loan borrowers across the country could soon see up to $20,000 of their student loan debt forgiven in the massive handout announced by President Biden – but it still may come at a cost,” Fox News reported. “State tax may be charged on student loan handout funds. The tax laws vary from state to state.”

Former Mississippi State college student Dee Stegall spoke to Fox News after qualifying for $20,000 in student loans forgiveness, noting that the good news came with some potentially bad news.

“I was very relieved to hear that that relief was coming from the federal government,” Stegall explained. “Within 24 hours, those feelings get complicated, because then you realize that depending on what state you’re in – Mississippi – you could potentially be paying taxes on that.”

“It feels in a lot of ways like a tax on being poor,” he added.

Consumer debt expert Steve Rhode spoke to the network on why student loan handout money can be taxed.

“Forgiven debt is taxed on your income tax return like its money that you earned,” he said, before comparing the two to suggest paying taxes is the lesser of two evils.

“If you had to pay $1,000 of income tax in Mississippi or $20,000 plus interest over time, you know what the thousand dollar tax bill is a blessing,” Rhode said.

Still, Stegall doesn’t see the tax in a positive light.

“It’s not easy at all when you’re, you know, you’re trying to make ends meet and you’re trying to build a life for yourself as a young person,” he said.

States that have announced plans to tax the student loan handout funds include Mississippi, Minnesota, Wisconsin, Massachusetts, Arkansas, Indiana and North Carolina.  Other states have said they will not tax the forgiven debt, including Virginia, Idaho, New York, West Virginia, Pennsylvania and Kentucky.

The issue prompted some interesting online debate on taxes… here’s a sampling of responses to the story on Twitter:


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