Special Report

8 States That Might Tax Student Debt Forgiveness

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6. Arkansas
> Number of student loan borrowers, 2021: 373,900
> Percentage of borrowers past due, 2021: 9.0% – 9th highest (tied with Indiana)
> Average student loan debt balance, 2021: $32,400 – 33rd highest
> State individual income tax collection per capita, 2020: $968 – 30th highest
> State revenue per capita, 2020: $7,837

Scott Hardin, spokesperson for the Arkansas Department of Finance and Administration, told local CBS affiliate KFSM-TX that his agency will be taking “a hard look at” whether or not to treat forgiven student loan debt as taxable income. Unless the state makes a special provision, anyone who received federal student loan forgiveness would be on the hook for additional state income tax.

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7. West Virginia
> Number of student loan borrowers, 2021: 215,900
> Percentage of borrowers past due, 2021: 10.0% – 2nd highest
> Average student loan debt balance, 2021: $32,500 – 31st highest
> State individual income tax collection per capita, 2020: $1,086 – 26th highest
> State revenue per capita, 2020: $8,294

Officials in the Mountain State have been mum about any changes that would exempt forgiven federal student loan debt from the state’s income tax code. As of Sept. 10, West Virginia remains one of five states that have yet to announce plans to take a reciprocal approach to Biden’s executive order by exempting this forgiven debt from state income tax.

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8. Mississippi
> Number of student loan borrowers, 2021: 417,600
> Percentage of borrowers past due, 2021: 10.8% – The highest
> Average student loan debt balance, 2021: $37,500 – 9th highest
> State individual income tax collection per capita, 2020: $629 – 39th highest
> State revenue per capita, 2020: $7,263

Republican Sen. Josh Harkin, chairman of the state Senate committee in charge of tax issues, told the Associated Press in a report published on Sept. 4 that he is willing to examine the issue of taxing student loan debt forgiveness in the next legislative session. However, according to an Aug. 30 Bloomberg report, Mississippi has decided against the exemption, putting those in the state who receive student loan debt relief on the hook for paying state income tax on that forgiven debt.

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