Michigan will not tax forgiven students loans
LANSING, Mich. (CBS DETROIT) -Student loan borrowers in Michigan won't see taxes on their forgiven loans. Gov. Gretchen Whitmer made the announcement Sept 28th, affecting anyone who benefits from the Public Service Loan Forgiveness program or other student loan forgiveness.
Whitmer says approximately 1.4 million Michigan borrowers are eligible for the relief. "Michigan PSLF recipients who serve their community will not be taxed for any amount of student loan relief they have received," Whitmer said.
Individuals seeking relief must work in public service, which includes qualifying non-profit organizations, military, state, local, federal or tribal governments. They also must have made 120 on-time student loan payments with 10 years of service.
There are new temporary changes to the program that make it easier to qualify for debt relief, including allowing periods of past payment that previously would not have qualified.
The temporary changes to the PSLF are expected to end Oct. 31.
Public service workers are encouraged to apply here.
Generally, the Internal Revenue Service considers debt relief a source of taxable income.
Any federal loans that are discharged between the years of 2021 and 2025 will not be considered taxable income by the federal government.
This will also include state tax law, because it aligns with federal law. This temporary relief will be in effect in Michigan through 2025 as well.
PSLF was created by Congress to help recruit and retain top talent in the public sector workforce.
The U.S. Department of Education is offering public servants working in government and eligible non-profits a second chance to qualify for student loan forgiveness until Oct. 31.
To apply for the PSLF waiver, borrowers should:
- Visit PSLF Employer Search to verify their employer qualifies for PSLF.
- Submit a certified copy of the PSLF Certification Form to the U.S. Department of Education before October 31.
If borrowers have questions regarding their individual situation, they can visit or call FedLoan Servicing at 1-855-265-4038.