Student rates

Candidates Give Their Thoughts on Student Debt Relief

Two candidates vying for Indiana State House District 59 seat back exempting student debt relief from state taxes after Indiana says it plans to consider debt forgiven as taxable income.

However, the two candidates — incumbent Rep. Ryan Lauer, R-Columbus and Democratic challenger Ross Thomas — have differing views on whether those with student loan debt should have gotten relief at all.

Lauer called the Biden administration’s student debt relief plan unconstitutional and a “thumb in the eye for working-class families.” But he said, “Indiana should not mandate debt forgiveness on student loans up to a certain amount.”

Lauer clarified that the “certain amount” is up to $10,000 in canceled student loan debt, although he said he was still clarifying whether Pell Grant recipients with canceled student loans are already exempt from paying taxes on their debt.

Thomas said taxing canceled student debt would be “unnecessarily punitive,” adding that he thinks state officials are using the tax code to express opposition to Biden’s debt relief plan. He said he would support legislation to retroactively eliminate state income tax on debt relief.

The two candidates’ comments come after the Indiana Department of Revenue told The Associated Press in an email that residents will be required to list their canceled loans as taxable income, mirroring similar policies in d other US states following the Biden administration’s announcement of a rebate plan. last month.

More than 40 million Americans could see their student loan debt reduced or eliminated under President Joe Biden’s plan, which erases $10,000 in federal student loan debt for people with incomes below $125,000. per year or households earning less than $250,000, according to news reports. . Federal Pell Grant recipients could receive an additional $10,000 in federal rebate under the plan.

In June, Americans held nearly $1.75 trillion in student loan debt, according to the latest figures from the US Federal Reserve. Median student loan debt among Bartholomew County residents was $18,521 last June, compared to a median of $19,346 in Indiana and $20,108 nationally, according to the Debt in America report. 2022 from the Urban Institute.

But depending on state tax rates, the taxpayer’s other income, and any deductions and exemptions they may claim, residents could owe up to several hundred dollars in additional tax on canceled loans.

Indiana’s tax rate is 3.23%, which means those who are eligible to receive $10,000 of federal loan relief will pay up to $323 in taxes, while recipients of the Pell Grant could owe about $646, according to figures provided to The Associated Press by the Indiana Department of Revenue. .

Residents must also pay additional county taxes on canceled loans, according to news reports. For Bartholomew County, residents would pay $175 to $350 depending on the amount forgiven and other factors, according to figures the Indiana Department of Revenue provided to The Associated Press.

Indiana had a budget surplus of $6.1 billion last July after rising tax revenues pushed state cash reserves to record highs, news reports said.

Lauer said House members are “having conversations” about whether to exempt Indiana residents from paying state taxes on canceled student debt, but does not anticipate the legislature taking action. measures before the next legislative session in January, two months after the November elections.

“The method by which Biden is doing this does not give Indiana time to respond to politics in the normal way through our legislative process,” Lauer said. “…The fact that this was thrown at the nation, for me very politically in an election year, is exactly where we are right now.”

“Biden is shifting the burden of college loan debt onto working-class Hoosiers and Americans, and that’s not fair,” Lauer added later in the interview.

Thomas, however, said he supported the Biden administration’s debt relief plan and pointed to bailouts during the 2008 financial crisis and the Paycheck Protection Program, which provided federal loans. reimbursable to help small businesses stay open and their employees working during the COVID-19 pandemic. .

Under the program, 1,300 forgivable loans totaling $44 million have been issued to small businesses in Columbus, according to data from the Small Business Association.

“It’s not just young people. Some people have student debt into middle age because of interest rates and those kinds of things that are really a burden on people who can’t be discharged in bankruptcy,” said Thomas. “It’s just an albatross around your neck.”

“(Biden’s debt relief plan) is good policy and will help a lot of people who are struggling,” Thomas said.