Student loan borrowers who use income-driven-repayment (IDR) plans could soon experience large, unexpected tax liabilities. After borrowers on IDR plans pay their loans for a set period (either 20 or 25 years), the federal government discharges those debts. Currently, discharged student loan debt is excluded from income for federal tax purposes. But, beginning in 2026, only debt forgiven due to the student’s death or total and permanent disability will be excluded. Recently, several Democratic senators asked U.S. Treasury Secretary Scott Bessent to use his legal authority to prevent borrowers from owing income tax on debt discharged under an IDR plan in 2026 and beyond.
