LANSING, Mich. – Student loans that are forgiven through 2025 will not be treated as taxable income in Michigan.
That includes Michigan residents who are receiving benefits of the Public Service Loan Forgiveness (PSLF) program, and federal student loan debt forgiveness. Around 1.4 million Michigan residents have student loans, according to the state.
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Normally, when debt is forgiven, the IRS treats it as taxable income. Provisions of the American Rescue Plan temporarily lifted that requirement. That means any federal loans that are discharged between 2021 and 2025 will not be considered taxable income by the federal government or by the state government.
“Tax-free student loan forgiveness could benefit up to 1.4 million Michiganders and help keep money in their pockets,” said Gov. Gretchen Whitmer. “Michigan PSLF recipients who serve their community will not be taxed for any amount of student loan relief they have received. In Michigan, we value the hard work that all our citizens put in to get the education they need. I will work with anyone to keep lowering the cost of higher education and help students not go into debt in the first place.”
Learn more: It’s easier than ever to qualify for Public Service Loan Forgiveness but you’re running out of time
If you have worked in public service for 10 years or more, you might be able to have all your student debt canceled through the PSLF program.
Working in public service includes working for federal, state, local, tribal government or a nonprofit organizations. If you’ve worked in the public sector, you can still qualify for forgiveness even if those 10 years weren’t served consecutively.
The Department of Education made time-limited changes to the Public Service Loan Forgiveness (PSLF) program that make it easier for eligible federal student loan borrowers to get forgiveness.
“Those who have served less than 10 years may now more easily get credit for their service to date toward eventual forgiveness. These changes allow eligible borrowers to gain additional credit toward forgiveness, even if they had been told previously that they had the wrong loan type,” the White House said.
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