Gov. Wolf forgives state taxes from student loan forgiveness for public servants

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(Photo: PA Governor’s Office)

HARRISBURG — Certain residents of the commonwealth will receive a tax break on their student loans.

On Friday, Governor Tom Wolf announced Pennsylvanians will not have to pay state income tax on the student loan debt relief they get from the federal Public Service Loan Forgiveness (PSLF) Program and the Pennsylvania Student Loan Relief for Nurses (SLRN) Program.

The decision is an effort to save thousands of dollars in state tax for people eligible for those programs potentially.

“The point of student loan forgiveness programs for public servants is that these are people who have chosen jobs, often in lower paying fields, because they want to make a difference,” said Gov. Wolf. “It’s wrong to take what should be a blessing and turn it into just another burden.

“As a commonwealth and as a nation, we can’t afford for astronomical student loan debt to keep talented people from choosing to serve as teachers, firefighters, or nurses. We need to make sure that financial burdens don’t keep our best and brightest from taking on some of our most important jobs. Ensuring that student loan forgiveness through the PSLF and SLRN programs is not considered taxable income will remove one more barrier for Pennsylvanians who are working to make a difference in our communities.”

Student loan forgiveness is not considered taxable income at the federal level, and this development puts Pennsylvania in line with many other states.

The SLRN Program was established to help nurses in Pennsylvania who have worked tirelessly to fight the COVID-19 pandemic continue in the nursing profession by relieving some of the burden of student loans.

The PSLF Program is a federal program that permits Direct Loan borrowers who make 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer to have the remainder of their student loan balance forgiven. Qualifying employers include federal, state, local and tribal governments, as well as 501(c)(3) non-profits.

As an example, Governor Wolf said if a Pennsylvanian with $50,000 in student loans forgiven through PSLF will avoid the unpleasant surprise of a $1,535 state income tax bill.

“The whole point of student loan forgiveness programs for public servants is these people have chosen to serve the public and often in lower-paying fields because they want to make a difference,” said. Gov. Wolf. “They don’t have thousands of dollars lying around to pay a one-time tax bill. So, it’s wrong to take what should be a blessing and turn it into just another burden.”

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The Department of Revenue also issued a revised tax bulletin Friday to clarify the language of student loan forgiveness and make clear that loan forgiveness through PSLF and SLRB is not considered taxable income.

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