RALEIGH, N.C. — Gov. Roy Cooper called on legislators Wednesday to waive the state income taxes on student loan forgiveness.
President Biden announced in late August, any student loan debtor making less than $125,000 a year is eligible for $10,000 of their student loans to be forgiven. An additional $10,000 is eligible for those who have a Pell Grant.
While student loan forgiveness is untaxable on the federal level, currently in North Carolina they are considered income and taxable. For every $10,000 of your student loans forgiven, you'll pay $525 in taxes.
Cooper is asking legislators to remove the tax on student loan forgiveness as they did for the Paycheck Protection Program (PPP) loans.
Originally, PPP loans were also considered taxable income until the General Assembly passed a bill that PPP loans would not be taxed.
"Legislators waived taxes on business loans; working people deserve the same treatment," Cooper said.
NC would have to change tax law to fall in line with federal guideline
Usually, forgiven loans are considered taxable income on federal and state returns. The American Rescue Plan, that's the federal law, says forgiven student loan debt is not taxable at the federal level. There are no tax consequences on student debt relief until 2026.
North Carolina would have to change their tax law to fall in line with the federal guideline. Will our state lawmakers do that...or not? 2 Wants to Know will keep you updated on their responses.
Here's what Rep. Jon Hardister had to say:
"The General Assembly does not plan to change the law on this. It would be unfair to tax people who work for their income while giving a break to those who receive unearned income. I am strongly in favor of lower taxes, but I am also in favor of fairness. People who work for a living pay taxes on their income. If someone receives a free, unearned payment from the government, the same tax rate should be applied to that windfall. Otherwise, we would be punishing workers and giving special privileges to those who receive a non-earned profit," he said.
How to contact your lawmaker
In the meantime, you can tell them what you think.
Head to the find your legislators page on the North Carolina General Assembly website. You can click on the map, find the lawmaker for your area and there is their email address right under their picture.