What’s the Latest on Student Loan Forgiveness?

Federal student loan forgiveness is still available in 2026 through several distinct programs, but the landscape shifted hard in March when a federal court struck down the SAVE Plan and roughly 8 million borrowers had to start choosing a new repayment plan. Public Service Loan Forgiveness, Teacher Loan Forgiveness, income-driven repayment forgiveness, and disability and closed-school discharges all remain in place. Two new repayment plans launch July 1, 2026, and a tax exclusion that made forgiveness federally tax-free has expired for most programs.¹

What Happened to SAVE and What You Need to Do Now

On March 10, 2026, a federal court order formally ended the Saving on a Valuable Education (SAVE) Plan.¹ The Eighth Circuit affirmed a preliminary injunction and instructed the lower court to block the entire rule.²

If you were enrolled in SAVE or had an application pending, your loans were placed in administrative forbearance during the litigation. Interest has been accruing since August 2025. You now have to pick a new plan. Starting July 1, 2026, loan servicers will begin issuing notices giving you 90 days to choose. If you don’t act, you’ll be automatically placed into either the Standard Repayment Plan or the new Tiered Standard Plan.³ You don’t have to wait for the notice. You can contact your servicer now to enroll in a different plan, which stops the interest clock from running longer than it has to.

Public Service Loan Forgiveness

PSLF is the most valuable forgiveness program if you work in government or the nonprofit sector. After 120 qualifying monthly payments (about 10 years), your remaining Direct Loan balance is forgiven entirely, and the forgiveness stays tax-free.⁴

Qualifying employers fall into three categories:

Federal, state, local, or tribal government agencies.
Tax-exempt organizations under Section 501(c)(3) of the Internal Revenue Code.
Other nonprofits that provide qualifying public services like public education, public health, law enforcement, emergency management, early childhood education, or public library services. Labor unions and partisan political organizations are excluded.⁴

You must work full-time for a qualifying employer during each of those 120 payments, and the payments must be made under an income-driven repayment plan or the 10-year standard plan. Progress is tracked through employment certification forms. Submit them annually or whenever you change employers so there are no surprises when you reach 120 payments. The PSLF Help Tool on StudentAid.gov manages the whole process, and you’ll need the Employer Identification Number from your W-2 to complete the form.⁵

Teacher Loan Forgiveness

Teachers at low-income schools have a faster, targeted path. Teach full-time for five complete and consecutive academic years at an eligible school and you can qualify for up to $17,500 in forgiveness for teaching math, science, or special education at the secondary level. Other qualifying teachers can receive up to $5,000. You must have been a new borrower on or after October 1, 1998. Eligible schools are listed in the Teacher Cancellation Low Income directory on StudentAid.gov.⁶

Teacher Loan Forgiveness and PSLF aren’t mutually exclusive over a career, but the same payments cannot count toward both at the same time. Some teachers complete Teacher Loan Forgiveness first to knock down the balance, then pursue PSLF for what remains. That works, but your PSLF payment counter effectively resets after Teacher Loan Forgiveness.

Income-Driven Repayment Forgiveness

Every income-driven repayment plan eventually forgives whatever balance remains after a set number of years. The timeline depends on the plan:

IBR, new borrowers on or after July 1, 2014: 20 years.
IBR, borrowers before July 1, 2014: 25 years.
ICR: 25 years.
PAYE: 20 years.
RAP: 30 years (360 monthly payments).⁷

If you’re already enrolled in IBR, ICR, or PAYE, you don’t need to switch. If you’re coming off SAVE forbearance, you can enroll in one of these now.¹ The catch on IDR forgiveness is that it now comes with a federal tax bill, covered below.

