Overview
- Under an AFT-related settlement, borrowers on SAVE who already meet forgiveness criteria must apply to switch to another income-driven plan by Dec. 31, 2025 to avoid a tax bill on their discharge.
- The American Rescue Plan’s tax exclusion expires at year’s end because the OBBBA did not extend it, though Public Service Loan Forgiveness remains tax-free.
- Education Department and servicer system updates are underway in December 2025, and borrowers are being told to submit IDR applications now despite slow processing.
- For new loans issued on or after July 1, 2026, repayment choices narrow to the Standard plan and the new Repayment Assistance Plan, which sets payments at 1–10% of AGI or $10 per month for very low incomes.
- Parent PLUS borrowers face major shifts: loans taken after July 1, 2026 will be ineligible for income-driven plans, current borrowers are urged to consolidate before that date, and new borrowing caps will limit graduate, professional and Parent PLUS loan amounts.