Contrary to national news reports, Virginia is not among the states that will treat forgiven student debt as income, according to the Virginia Department of Taxation.
Department spokeswoman Heather Cooper said in a statement to WTOP that student loans that are forgiven “would not be taxable on the Virginia income tax return.”
More than 40 million Americans could see their student loan debt reduced — and in many cases eliminated — under the long-awaited forgiveness plan President Joe Biden announced last week, a historic but politically divisive move in the runup to the midterm elections.
About a dozen states plan to treat the forgiven debt as income, meaning people in those states who have their student loan debt forgiven will see a tax hike when they receive their state tax returns.
They could end up paying at least a few hundred extra dollars as a result, Bloomberg reported.
News reports erroneously listed Virginia as being among those states; however, Cooper said Virginia tax regulations are tied to a federal policy “excluding student loan forgiveness from gross income for taxable years 2021 through 2025.”
Biden is erasing $10,000 in federal student loan debt for those with incomes below $125,000 a year, or households that earn less than $250,000. He’s canceling an additional $10,000 for those who received federal Pell Grants to attend college.
It’s seen as an unprecedented attempt to stem the tide of America’s rapidly rising student debt, but it doesn’t address the broader issue: the high cost of college.
Republicans quickly denounced the plan as an insult to Americans who have repaid their debt and to those who didn’t attend college. Critics across the political spectrum also questioned whether Biden has authority for the move, and legal challenges are virtually certain.
Biden also extended a pause on federal student loan payments for what he called the “final time.” The pause is now set to run through the end of the year, with repayments to restart in January.
The Associated Press contributed to this report.
