Tax-Free Student Loan Forgiveness Window Narrows for 2025 Eligibles
Student loan borrowers qualifying for forgiveness in 2025 face a narrowing window to avoid federal tax liabilities. The Department of Education confirms discharged loans won't be taxed if eligibility is achieved before January 1, 2026—when Biden-era temporary provisions expire.
Processing delays create urgency. While IDR plan forgiveness resumed this month, bureaucratic backlogs mean 2025 qualifiers may wait until 2026 for discharge paperwork. The ticking clock: discharges completed after December 31, 2025 become taxable events.
Four critical actions emerge: payment verification, repayment plan audits, income documentation updates, and proactive communication with loan servicers. Missing any step risks pushing forgiveness into taxable territory.
