Student Loan Forgiveness Could Triple Tax Bill for Many Borrowers: Report
Between 2 million and 3 million Americans could face a student loan "tax bomb" over the next decade.
A new report warns that many student loan borrowers could face significant tax increases after their remaining debt is forgiven. Protect Borrowers, a nonprofit advocating for student debt relief, estimates that between 2 and 3 million Americans could experience a tax bomb resulting from loan forgiveness over the next decade. The additional tax burden could exceed $12,000 for some households, wiping out emergency savings or delaying retirement contributions.
This tax hit comes as the federal tax exemption for student loan forgiveness expired at the end of 2025. Income-driven repayment plans, which eventually cancel remaining balances after a set period, are now subject to potential taxation once forgiven balances are counted as taxable income. With an average canceled balance of $49,697, borrowers making less than $50,000 annually could see their tax liability triple.
The tax consequences are most severe for those with large balances, modest incomes, and limited savings. Experts warn that borrowers may face wage garnishments, liens, and collection efforts from the IRS if they cannot afford the additional tax bill.
Written by urgent.news from Newsweek's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
