Income-driven repayment forgiveness still exists after the SAVE plan’s collapse, but the ground under it has shifted. SAVE is permanently off the table, the Department of Education’s one-time payment count adjustment finished in early 2025, new repayment plans are replacing what was lost, and forgiven balances became taxable at the federal level again on January 1, 2026. If you were counting on SAVE or on tax-free IDR forgiveness, the plan you build for 2026 needs to look different from the one you had in 2024.
What Happened to SAVE
Federal courts blocked SAVE through a preliminary injunction that the Eighth Circuit affirmed in February 2025, finding the entire rule should be enjoined. A settlement between the Department of Education and the State of Missouri then formally ended the program. The Department agreed to stop enrolling new borrowers, deny all pending SAVE applications, and move existing SAVE borrowers into other plans.1U.S. Department of Education. U.S. Department of Education Announces Next Steps for Borrowers Enrolled in Unlawful SAVE Plan
Borrowers who were on SAVE received a 90-day window from their servicer to pick a new plan. Anyone who did not choose within that window was placed automatically into either the Standard Repayment Plan or the new Tiered Standard Plan that became available July 1, 2026. Standard plans do not build toward IDR forgiveness. If you were on SAVE and have not confirmed where your loans landed, call your servicer now, because every month on a standard plan is a month you are not earning credit toward cancellation.
Your IDR Options in 2026
The One Big Beautiful Bill Act, signed July 4, 2025, reshaped what is available. It did not change the payment formulas on existing IDR plans, but it opened up eligibility and created new plans starting July 1, 2026.
Income-Based Repayment
The “partial financial hardship” requirement is gone for borrowers with loans made on or after July 1, 2014. If your loans were made between July 1, 2014, and July 1, 2026, you can enroll in IBR regardless of your income-to-debt ratio, pay 10 percent of discretionary income, and receive forgiveness after 20 years.2Federal Student Aid Partners. Federal Student Loan Program Provisions Effective Upon Enactment Under One Big Beautiful Bill Act
Borrowers with loans from before July 1, 2014, stay on the older IBR formula: 15 percent of discretionary income with forgiveness after 25 years. Parent PLUS borrowers who consolidated can now enroll in IBR, which was previously closed to those loans.3Federal Student Aid. One Big Beautiful Bill Act Updates
The Repayment Assistance Plan and Tiered Standard Plan
Two new plans, the Repayment Assistance Plan (RAP) and a Tiered Standard Plan, launch July 1, 2026. RAP payments will count toward Public Service Loan Forgiveness, which matters for public-sector workers who lost that qualifying path when SAVE ended. The Department is still finalizing RAP’s payment formula and forgiveness terms.1U.S. Department of Education. U.S. Department of Education Announces Next Steps for Borrowers Enrolled in Unlawful SAVE Plan
The One-Time Account Adjustment Is Closed
The Department’s one-time IDR account adjustment finished in early 2025. It recounted qualifying months for borrowers with Direct Loans and federally held FFEL loans, credited time in repayment regardless of whether payments were made, and swept in certain forbearance and pre-2013 deferment periods that servicers had excluded. Borrowers who hit 240 months (undergraduate) or 300 months (graduate) received automatic discharge; everyone else got an updated count on their studentaid.gov dashboard. From September 2024 forward, your servicer handles payment tracking normally.4Federal Student Aid. Payment Count Adjustments Toward Income-Driven Repayment and Public Service Loan Forgiveness Programs
One boundary matters for borrowers with commercially held FFEL, Perkins, or Health Education Assistance Loans: those loans needed to be consolidated into a Direct Consolidation Loan by June 30, 2024, to benefit. Consolidations disbursed on or after October 1, 2024, did not receive the adjustment, and the Department has not announced any replacement window.5Federal Student Aid. What to Know About Federal Family Education Loan (FFEL) Program Loans Consolidation itself is still available and still required for those loan types to pursue PSLF or IDR going forward.
Forgiven Balances Are Taxable Again
The American Rescue Plan Act’s exclusion of forgiven student loan debt from federal taxable income expired on January 1, 2026. IDR forgiveness granted in 2026 or later is treated as ordinary income on your federal return.6IRS. Topic No. 431, Canceled Debt – Is It Taxable or Not?
The impact is real. A borrower with $80,000 forgiven could see taxable income jump by that amount, potentially push into a higher bracket, and face a tax bill of $15,000 or more depending on other income. Your servicer will send a Form 1099-C reporting the canceled amount, which goes on the return for the year the cancellation is effective.
What Stays Tax-Free
Public Service Loan Forgiveness is permanently excluded from federal taxable income. So are discharges for total and permanent disability, borrower defense to repayment, and closed schools.7Taxpayer Advocate Service. What to Know About Student Loan Forgiveness and Your Taxes Timing can also help: if the Department notified you in 2025 that your loan was eligible for forgiveness, the tax year that governs is generally when cancellation became effective, not when your servicer finished zeroing the balance.
The Insolvency Exclusion
If your total liabilities exceeded the fair market value of your assets immediately before discharge, you are insolvent under federal tax law and can exclude the forgiven amount up to the extent of that insolvency. Claim it on IRS Form 982, checking the box on line 1b and reporting the excluded amount on line 2. Publication 4681 has a worksheet for calculating the insolvency figure, and Part II of Form 982 requires you to reduce certain tax attributes.8Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness9IRS. Publication 4681 (2025), Canceled Debts, Foreclosures, Repossessions, and Abandonments
Many borrowers who spent 20 or 25 years in IDR are insolvent by this measure once you add remaining student debt, credit cards, a mortgage, and modest savings. Run the numbers before assuming you owe the full tax, and keep your 1099-C and insolvency worksheet for at least seven years.
State tax treatment varies. Some states follow the federal exclusion, others tax forgiven debt regardless. Check with your state tax authority for 2026 guidance.
Checking Your Payment Count and Fixing Errors
Your updated IDR qualifying payment count should appear on your studentaid.gov dashboard, reflecting any credit from the adjustment. Compare it against your own records. If something looks wrong, start with your loan servicer, which handles first-level disputes. If the servicer cannot resolve it, escalate to the FSA Ombudsman Group through the studentaid.gov feedback center or at 800-433-3243. Have your specific error, prior contact history, and supporting documents ready.10Federal Student Aid Partners. Office of the Ombudsman FSA
Refunds for Overpayments
Under a court-approved settlement in AFT v. U.S. Department of Education, borrowers who kept paying after they had already reached the 240- or 300-month forgiveness threshold are entitled to refunds for those post-eligibility payments. Payments made before hitting the threshold do not qualify, even if the one-time adjustment later added “extra” credited months. The Department has acknowledged the obligation but has not published a disbursement schedule. If you think you overpaid past your threshold, hold onto your payment history.
Joint Spousal Consolidation Loans
Joint consolidation loans cannot be evaluated individually for IDR forgiveness until they are split. The Joint Consolidation Loan Separation Act lets co-borrowers apply to divide a joint Direct Consolidation Loan or Federal Consolidation Loan into two individual Direct Consolidation Loans. The application requirements are being revised to align with the One Big Beautiful Bill Act changes for loans received on or after July 1, 2026, so contact your servicer for the current procedure before filing.11Federal Student Aid Partners. Comment Request: Joint Consolidation Loan Separation Application