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Pennsylvania public workers no longer will have to pay state income taxes on forgiven student loans under two major programs, Governor Tom Wolf's administration announced Friday.
Public-sector workers and nurses participating in the federal Public Service Loan Forgiveness Program, which provides debt relief to teachers, social workers, military members and other public workers, and the Pennsylvania Student Loan Relief for Nurses Program, which forgives a maximum of $7,500 in student loan debt for state-licensed nurses, will be affected.
"The point of student loan forgiveness programs for public servants is that these are people who have chosen jobs, often in lower-paying fields, because they want to make a difference," Wolf said in a press release issued by his office. "It's wrong to take what should be a blessing and turn it into just another burden.
"Ensuring that student loan forgiveness through the PSLF and SLRN programs is not considered taxable income will remove one more barrier for Pennsylvanians who are working to make a difference in our communities."
Most other states and the federal government do not tax student loan forgiveness, but Pennsylvania lawmakers who advocated for the change said the state Department of Revenue deemed canceled students loans to be taxable income.
"Pennsylvanians have some of the highest student loan debt in the country – and when these students are finally eligible to see some of their loan forgiven through public service, they should not be burdened with a surprise tax bill," state Senator Katie Muth said in the release. "I appreciate that the Administration and Department of Revenue took swift action to make this vital change to our state tax regulations.
The Department of Revenue sent a bulletin on Friday to clarify that student loan forgiveness through the two programs would not be subject to state taxes.
Created in 2007, the Public Service Loan Forgiveness Program promises that college graduates who take jobs in public service or who work for nonprofit organizations can have their federal student debt forgiven after making 10 years of monthly payments. The Biden administration recently eased eligibility rules after the program was criticized for rejecting more than 90 percent of applications.
The Associated Press contributed to this report.
