Gov. Tony Evers wants to reduce student debt in Wisconsin, but currently, loan forgiveness is not widely available for Wisconsinites and many are “not aware” of a potential tax on forgiven funds, he said Thursday.
“Are they? No. Should they be? Yes. Or at least [should be] minimized,” Evers said when asked by The Daily Cardinal if student loans in Wisconsin are being forgiven.
Evers suggested providing resources to the University of Wisconsin System or adjusting loan rates through the Higher Educational Aids Board (HEAB) to mitigate student debt but noted it’s something he has “tried to do for five years now without any success.”
In 2021, the Biden administration proposed forgiving $10,000 in student debt for over 40 million low- and middle-class borrowers. By January 2023, Wisconsin received 465,000 forgiveness applications, with 302,0000 sent to loan servicers.
“I supported the president’s efforts around that, I thought it was a good idea,” Evers said.
But in July, the conservative-leaning U.S. Supreme Court voted in favor of blocking Biden’s loan forgiveness, ruling it was an overreach of the president’s power that required approval from Congress.
The Wisconsin Department of Financial Institutions (DFI) Secretary Cheryll Olson-Collins said in a November webinar over 700,000 students are loan borrowers in Wisconsin, totaling $23.2 billion in overall debt.
The DFI and Department of Agriculture Trade and Consumer Protection developed an online service called Savi to couple with Biden’s income-driven repayment plan, the Saving on a Valuable Education (SAVE) plan, to provide a free service to all Wisconsin residents striving to pay off their debt.
“The idea that somebody’s going to be a grandfather, and 60 years old, and still paying off their debt, that’s insanity. We have to find a better way,” Evers said.
Income-driven repayment plans adjust monthly payments on all federal student loans based on a borrower’s income and family size, with the promise of loan forgiveness after an extended period of time.
In Wisconsin, the amount of debt forgiven from an income-driven repayment plan is considered gross income and is taxed. But at a federal level, the amount of debt forgiven is not taxable as modified by the American Rescue Plan Act, according to the Wisconsin Department of Revenue.
Assembly Speaker Robin Vos, R-Rochester, told the Cardinal in November tax exemptions on loans are not “even viable right now, because I don’t think people are getting their loans forgiven.”
Additionally, he said the Legislature will not take up a bill “until we see what happens” from Congress.
Ava Menkes is the state news editor at The Daily Cardinal. She has covered multiple stories about Wisconsin politics and written in-depth about nurses unions and youth voter turnout. Follow her on Twitter at @AvaMenkes.
