Student loan forgiveness becomes taxable again in 2026, triggering a costly tax bomb for IDR borrowers
From 2026, cancelled student loans under income-driven repayment plans will once again be treated as taxable income in the US. The expiry of a federal tax exemption means borrowers nearing forgiveness could face large tax bills, potentially thousands of dollars. Experts quoted by CNBC urge early planning, savings and professional advice. Public Service Loan Forgiveness remains tax-free, while borrowers eligible in 2025 may still avoid federal taxation if documented properly and on time now ahead.
From 2026, cancelled student loans under income-driven repayment plans will once again be treated as taxable income in the US. The expiry of a federal tax exemption means borrowers nearing forgiveness could face large tax bills, potentially thousands of dollars. Experts quoted by CNBC urge early planning, savings and professional advice. Public Service Loan Forgiveness remains tax-free, while borrowers eligible in 2025 may still avoid federal taxation if documented properly and on time now ahead.
