Bill would bar New York state ‘cash grab’ from student loan forgiveness
A top lawmaker says Albany ought to act to give New York’s student loan debtors some peace of mind amid legal and political uncertainty —despite state tax authorities promising to keep their hands off potential federal relief.
“Relieving student debt is critical for so many across New York,” state Senate Deputy Leader Michael Gianaris (D-Queens) told The Post Friday. “It should not turn into a cash grab by the state.”
President Biden announced last week that the Education Department would write off up to $20,000 in student loan debt incurred by borrowers who received federal Pell Grants for their education and make below $125,000 individually or under $250,000 if part of a household, along with up to $10,000 in debt for non-Pell Grant recipients
A Department of Taxation and Finance spokesperson told The Post on Friday they do not believe the giveaway would be subject to state taxes — but not everyone agrees.
According to a recent analysis by the Tax Foundation, New York could charge borrowers up to $685 in new levies, even though the White House has said that the forgiven 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 has previously determined that student debt discharged due to death or disability are subject to state taxes.
But by passing his bill before “January at the latest,” Gianaris said Albany Democrats can put the kibosh on any chance that the relief would get taxed by the state.
“Taxpayers need certainty about what they may or may not owe when preparing their taxes,” he said.
Gov. Kathy Hochul, state Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie — the so-called “Three People in a Room” who ultimately call the shots in state politics — did not respond to requests for comment Friday.
State lawmakers adjourned for the year in June ahead of crucial elections this November, when Democrats’ legislative supermajorities are on the ballot alongside Hochul, who is running against Republican nominee Rep. Lee Zeldin (R-Suffolk) for a full term as governor.
“Mass cancellation of student debt feels good to some, but it’s a slap in the face to people who sacrificed to pay loans, worked through college, went to a less expensive school or skipped college altogether. Magically canceling loans is bad, far left policy & just flat out wrong,” Zeldin tweeted Aug. 23.
A Zeldin spokeswoman did not immediately comment Friday when asked how he might approach taxation of federal loan forgiveness if elected governor this November.
The bill’s co-sponsors include swing district Democratic state Sens. Anna Kaplan (D-Nassau), Kevin Thomas (D-Nassau) and Michelle Hinchey (D-Catskills), whose seats are critical for Democratic hopes of holding their supermajority.
“The state shouldn’t be nickel and diming people for taking advantage of a program that’s intended to help them,” Kaplan said. “It’s critical that we ensure every dollar of relief goes into the pockets of New Yorkers where it belongs.”
An estimated 2.25 million New Yorkers are expected to benefit from federal loan forgiveness if it overcomes expected legal challenges, according to US Senate Majority Leader Chuck Schumer.