Smith comments on benefits of student loan forgiveness, addresses discrepancies in state debt relief taxation
GARY – As a result of President Biden’s initiative to implement wide-scale student loan forgiveness, millions of Americans across the country will see their student debt canceled or reduced with 90% of relief going to borrowers making less than $75,000 annually.
However, current Indiana law requires residents to list their forgiven loans as taxable income. Therefore, Hoosier students who had debts forgiven may see up to $20,000 added onto income tax liabilities and taxed at 3.23%.
State Representative Vernon G. Smith (D-Gary), ranking Democrat on the Indiana House Education Committee, today commented on House Democrats’ plan to retroactively resolve the discrepancies, as well as the benefits of student loan forgiveness in Northwest Indiana:
“As a college educator and ranking Democrat on the Indiana House Education Committee, I’ve been impressed with our fiscally-responsible proposals to make higher education more affordable and attainable to all Hoosiers. President Biden’s historic actions are a monumental step towards giving students of color a chance to build financial stability post-college.
“Having said that, Indiana’s current taxation of student debt relief makes this advancement for hard-working Hoosiers largely ineffective. Therefore, I am supporting the House Democrats’ plan to retroactively eliminate any state individual income tax on student debt relief within the state. A reversal of this policy would allow Hoosiers to truly benefit from the well-deserved aid provided to them by the Biden administration.
“On a personal note, I have nieces and nephews who have completed higher degrees and are suffering due to the hardship of their debts imposed on them. In fact, so many in my district are unable to pay off their student loans, constantly having to choose whether to put their hard-earned money towards repayments or basic necessities such as food or housing. It is an unfortunate truth that minorities have historically been disenfranchised, largely through economic injustices.
“This economic relief will not only help more Hoosiers of color receive an education without fear of crippling debt, but will also help minorities in Indiana who have completed their degree to move forward free from the debt which too often leads to them living paycheck to paycheck.”