Taxability by type of forgiveness
| Forgiveness type | Taxable in 2026? |
|---|---|
| Public Service Loan Forgiveness | No |
| Teacher Loan Forgiveness | No |
| Income-driven repayment plans | Yes |
| Closed school discharge | Usually yes |
| Private loan settlement | Yes |
Source: Internal Revenue Service
Public Service Loan Forgiveness and Teacher Loan Forgiveness are not taxable under permanent statutes. Most other types of student loan forgiveness, including income-driven repayment plans and private loan settlements, are taxable for discharges in 2026 and later.
What changed and when
The American Rescue Plan Act made nearly all student loan forgiveness tax-free from 2021 through 2025. That exclusion expired on schedule at the end of 2025 and wasn’t extended, so the pre-2021 taxable treatment resumed for discharges starting January 1, 2026.
If your forgiveness was delayed into 2026
Borrowers who received written confirmation of forgiveness eligibility in 2025, but whose discharge wasn’t actually processed until 2026 because of servicer backlogs, may still qualify for tax-free treatment in some cases. Keep any dated eligibility notice as documentation.
What to expect at tax time
If your forgiveness included $600 or more in debt and is considered taxable, your loan holder will typically send a Form 1099-C, Cancellation of Debt, showing the amount discharged. You’ll report that amount as income on your federal income tax return unless an exclusion applies.
