Overview
- A temporary federal tax exclusion for forgiven student debt ends on December 31, 2025, making IDR discharges taxable starting January 1, 2026 unless officials intervene.
- Nine senators, including Elizabeth Warren and Bernie Sanders, asked Treasury and the IRS to block what they call a looming tax hit on borrowers who earn forgiveness.
- Protect Borrowers estimates a typical borrower with about $49,000 forgiven could face roughly $5,800 to more than $10,000 in federal taxes, with larger balances triggering higher bills.
- The burden would fall hardest on lower earners, as about 62% of IDR forgiveness recipients make $50,000 or less and many have under $1,000 in savings, according to data cited in the analysis.
- The senators warned that relying on the IRS insolvency exclusion is impractical and requested confirmation of the agencies’ intent to act by November 23, as litigation and program changes risk pushing discharges into 2026.