For Immediate Release:                                                                          Contact: Steven Harmon

November 30, 2022                                                                                        916-651-4007 (office)

                                                                                                                            916-539-5005 (cell)

SACRAMENTO – Senators Steve Glazer (D-Contra Costa) and Josh Newman (D-Fullerton) will introduce an urgency bill on the first day of session, December 5, to ensure that Californians who qualify for federal student loan forgiveness do not have to pay state income taxes on their forgiven debt.

Senators Glazer and Newman are partnering on the bill in the wake of a federal appeals court injunction on November 14 halting President Biden’s student debt cancellation plan. The loan forgiveness plan is on hold while the court considers a lawsuit brought by six Republican-led states, which claim that the president’s executive action to wipe out up to $20,000 in federal student loan debt per borrower exceeded his authority. President Biden appealed the injunction on November 18.

The bill exempts Californians from paying income on their student loan forgiveness through 2026 and would take effect immediately if approved by both houses by a two-thirds majority and signed by Governor Newsom.

“The issue isn’t fully resolved, but I want to make sure that Californians will not have to pay state income taxes on the federal student loan forgiveness if President Biden prevails in court,” said Senator Glazer, a former California State University trustee who has been chairman of the Senate Select Committee on Student Success.

Senator Newman said the legislation ensures “that student borrowers receiving loan forgiveness will not incur a state tax liability as a result. Too many Californians have labored for too long under the burdens of onerous student loans, and this measure is a very sensible next step in the right direction on their behalf.”

Senator Glazer’s legislation is meaningful relief to Californians with student debt, said Marlenee Blas Pedral, the student Regent for the University of California’s Board of Regents.

“Student loan debt has been a tremendous burden on those who have sought to improve their lives through education,” Blas Pedral said. “The plan to wipe out some of that debt has given people hope that they can move on with their lives with a lighter load on their backs. If President Biden’s plan holds, this bill makes sure that those savings aren’t clawed back through California income taxes.”

Senator Glazer first pledged to introduce legislation on September 9 when questions arose whether the state law mirrored current federal law, which exempts forgiven student loans from federal income taxes.

Legislative leaders soon endorsed the idea and Governor Newsom has since joined them after the California Franchise Tax Board confirmed on September 14 that the forgiven loans would be counted as income and taxed in California.

“Many people have struggled for decades to make their monthly payments on their student loans, so the federal plan for forgiven debts is a welcome relief,” Glazer said. “But, it is plain unfair – and yet another hardship – for them to have to pay income taxes on that forgiven portion of their student debt.”  

Senator Glazer praised Newsom, Senate President Pro Tem Toni Atkins and Assembly Speaker Anthony Rendon for their leadership in keeping college costs down and boosting state financial aid in recent years. Making sure that debt forgiveness is tax-exempt would be consistent with those policies, he said.

“I look forward to working with the Governor and legislative leaders on my bill to ensure that Californians won’t be saddled with these costs,” Glazer said. “I am introducing this as an urgency measure because we need this to be resolved before people pay their taxes next spring.”

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