North Carolina's GOP lawmakers shouldn't tax Biden's student-loan forgiveness, the state's governor says — and he calls on them to treat the relief like PPP loan forgiveness

North Carolina's GOP lawmakers shouldn't tax Biden's student-loan forgiveness, the state's governor says — and he calls on them to treat the relief like PPP loan forgiveness
North Carolina Gov. Roy Cooper speaks at a primary election night event hosted by the North Carolina Democratic Party in Raleigh, North Carolina, on May 17, 2022.Ben McKeown, file/AP Photo
  • North Carolina Gov. Roy Cooper asked GOP state legislators to waive taxes on student-loan forgiveness.
  • He said the relief should be treated like the loans forgiven from the Paycheck Protection Program.

A Democratic governor said Republicans should take a page out of their own books when deciding how to handle President Joe Biden's student-loan forgiveness.

After Biden announced up to $20,000 in federal debt relief at the end of August, confusion emerged regarding how taxes would be applied to that loan forgiveness. While Biden's American Rescue Plans ensure the relief will not be subject to any federal taxes, each state has its own individual tax code and can determine how, if at all, state taxes will be applied to federal debt cancellation.

Amid reports that Republican states are considering taxing the relief, North Carolina's Democratic Governor Roy Cooper called on GOP legislators in the state to waive the state income taxes on student-loan forgiveness in a Wednesday press release and urged them to use the Paycheck Protection Program (PPP) as precedent.

"Legislative leaders need to find a solution that treats student loan forgiveness the same way they handled the PPP loan forgiveness that many of them received," Cooper said. "Republican legislators were quick to help businesses and should now fix this fundamental unfairness for many hardworking people who will get hit hard by this."

According to the Tax Foundation, a number of GOP-led states like Indiana and Mississippi are on track to impose state taxes on Biden's debt relief. While North Carolina previously indicated its current tax code would consider student-loan forgiveness as taxable income, Cooper pointed out that the state's General Assembly passed legislation to ensure that residents wouldn't have to pay taxes on forgiven loans through the PPP, and he said the same benefit should be extended to student-loan borrowers in the state.


Since Biden's announcement, many Republican lawmakers were quick to criticize the policy, calling it costly and unfair to those who already paid off their debt. The White House responded by pointing out that many of the ones attacking the relief were those who got their PPP loans forgiven, like Sen. Marco Rubio and Rep. Marjorie Taylor Greene. While the White House said "we absolutely think it's a fair comparison" between PPP and student-loan forgiveness, Rubio argued otherwise.

Rubio, who helped create PPP in 2020, argued in an op-ed that "Biden's student debt forgiveness plan could not be more different, despite his lame attempts to draw similarities between the two."

"Let's start with the obvious: federal student loans were just that, loans. The whole idea was that students would take the loans to pay for an education that would lead to a job that repays them (along with the massive interest accumulated)," Rubio wrote.

Still, when it comes to taxes, its up to states to choose how they want to handle Biden's relief but will need to decide before borrowers start filing their taxes.

"At a time when we are announcing and creating thousands of jobs from companies that want a skilled, diverse workforce, we need to be encouraging young people to stay here and move here, not encouraging them to leave the state to avoid unfair taxes," North Carolina Secretary of Commerce Machelle Baker Sanders said in a statement.