From Yahoo Finance: 2024-02-22 13:04:00

Federal student loan borrowers may qualify for forgiveness through programs like PSLF, TLF, or after making payments under an IDR plan. PSLF has forgiven $79.4 billion for over 1 million borrowers. However, forgiven loans may be taxable, leading to the student loan tax bomb.

42.7 million people have federal student loans. Loan forgiveness can bring relief, but forgiven debt is usually taxable. The American Rescue Plan exempts forgiven loans from federal taxes until 2025. But some states tax forgiven debt.

PSLF offers tax-free forgiveness. TLF forgives up to $17,500. IDR plans base payments on income and can lead to forgiveness after 20-25 years. Borrower Defense and TPDD discharge loans. TPDD may be taxable at the state level.

Private student loans are not eligible for federal programs. The American Rescue Plan exempts forgiven private loans from federal taxes until 2025. Payments may impact tax bills post-2025. Tax amount depends on forgiveness amount and tax bracket.

Congress may extend the American Rescue Plan past 2025, exempting IDR, TPDD, and private loan forgiveness from federal taxes. PSLF remains tax-free. Prepare for potential tax bills by setting aside savings monthly.

Read more: Will I be taxed on student loan forgiveness?