Student Loan Tax Bomb: Prepare Now
Update: 2025-11-24
Description
Student Loan Borrowers Beware: Tax Exemption Expiring in 2025 Could Lead to Tax BombThis podcast episode warns student loan borrowers about a significant change in tax exemptions for loan forgiveness. As of December 31, 2025, loans forgiven on or after January 1, 2026, could be taxed as income, primarily affecting those in income-driven repayment plans. The American Rescue Plan Act, which made many forms of loan forgiveness tax-free, is ending, leaving some programs without tax exemption. Borrowers in income-driven repayment plans could face a student loan tax bomb, with potential taxes on forgiven balances pushing them into higher tax brackets. Experts advise estimating potential forgiveness amounts and tax bills, exploring options like proving insolvency to the IRS or setting up payment plans, and starting to save now if anticipating future tax liabilities.
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