The Role Of State Governments In Alleviating Student Loan Burden

The Role Of State Governments In Alleviating Student Loan Burden – Pennsylvania Gov. Tom Wolf congratulated Gina Dattilo of Chester County before a news conference Thursday where Pennsylvanians, including Dattilo, announced they no longer have to pay state taxes on student loans. which they received from the Federal Public Service Loan Forgiveness Program and. Pennsylvania student loan assistance for nurses. December 17, 2021 Commonwealth Media Services

Pennsylvanians who take advantage of federal student forgiveness programs don’t have to worry about getting an unexpected hit on their state tax returns from now on.

The Role Of State Governments In Alleviating Student Loan Burden

Gov. Tom Wolf on Friday announced that the loan relief offered through the Public Service Loan Forgiveness Program and the Pennsylvania Student Loan Relief for Nurses will be released to what is expected to be thousands of borrowers in the state. from income taxes.

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Student loan forgiveness is designed to help people who choose careers in public service such as teachers, firefighters or police officers to achieve that. businesses, Wolf said.

“We need to make sure that financial burdens do not keep our best from taking away some of our most important jobs,” the governor said in the first press conference held at the The governor’s lobby at the Capitol as of early March 2020. of COVID-19.

The federal government does not count the canceled loan as taxable income but state and local governments do. Even better, Wolf says, this debt relief often comes in one lump sum. This leads to a significant increase in tax revenue in relation to state taxes.

Earlier this year, he woke up one day to find that through the Federal Public Service Loan Forgiveness Program he no longer owes more on his student loans.

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“I’m very grateful for that but my joy was short-lived because I found out that while it’s not taxed at the federal level, Pennsylvania and Missouri are the only two states that tax it at the state and federal level. local,” said Dattilo, a single mother of two who has worked for nonprofits for 20 years. “So this April, I’ll be paying state and local taxes on about three times my salary. I don’t make that kind of money.”

The Federal Public Service Loan Forgiveness Program allows student borrowers who make 120 monthly payments under certain repayment plans while working full-time at a government organization or earning income to have the balance forgiven. their student loans.

The nursing loan forgiveness program started in January with up to $7,500 in loan forgiveness for state licensed nurses.

“The whole idea of ​​public service student forgiveness programs is that people choose to serve the public and often in low-income schools because they want to make a difference,” Wolf said. “They don’t have thousands of dollars laying around to pay a one-time tax bill.”

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A statement from the state Department of Transportation revealed that this policy change will affect those two color programs. Most other loan forgiveness or debt settlement programs are subject to Pennsylvania income tax under state law.

“For example, in a typical situation where an employer pays off an employee’s student loans as part of their paycheck, the payments are still taxable income,” says Jeff Johnson. “Taxpayers who have questions about their tax status should go to the Department of Revenue or the Internal Revenue Service to determine if there is a Pennsylvania personal income tax on forgiven loans.”

As for the amount of public revenue lost in this policy change, Johnson said that this is revenue that has not been recorded and is not included in the budget forecasts so the impact is uncertain.

“Most importantly, this decision shows that the state, like the federal government, recognizes the value of public service and does not want to discourage people from taking jobs in suitable for pardoning countries to change,” he said.

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Wolf praised U.S. Sen. Bob Casey, D-Pa., and Democratic Sens. Katie Muth of Montgomery County, Lindsey Williams of Allegheny County, and Steve Santarsiero of Bucks County for bringing this issue to his attention. The judges sent a letter to the governor on Dec. 8.

The day before that letter came out, Rep. Parke Wentling, R- Mercer County, introduced legislation approved by the House Finance Committee earlier this week to accomplish the same goal.

He maintained that the law does not need to change this tax change to be implemented for the forgiveness granted in 2021 and forward. He also said this change does not apply to state-level local taxes; however, “in most cases, local governments follow state and federal practice.”

Muth, who was on hand for the press conference, called this tax policy change for the 1,700 Pennsylvanians who have so far had loans forgiven a “Christmas power that people have been waiting for. “

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Williams said in a statement that Pennsylvania graduates hold the third highest average student debt in the nation.

The class of 2020 left college with an average of $39,375 in student loans, up nearly $350 from the year before, according to a report by the Institute for College Access and Success.

“Student debt is a major problem that prevents Americans from investing in their communities and local businesses,” Williams said. “I’m very happy that people who qualify for these loan programs, like teachers and nurses, will no longer face a surprise tax bill because they live in Pennsylvania.”

If you buy a product or sign up for an account through one of the links on our site, we get paid. By visiting this website, we may share your information with our social media partners in accordance with our privacy policy. Many people use it as an indicator of a country’s financial health. A term often used to refer to government spending and revenues rather than businesses or individuals.

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Budget deficits include the national debt, the total annual budget deficits, and the total amount of money the country owes.

When a deficit is identified, current expenses exceed income through normal operations. To correct its nation’s fiscal deficit, often referred to as the fiscal deficit, the government may reduce certain expenditures or increase revenue-generating activities.

A deficit can lead to higher levels of debt, higher interest rates, and lower returns, resulting in lower income in the coming year.

The opposite of a budget deficit is a budget surplus. When there is a surplus, income exceeds current expenses, resulting in surplus funds that can be redistributed. When inflows equal outflows, the budget is considered balanced.

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At the beginning of the 20th century, few industrialized countries had large budget deficits; however, during the First World War, deficits increased due to the fact that governments were heavily indebted and depleted their savings accounts to finance their growth. These periods of war and boom continued until the 1960s and 1970s, when global economic growth collapsed.

Both levels of taxation and spending affect the government’s budget deficit. Common examples that create deficits by reducing income and increasing spending are:

Budget deficits can be found as a way to respond to certain unexpected events and policies, such as the increase in defense spending after the September 11 terrorist attacks.

Financial deficits affect individuals, businesses, and the entire industry. As the government takes measures to improve the deficit, spending on programs such as Medicare or Social Security may be reduced. Improvements can be linked to businesses.

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To increase revenue, the tax rate for high income earners or large corporations may be higher, which may affect their ability to invest in new businesses or hire new employees. .

Countries deal with fiscal deficits by encouraging economic growth through fiscal policies, such as reducing government spending and increasing taxes. Determining the best strategies involves spending to be cut or taxes to be increased often.

To pay for government programs while operating under a deficit, the federal government borrows money by selling U.S. Treasury bonds, bills, and other assets. Yes.

The federal government’s budget deficit occurs when the government spends revenue or receives money from taxes, fees, and investments. Deficits add to national or federal debt. If the government’s debt grows faster than gross domestic product (GDP), the debt-GDP ratio can balloon, possibly indicating a recession.

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The last time the US government had a federal budget surplus was in 2001. Every year since then there has been a federal budget deficit.

The government can work to reduce the budget deficit by using its fiscal policy toolkit to promote economic growth, such as reducing government spending and increasing taxes.

Fiscal deficits, expressed as a percentage of GDP, can decrease during times of economic prosperity, as incomes rise, unemployment rates decrease, and inflation increases. economic downturns that reduce the effectiveness of government-sponsored programs such as unemployment.

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