California Passes Crucial State Tax Relief for Student Loan Borrowers
AB 111 ensures federal actions taken by the Biden Administration to provide student debt relief are exempt from state taxation through 2025.
FOR IMMEDIATE RELEASE: May 16, 2023
(SACRAMENTO, CA) - Yesterday, Governor Newsom signed a package of early budget action bills, including AB 111 that exempts federal student debt cancellation from state taxation. This legislation, which is supported by advocates, students, and state leaders, is a big step to protect California’s nearly 4 million student loan borrowers, by ensuring that federal student debt relief is exempt from state taxation.
This legislation follows Governor Newsom’s, Senate President Pro Tempore Atkins’, and Assembly Speaker Rendon’s commitment to take action on this important issue last year after President Biden announced his plan to provide student loan debt relief to millions of borrowers.
AB 111 provides full conformity with federal law, specifically the American Rescue Plan Act, which means a host of different student debt relief programs provided by the Biden Administration during the pandemic will be exempt from state tax. This is in addition to exempting the President’s $10,000/$20,000 debt cancellation plan from state taxes, which is currently under consideration by the U.S. Supreme Court.
On top of this state tax exemption for federal student debt relief, this early budget action provides further support to college students still struggling from the pandemic by expanding this state tax exemption to state-funded institutional debt forgiveness and to federal emergency grant aid.
AB 111 is necessary to ensure that those most in need of student debt relief are able to access it. As the student debt crisis disproportionately impacts communities of color, low-income borrowers, and women, California has taken a big step toward uplifting the most vulnerable borrowers and addressing the nearly $2 trillion student debt crisis.
In response, the Campaign for California Borrowers’ Rights coalition issued the following statement:
“We thank California leaders for their commitment to uplifting the most vulnerable student loan borrowers by passing early budget action through AB 111. While the President’s debt relief program is still held up in the U.S. Supreme Court, our state is making strides toward ensuring that no student or student loan borrower faces tax penalties for accessing much-needed debt relief and grant assistance. Young adults across the country are facing ever increasing economic instability - we must keep working to increase protections for student loan borrowers. As a coalition that works to level the playing field for student borrowers so that they can one day see a future free of debt, we are thankful for the work that Governor Newsom, th Legislature, and all our partners in the coalition have done to get us one step closer to that vision.”
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NextGen California, Student Borrower Protection Center, Young Invincibles, Student Debt Crisis Center, Consumer Reports
Contact
Cody Hounanian, Student Debt Crisis Center (cody@studentdebtcrisis.org)
Robin Swanson NextGen California (robin@swansoncomm.net)
Emma Bittner, Young Invincibles (emma.bittner@younginvincibles.org)
About the Campaign for California Borrowers’ RightsContact
The Campaign for California Borrowers’ Rights is a diverse coalition of organizations representing students, workers, consumers, older people, communities of color, veterans, and millions of other Californians affected by the student debt crisis. The Campaign is led by NextGen California, Young Invincibles, Student Debt Crisis Center, Student Borrower Protection Center, and Consumer Reports. More information about the Campaign is available at https://www.californiaborrowers.org/.