How to Avoid a Tax Hit as Student Loan Forgiveness Resumes: What You Need to Know

Federal student loan borrowers will soon receive the promised loan forgiveness this year, and they will not be required to pay federal taxes on it.
In a settlement agreement reached last week, the Department of Education said it would resume student loan forgiveness on most income-driven repayment plans. The department also stated that borrowers who become eligible for discharge in 2025 will not be required to pay taxes on it, even if their forgiveness is processed in 2026.
What Does This Mean For Me? Borrowers who are eligible for loan forgiveness this year under the Income-Based Repayment, Income-Contingent Repayment, or Pay as You Earn plan will not have to pay taxes on their loan discharge.
The Department of Education confirmed that the