LANSING, Mich. (Michigan News Source) – For borrowers living in Michigan, student loan relief will not be treated as taxable income in Michigan.

According to Gov. Gretchen Whitmer’s office, roughly 1.4 million Michiganders eligible for relief will not owe any state taxes for receiving benefits of the Public Service Loan Forgiveness (PSLF) program or other student loan forgiveness.

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Typically, when debt is forgiven, the IRS treats it as taxable income. However, provisions of the American Rescue Plan have temporarily lifted this requirement.

However, it remains to be seen whether this “forgiveness” will become a reality. The Biden administration’s student loan forgiveness plan is officially facing its first legal challenge. A new lawsuit alleges the program is unfair because some Americans will be forced to pay state taxes on their forgiven debt.

The Pacific Legal Foundation filed the complaint Tuesday and aims to block President Joe Biden’s recently announced student loan relief initiative. The lawsuit comes after the Congressional Budget Office released an analysis estimating the plan will cost the federal government $400 billion to implement.