Welcome to 2026: Some Student Loan Forgiveness Is Now Taxable
Hugh T. Ferguson
January 7, 2026
A change in tax policy for 2026 has created some confusion over how certain forms of student loan forgiveness could now be taxed.
The American Rescue Plan Act (ARP) specified that any student loan debt (federal, institutional, or private) that was modified or discharged from December 31, 2020, through January 1, 2026, is excluded from an individual’s income when they file their tax returns.
This provision was incorporated into ARP during a reconciliation process, and to meet budgetary requirements, it was only able to remain in place for a five-year period. It was also implemented while the Biden administration was considering broader efforts to implement student loan debt cancellation that could have resulted in taxable income without this provision. The U.S. Supreme Court ultimately halted that effort to implement broad-scale student loan debt cancellation.
Now that the provision has expired and students are navigating significant changes to the student loan landscape with the One Big Beautiful Bill Act (OBBBA) revising repayment options, efforts to wind down the Saving on a Valuable Education (SAVE) student loan repayment plan, and ongoing legal challenges to the Department of Education’s (ED) processing of loan cancellation forms, borrowers have been left with questions over how their finances could be impacted.
