In December 2025, student loan borrowers in the SAVE program face an unexpected deadline for loan forgiveness eligibility. Legal battles and court rulings have led to the end of SAVE, requiring seven million borrowers to switch to other repayment plans like IBR, ICR, or PAYE by July 2028.

Borrowers on income-driven repayment plans face a tax challenge, as loan forgiveness will no longer be tax-exempt starting January 1, 2026. Democrat senators urge the administration to use existing authorities to prevent a looming tax burden for borrowers, including those in IDR programs like IBR, ICR, or PAYE.

The Department of Education has agreed to resume processing loan forgiveness for borrowers in certain income-dependent repayment plans, resolving a lawsuit brought by the American Federation of Teachers. Borrowers who became eligible before the tax rule change in 2025 won’t be taxed on forgiven loans, providing relief for those in limbo.

With the end of the SAVE program, borrowers must act quickly to switch to other income-driven repayment plans to avoid a hefty tax bill by December 31, 2025. A joint settlement agreement between the DoE and Missouri spells out the end of SAVE, forcing borrowers to make timely decisions to protect themselves from tax implications.

Read more at Yahoo Finance: This group of student borrowers will be in for a ‘tax bomb’ if they don’t act quickly. Protect your money