Newsom says California won’t tax Biden’s student loan forgiveness, saving borrowers an additional $1.3 billion

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California Governor Gavin Newsom recently announced through a press release on November 5th a proposal to ensure that Californians get their benefits. Waiver of federal student loans. You do not have to pay state tax on amounts exempted under President Joe Biden’s ProgramAccording to a press release, the proposal could save California borrowers up to $1.3 billion in expected taxes and will be part of the governor’s budget to be announced in January.

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“California residents who are exempt from student debt should not be subject to taxes.This will result in tax relief of up to $1.3 billion for more than 3.5 million Californians,” Newsom said in a release. is described. “We look forward to working closely with Congress to make this happen through early action.”

Biden’s plan could offer up to $10,000 in federal student debt relief to borrowers with incomes below $125,000 ($250,000 for households) in 2020 or 2021. The figure could top Pell’s $20,000 in student loan cancellations for her grant recipients. For dependent students, eligibility is based on parental income. Most federal loans are eligible — Undergraduate and Graduate Direct Loans, Parent PLUS and Graduate PLUS Loans, Consolidated Loans, Federal Family Education Loan (FFEL) Program Loans held by the Department of Education, Perkins Loans held by the same department, defaults , according to studentaid.gov.

California has approximately 3,550,000 eligible borrowers, of which an estimated 2,340,600 are Pell Grant borrowers, according to the release. By waiving state tax on forgiven student loan debt, borrowers can save hundreds of dollars (on average) individually and up to $1,860 per release.

Mississippi and Indiana have already confirmed that debt relief will be taxable, while other states have taken the opposite approach, according to Business Insider.

Indiana borrowers will have to pay $323 in state taxes for a $10,000 student loan forgiveness and $646 for a $20,000 student loan forgiveness, according to the Indiana Department of Revenue.

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On Nov. 5, the White House said 26 million people have provided the Department of Education with the information it needs to consider debt relief, and 16 million applications have been approved to date.

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This article originally appeared on GOBankingRates.com: Newsom says California won’t tax Biden’s student loan forgiveness, saving borrowers another $1.3 billion

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