New Repayment Plans Starting July 2026

Congress authorized two new options through P.L. 119-21, both available July 1, 2026. For borrowers who take out new Direct Loans on or after that date, the Repayment Assistance Plan is the only income-driven option available.⁷

Repayment Assistance Plan (RAP)

RAP calculates your monthly payment from your total adjusted gross income rather than discretionary income. The payment percentage follows a sliding scale: if your AGI is $10,000 or less, you pay $10 per month. Above $10,000, the percentage rises by one point for each $10,000 increment in income, topping out at 10%. Each dependent reduces your payment by $50, with a floor of $10.⁷

After 360 monthly payments, any remaining balance is forgiven. The plan includes an interest subsidy: if your payment doesn’t cover all the monthly interest, the unpaid interest isn’t charged to you. There’s also a matching principal payment. If you pay less than $50 toward principal in a given month, the government matches your principal payment up to $50.⁷

Parent PLUS borrowers are not eligible for RAP. The only income-driven plan available to them remains Income-Contingent Repayment, which requires consolidating the Parent PLUS loan into a Direct Consolidation Loan first. If you hold a Parent PLUS loan and want access to ICR, consolidate before July 1, 2026.⁷

Tiered Standard Plan

The Tiered Standard Plan offers fixed repayment terms of 10, 15, 20, or 25 years based on your total outstanding loan balance. Higher balances get longer terms and lower monthly payments. The payment doesn’t adjust to your income and stays the same throughout the term. It’s built for borrowers who want predictability and don’t want (or don’t qualify for) an income-based calculation.³

Disability, Closed School, and Borrower Defense Discharges

Total and Permanent Disability

Borrowers who are totally and permanently disabled can have their entire federal student loan balance discharged. There are three ways to establish eligibility. First, a Social Security notice of award for SSDI or SSI showing your next disability review is scheduled five to seven years out.⁸ Second, a physician’s certification that your condition is expected to result in death or has lasted continuously for at least 60 months. Third, a VA determination that you’re unemployable due to a service-connected disability.⁹

The old three-year post-discharge income monitoring period has been eliminated. Your loans will not be reinstated based on income. However, if you take out new federal student aid within three years after receiving a TPD discharge, your previously discharged loans could be reinstated. TPD discharge is also permanently tax-free.

Closed School Discharge

If your school closed while you were enrolled, during an approved leave of absence, or within 180 days after you withdrew, you’re eligible for a full discharge of the loans you took out to attend that school. For schools that closed on or after July 1, 2023, the discharge happens automatically one year after the Department of Education establishes the official closure date. You don’t need to apply. Your servicer will notify you. You can submit an application sooner if you want to speed things up.¹⁰

You don’t qualify if you completed your program, withdrew more than 180 days before closure absent exceptional circumstances, or transferred to and completed a comparable program at another school through a teach-out agreement.¹⁰

Borrower Defense

Borrower defense to repayment provides a discharge path if your school misled you or engaged in misconduct that directly relates to your loans. Applications are submitted through StudentAid.gov using your FSA ID. Cases are reviewed individually, and processing has historically been slow. If you believe your school engaged in fraud or misrepresentation, file sooner rather than later.

Taxes on Forgiven Loans in 2026 and Beyond

This is the piece most borrowers don’t see coming. The American Rescue Plan Act temporarily made all federal student loan forgiveness tax-free at the federal level, but that exclusion expired on December 31, 2025. Any loan balance forgiven in 2026 or later under an income-driven repayment plan is now treated as taxable income.¹¹

What that looks like in practice: if you’ve been on IBR for 25 years and $80,000 is forgiven, you’ll receive a Form 1099-C from your lender in early 2027, and you’ll owe income tax on that $80,000 as if you earned it that year. For someone in the 22% bracket, that’s roughly $17,600 in additional tax.

