Whitmer Announces Tax-Free Public Service Loan Forgiveness
September 28, 2022
FOR IMMEDIATE RELEASE
September 28, 2022
Gov. Whitmer Announces Tax-Free Public Service Loan Forgiveness
Michiganders do not have to pay state or federal taxes on federal loan forgiveness; approximately 1.4 million Michiganders have student loans
LANSING, Mich. – Today, 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.
Governor Whitmer’s Bipartisan Investments in Tuition-Free Certificates and Degrees
Since taking office, Governor Whitmer has worked across the aisle to make college more affordable by expanding access to tuition-free certificates and degrees for Michiganders 25 and over and future educators, as well as scholarships for students pursuing degrees at public Michigan universities. She established the bipartisan Michigan Reconnect program, which has put over 100,000 people on the path to tuition-free higher education or skills training. Governor Whitmer's recent bipartisan education budget created the Mi Future Educator Fellowship, which provides $10,000 scholarships for 2,500 future Michigan educators. The budget also funded Grow Your Own Programs, helping districts train school staff for classroom positions, tuition-free.
Public Service Loan Forgiveness Program Background
If you work in public service, including the military, qualifying non-profits, or federal, state, local, or tribal governments, you may qualify for PSLF. After 10 years of public service employment and 120 on-time loan payments, you may be eligible to have your entire student loan balance forgiven.
As of July 2022, 7,000 Michiganders have had $406 million in loans forgiven under the PSLF. Over 147,000 more Michiganders may be eligible due to the recent PSLF waiver.
New temporary changes to the PSLF program make it easier than ever to have your debt forgiven. Some changes include allowing borrowers to receive credit for past periods of repayment that would otherwise not qualify for PSLF. However, these temporary changes end on October 31, 2022. Public servants should apply at: studentaid.gov/pslf/.
Until October 31, 2022, the U.S. Department of Education is offering public servants working in government and eligible non-profits a second chance to qualify for student loan forgiveness. An estimated 154,000 public service workers in Michigan could be eligible for student loan debt relief under the PSLF waiver. According to the Office of Federal Student Aid’s June report, over 6,000 Michiganders have taken advantage of the PSLF waiver and have had $358 million in loans forgiven.
The recent changes to the federal PSLF program allow previously ineligible borrowers – those with a non-Direct loan, who are not enrolled in an income driven repayment plan, who have missed a repayment, or made a partial repayment in the past – to receive credit toward loan forgiveness for the years they worked in government or a qualifying non-profit.
To apply for the PSLF waiver, borrowers should:
- Visit the PSLF Employer Search to verify their employer qualifies for PSLF.
- Submit a certified copy of the PSLF Certification Form to the U.S. Department of Education before October 31.
If borrowers have questions regarding their individual situation, they can visit or call FedLoan Servicing at 1-855-265-4038.
Congress created PSLF to recruit and retain top talent in the public sector workforce. If an individual works for federal, state, local, or tribal government or a qualifying non-profit for 10 years, makes 120 full, on-time loan payments, and submits all required paperwork, the federal government forgives all of their remaining student loan debt.
Though PSLF was established in 2007, it has faced implementation challenges. Prior to the PSLF Waiver, only 2.1% of eligible borrowers had been approved for loan forgiveness. The recent PSLF program overhaul is the U.S. Department of Education’s attempt to deliver on the program’s promise and thank the public service workforce for their dedication and support.
The PSLF: Champions Toolkit is available for employers and professional associations to help them amplify the PSLF waiver opportunity and connect borrowers to resources. The toolkit includes sample email correspondence and social media posts. It is available for download here.