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Key NC leader: No plan to excuse state taxes on forgiven student loans

Posted September 20, 2022 1:55 p.m. EDT
Updated September 20, 2022 8:21 p.m. EDT

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Don’t expect the state of North Carolina to waive income taxes on student loan debts forgiven by the Biden administration.

Senate President Pro Tem Phil Berger, one of the most powerful elected officials in the state, said Tuesday that he doesn’t see the need to do so.

“I think it’s something that, in my opinion, we do not need to address,” Berger said.

The Biden administration’s plan to forgive up to $20,000 in individual federal student loan debt won’t trigger federal income taxes, but forgiven debt typically is taxable, and not every state has agreed to waive its own income taxes on the plan.

North Carolina has not, though Gov. Roy Cooper called last week on the General Assembly to do so.

Berger, R-Rockingham, told reporters Tuesday that he questions the Biden administration's legal authority to forgive student loan debt and that waiving state income taxes “would be totally unfair” to people who pay taxes on other forgiven debts, such as credit card and mortgage settlements.

Cooper noted last week that the legislature waived tax collections on forgiven Paycheck Protection Program loans, which businesses received to avoid laying people off during the pandemic. Berger said that program was authorized by Congress in response to the government shutting down the economy.

Student loans weren’t taken out in an emergency, he said.

The state income tax rate is just under 5%. The U.S. Department of Education, which will implement forgiveness, has not said yet when debts actually will be forgiven, leaving it unclear when any state income tax burden would be triggered.

It's also not clear how much tax money the state would collect off forgiven loan debt. The N.C. Department of Revenue said last week that it did not know.

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