4 Moves to Make By Year-End to Get Tax-Free Student Loan Forgiveness

Core Insights - The Department of Education has resumed student loan forgiveness for most income-driven repayment plans, but there is no confirmed date for when borrowers will receive their forgiveness [3] - Borrowers eligible for forgiveness in 2025 will not have to pay federal taxes on their discharged loans, provided they take necessary steps before the end of the year [4][5] Group 1: Loan Forgiveness Resumption - The Department of Education is processing tax-free loan discharges for borrowers under Income-Based Repayment, Pay As You Earn, and Income-Contingent Repayment plans [6] - Borrowers under the Saving for a Valuable Education plan are currently unable to receive forgiveness due to ongoing lawsuits [6] Group 2: Tax Implications - Borrowers who qualify for loan forgiveness in 2025 must ensure they take steps to avoid being taxed on their discharged loans, which could result in significant tax liabilities [5] - The temporary tax rule allowing tax-free forgiveness will end on January 1, 2026, creating urgency for borrowers to act [4] Group 3: Verification Steps - Borrowers should verify their repayment plan qualifies for forgiveness and ensure they have made the required number of payments, which is 240 or 300 months depending on the plan [10] - Borrowers can request a transfer of repayment plans through the Federal Student Aid website to ensure tax-free forgiveness [9]