Several types of forgiveness remain permanently tax-free regardless of the ARP expiration:

Public Service Loan Forgiveness.
Teacher Loan Forgiveness.
Total and permanent disability discharge.
Death discharge.
Closed school discharge.¹¹

The Insolvency Exclusion

If your total liabilities exceed the fair market value of your total assets at the time your debt is forgiven, you’re considered insolvent for tax purposes. You can exclude the forgiven amount from taxable income, but only up to the amount by which you’re insolvent.¹² You claim the exclusion by filing IRS Form 982 with your return and calculating your insolvency using the worksheet in IRS Publication 4681.¹³ Many borrowers who reach IDR forgiveness after 20 or 25 years are in fact insolvent, which is often why they’ve been on income-driven plans for so long. If this applies to you, the tax hit could be significantly reduced or eliminated.

State tax treatment varies. Some states follow the federal exclusion rules; others tax forgiven debt even when the federal government doesn’t. Check with your state’s revenue department or a tax professional before your forgiveness date.

How to Apply

All forgiveness applications go through StudentAid.gov. You’ll need an active Federal Student Aid (FSA) ID, which acts as your digital signature. You’ll also need your Social Security number, a valid email address, and your most recent federal income tax return. Authorizing the IRS to share your tax data directly speeds the process.

For PSLF, the application doubles as an employment certification form. You’ll need the Employer Identification Number from box b of your W-2, or directly from your employer if you’re paid through a staffing agency or professional employer organization.⁵ Errors in the EIN or Social Security number fields are the most common cause of processing delays.

Electronic submission is the default, with confirmation emails and tracking numbers after you finalize. Paper applications can be downloaded and mailed to the address listed for your loan servicer. Status updates appear on your borrower dashboard at StudentAid.gov, including notifications about missing documents or final decisions. Check it regularly, because requests for additional information often come with tight response deadlines.

One practical step: sign up for auto-pay once you’re on your new repayment plan. It prevents missed payments and earns a 0.25% interest rate reduction.¹ Over 20 or 25 years on an IDR plan, that adds up.

Avoiding Student Loan Forgiveness Scams

Every major shift in student loan policy brings a wave of scammers, and the end of SAVE is no exception. Every federal student loan forgiveness program is free. Your loan servicer will never charge you to change repayment plans, apply for forgiveness, or consolidate your loans.¹⁴ Any company charging an upfront fee or monthly charge to navigate forgiveness is taking money for something you can do yourself at no cost.

Common red flags: unsolicited calls or texts about forgiveness opportunities, pressure to act immediately, requests for your FSA ID password, and companies using official-sounding names with words like “federal” or “national.” Legitimate servicers and the Department of Education will never ask for your FSA ID password. If someone says they can get your loans forgiven quickly for a fee, that’s the scam. Most government forgiveness programs require years of qualifying payments before any balance is discharged.

Report suspected scams at reportfraud.ftc.gov. For help with your actual loans, go directly to StudentAid.gov or call your loan servicer.

1
Federal Student Aid. IDR Plan Court Actions: Impact on Borrowers
2
United States Court of Appeals for the Eighth Circuit. State of Missouri v. Donald J. Trump
3
U.S. Department of Education. U.S. Department of Education Announces Next Steps for Borrowers Enrolled in Unlawful SAVE Plan
4
Federal Student Aid. What Are Qualifying Employers for PSLF
5
Federal Student Aid. Public Service Loan Forgiveness and Temporary Expanded PSLF Certification and Application
6
Federal Student Aid. 4 Loan Forgiveness Programs for Teachers
7
Congressional Research Service. The Repayment Assistance Plan (RAP) in P.L. 119-21
8
eCFR. 34 CFR 685.213 – Total and Permanent Disability Discharge
9
Federal Student Aid. Automatic Total and Permanent Disability Discharge through Social Security Administration Data Match
10
Federal Student Aid. Closed School Discharge
11
Taxpayer Advocate Service. What to Know about Student Loan Forgiveness and Your Taxes
12
Office of the Law Revision Counsel. 26 USC 108 – Income from Discharge of Indebtedness
13
Internal Revenue Service. 2025 Publication 4681
14
Federal Student Aid. How To Avoid Student Loan Forgiveness Scams