A top lawmaker says Albany should act to give New York student loan debtors some peace of mind amid legal and policy uncertainty — despite state tax authorities’ promise not to not touch any federal relief.
“Student debt relief is essential for so many across New York City,” Deputy Senate Leader Michael Gianaris (D-Queens) told The Post on Friday. “It shouldn’t turn into a cash grab from the state.”
President Biden announced last week that the Department of Education would forgive up to $20,000 in student loan debt incurred by borrowers who received federal Pell grants for their education and earn less than $125,000 individually or less than $250,000 if part of a household, plus up to $10,000 in debt for non-Pell Grant recipients
A spokesperson for the Department of Taxation and Finance told the Post on Friday that they don’t believe the giveaway will be subject to state taxes — but not everyone agrees.
According to a recent analysis by the Tax FoundationNew York could charge borrowers up to $685 in new levies, even though the White House has said canceled portions of student loans will not be considered taxable income by the IRS.
Jared Walczak, the Tax Foundation’s vice president for state projects, noted earlier this week that New York had previously determined that student debt discharged due to death or disability was subject to taxes from the state.
But pass his bill before “January at the latest,” Gianaris said, Democrats in Albany can put a stop to any chance the relief will be taxed by the state.
“Taxpayers need certainty about what they may or may not owe when preparing their taxes,” he said.
Governor Kathy Hochul, State Senate Majority Leader Andrea Stewart-Cousins, and Assembly Speaker Carl Heastie — the so-called “three people in a room” who ultimately decide the politics of the state – did not respond to requests for comment on Friday.
State lawmakers adjourned for the year in June ahead of the crucial November election, when Democrats’ legislative supermajorities are on the ballot alongside Hochul, who is running against Republican Rep. Lee Zeldin (R- Suffolk) for a full term as Governor.
“The massive cancellation of student debt is good for some, but it’s a slap in the face for people who sacrificed to pay off their loans, worked in college, went to a cheaper school or completely skipped college. Magical loan forgiveness is bad far-left policy and just plain wrong,” Zeldin tweeted August 23.
A spokeswoman for Zeldin did not immediately comment on Friday when asked how he might approach imposing federal loan forgiveness if elected governor in November.
The bill’s co-sponsors include swing-district Democratic state senators Anna Kaplan (D-Nassau), Kevin Thomas (D-Nassau) and Michelle Hinchey (D-Catskills), whose seats are critical for the Democratic hopes of retaining their supermajority.
“The state shouldn’t be polished and obscuring people for taking advantage of a program that was meant to help them,” Kaplan said. “It’s critical that we ensure every relief dollar goes into the pockets of New Yorkers, where it belongs.”
An estimated 2.25 million New Yorkers are set to receive federal loan forgiveness if it overcomes expected legal challenges, according to U.S. Senate Majority Leader Chuck Schumer.