Student Loan Taxable as Income for Some Borrowers
Published January 12, 2026
By AACOM Government Relations
Federal Policy Graduate Medical Education Higher Education OME Advocate
- On January 1, 2026, a temporary exemption that made student loan forgiveness tax free under the American Rescue Plan Act expired, meaning loans forgiven on or after that date may be taxable as income for some borrowers.
- Borrowers who met the requirements for loan forgiveness in 2025 and applied before the end of the year, but did not have their application processed due to ED’s backlog should still be eligible for tax-free forgiveness, according to court documents from an ongoing lawsuit between ED and the American Federation of Teachers.
- Borrowers who qualify to have their remaining debt forgiven after January 1 and are paying loans through income-driven repayment plans will likely owe federal taxes on that amount.
- The Public Service Loan Forgiveness Program is not considered taxable income and is not affected by these tax changes.