Resources Available to Assist Taxpayers with Student Loan Forgiveness & Repayment

Federal student loan repayment and forgiveness programs changed significantly in 2026. Eligibility depends on the borrower’s loan type, loan-disbursement dates, repayment history, employer, and selected repayment plan. Tax treatment depends on the forgiveness program, the date of discharge, and any applicable exclusion.

Core Federal Forgiveness Programs (Active)

• Public Service Loan Forgiveness may forgive the remaining balance on qualifying Direct Loans after the borrower satisfies the equivalent of 120 qualifying monthly payments under an accepted repayment plan while working full-time for an eligible government or qualifying not-for-profit employer. The qualifying payments do not need to be consecutive. Borrowers with other types of federal student loans generally must consolidate them into a Direct Consolidation Loan to pursue PSLF.
• Income-Driven Repayment (IDR) Forgiveness: Income-Based Repayment (IBR) remains available to eligible Direct Loan and FFEL Program borrowers. Eligibility and the applicable repayment period depend on the borrower’s loan type and borrowing history, including when the loans were received. IBR forgiveness may be available after 20 or 25 years of qualifying payments, while the Repayment Assistance Plan (RAP) provides forgiveness after 30 years of qualifying payments.
• Disability & Special Discharges: Total and Permanent Disability (TPD) discharges and death discharges remain available to eligible borrowers. The former post-discharge income-monitoring requirement for TPD discharges has been eliminated.

Recent Structural & Policy Changes

• The SAVE Plan and Broad Cancellation: The Biden-era one-time mass debt cancellation was struck down by the Supreme Court. Official federal servicer guidance says a March 10, 2026 court order ended SAVE and affected borrowers must select another plan after receiving notice.
• New Repayment Options: Federal Student Aid lists multiple fixed-payment plans, including Standard, Tiered Standard, Graduated, and Extended repayment options. Borrowers who do not select a repayment plan and whose loans were disbursed on or after July 1, 2026, are placed on the Tiered Standard Plan. Availability of income-based repayment plans, including the Repayment Assistance Plan (RAP), depends on factors such as the borrower’s loan type and disbursement date.
• FFEL and Parent PLUS Loans: Eligible FFEL Program loans may be repaid under Income-Based Repayment (IBR) without consolidation. However, non-Direct federal loans generally must be consolidated into a federal Direct Consolidation Loan to qualify for programs such as Public Service Loan Forgiveness (PSLF). Consolidation requirements vary by program and loan type. Parent PLUS Loans—and Direct Consolidation Loans that repaid Parent PLUS Loans—are not eligible for IBR. Direct Consolidation Loans containing Parent PLUS debt are also not eligible for the Repayment Assistance Plan (RAP). Consolidation does not automatically make Parent PLUS debt eligible for every income-driven repayment plan, so borrowers should review the requirements of the specific program they are considering.

Federal Tax Treatment of Forgiven Student Loan Debt

The temporary American Rescue Plan Act (ARPA) exclusion for student loan forgiveness ended on December 31, 2025. After that date, canceled student loan debt is generally taxable for federal income tax purposes unless a specific exception or exclusion applies. The tax result depends on the type of discharge and the law that applies to it, so each forgiveness or discharge program should be reviewed separately.

• Taxable Forgiveness: For many borrowers, forgiveness under an income-driven repayment plan after December 31, 2025 generally may result in federal taxable cancellation-of-debt income unless another exception or exclusion applies. The amount included in taxable income, if any, depends on the borrower’s circumstances and the tax law in effect for the year of forgiveness.
• Program Eligibility and Tax Treatment: Public Service Loan Forgiveness (PSLF) is generally excluded from federal gross income under the separate PSLF tax rule, although state tax treatment may differ. Total and Permanent Disability (TPD) and death discharges remain available to eligible borrowers, but discharge eligibility does not by itself determine the tax result. Taxpayers should verify the federal and state tax rules applicable in the year of discharge rather than assume every TPD or death discharge is tax-free.
• Insolvency Exception: A taxpayer is insolvent when total liabilities exceed the fair market value of total assets immediately before the debt discharge. Canceled debt may be excluded from federal taxable income to the extent of the taxpayer’s insolvency. IRS Form 982 is used to determine and report a qualifying exclusion under Internal Revenue Code section 108. Tax-attribute reduction may also apply.

Wisconsin Tax Treatment

Wisconsin income tax law does not always follow federal student loan forgiveness provisions. Certain forgiveness programs, including Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, Total and Permanent Disability discharges, and death discharges, are generally not taxable for Wisconsin purposes. However, taxpayers receiving forgiveness under income-driven repayment programs should separately evaluate Wisconsin tax consequences for the year of discharge. The Wisconsin Department of Revenue periodically updates its conformity guidance, and tax treatment may differ from the federal result. Taxpayers residing outside Wisconsin should review the tax law of their state of residence, as state treatment of student loan forgiveness varies and may differ from the federal result.

Important notice: Federal student loan rules continue to change through legislation, regulation, litigation, and administrative guidance. Information should be verified through StudentAid.gov, the borrower’s federal loan servicer, and current IRS guidance before repayment, consolidation, forgiveness, or tax decisions are made.

Federal Resources & Next Steps

• Official Portal: Visit StudentAid.gov to review active loan types, check payment counts, and use the official Repayment Calculator, formerly called the Loan Simulator. The calculator compares available plans, estimated monthly and total payments, consolidation scenarios, and PSLF-related options. Final eligibility and payment amounts are determined after the application is processed.
• Professional Consultation: Because the expiration of the federal tax exclusion creates a potential federal income tax liability for standard IDR forgiveness paths, proactive planning is critical.