The fate of student loan forgiveness remains unclear –especially under a Trump presidency.
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It depends on where you live.
Of those, five states tax student loan forgiveness:Arkansas,Indiana,Mississippi,North CarolinaandWisconsin.
Here are the rules and exemptions for each state, and how much you might owe.
Note, the below calculations do not include any tax deductions or credits you might be eligible for.
There are no exemptions for those enrolled in the Public Service Loan Forgiveness program.
Indiana has a flat state tax rate of 3.05%.
Local taxesvary by county.
This would bring your tax total to $507 for your forgiven debt.
Mississippi
Mississippi also has aprogressive income tax rate.
You’d effectively owe $470 on your forgiven student loan debt.
That means you’d owe approximately $450 in taxes for your loan debt.
Wisconsin
Student loans that were forgiven in 2024 are subject to state taxes in Wisconsin.
However, there are some exceptions.
What if I can’t afford the taxes on my student debt?
Borrowers who aren’t able to pay the taxes they owe might be eligible for an installment plan.
This isan agreement with the IRSthat lets you pay the taxes over an extended timeframe.
Keep in mind, though, that there are different kinds of extensions.
Whereas an installment plan is a separate agreement thatdoesextend the payment due date.
If my student loans are forgiven in 2025, will I owe federal taxes?
All student loan cancellation is exempt from federal taxes through the end of 2025, according to Kantrowtitz.
That means if your loans are forgiven in 2025, you will not owe federal taxes.
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