LANSING, Mich. – Wednesday, Governor Gretchen Whitmer announced that student loan relief would not be treated as taxable income in Michigan. Approximately 1.4 million Michiganders eligible for relief will not owe any state taxes for receiving benefits of the Public Service Loan Forgiveness (PSLF) program or other student loan forgiveness. Today’s announcement builds on Governor Whitmer’s actions to make higher education more affordable for Michiganders in every corner of the state.
“Tax-free student loan forgiveness could benefit up to 1.4 million Michiganders and help keep money in their pockets,” said Governor 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.”
“Our work to open pathways of opportunity for more Michiganders is critical to growing our economy, creating jobs, and building prosperity,” said Lt. Governor Garlin Gilchrist II. “Exempting student loan relief from taxable income builds on the work we have done to boost postsecondary education and skills training in Michigan. Governor Whitmer and I are committed to continuing this work and helping Michiganders access affordable education.”
“I was born in a western Kentucky coal town, daughter of Detroit auto factory workers. It was against the odds that I got my GED, and somehow clawed my way into the Honors College at Western Michigan University. I worked hard, held down a student job, became a Presidential Scholar, and got funding for a fellowship in grad school. Regardless of full fellowship funding, I still needed loans to survive, despite working three jobs during that time. My parents had no way of helping me,” said Melissa Milton-Pung, a project manager at the Michigan Municipal League and PSLF participant. “As the first person in my family to get a bachelor’s degree, then a master’s degree, the decision to go into public service was made easier by the promise of loan relief. It took 17 years for that forgiveness: 10 years of working to qualify, then 7 more years waiting for the program to finally work. I believe in this mission-oriented life and plan to continue to do good work in public service.”
Tax-Free Student Debt Relief
Typically, when debt is forgiven, the IRS treats it as taxable income. However, provisions of the American Rescue Plan have temporarily lifted this requirement. Any federal loans that are discharged between 2021 and 2025 will not be considered taxable income by the federal government. Because state tax law aligns with federal law, this temporary relief will be in effect in Michigan through 2025 as well.
