Student Loan Forgiveness May Hit You With a Heavy Tax Bill

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This article is reprinted with permission from SmartAsset.

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Depending on where they live, student borrowers may soon face an unexpected tax burden.

In August, the Biden Administration made news by announcing that it would forgive up to $10,000 in student debt for most borrowers and up to $20,000 for Pell Grant recipients. This would eliminate student debt entirely for approximately 20 million borrowers, primarily among low-income households, and would reduce the average bachelor’s degree debt by about one-third.

But the government giveth, and the government taketh away: Some states have announced that they will tax this loan forgiveness as a form of income. Here’s how to determine if you’ll face a tax bill on your student loan forgiveness.

For extra assistance navigating the complicated terrain of taxes and student loan forgiveness, consider matching with a trusted financial advisor.