The American Rescue Plan Act of 2021 offers student loan forgiveness without taxes, but this provision expires at the end of 2025. Public Service Loan Forgiveness (PSLF) remains tax-free for federal loan borrowers, as does the income-driven repayment plan. Forgiveness under these programs will remain tax-free past 2026. Teacher Loan Forgiveness remains exempt from income taxes. The One Big Beautiful Bill (OBBB) makes federal and private student loans discharged due to death or disability tax-free indefinitely. However, borrowers may face a “student loan tax bomb” if loans are forgiven after 2025.

To prepare for potential tax bills, estimate your forgiveness amount, consider insolvency, set up a payment plan, or save cash. Consult a tax professional for guidance. If not eligible for forgiveness, student loan refinancing could be an option.

Read more at Yahoo Finance: Tax-free student loan forgiveness ends in 2025. Will you owe more?