Students study at the John T. Richardson library in Chicago on Saturday, Jan. 17, 2026. (Medill Illinois News Bureau photo by Sam Freeman)
Article Summary
- Certain types of student loan forgiveness face federal and state taxes after a law that protected borrowers expired Dec. 31. Now, these loan breaks are considered taxable income at the federal and state levels.
- A new settlement agreement could terminate the Saving on Valuable Education plan, requiring borrowers to switch to other plans to qualify for loan forgiveness.
- Student loan forgiveness that was halted by the lawsuit is expected to resume in February, but programs including income-contingent repayment and pay-as-you-go plans will be phased out entirely by July 2028.
This summary was written by the reporters and editors who worked on this story.
SPRINGFIELD — For the first time in five years, certain forms of student loan forgiveness will be taxable following a change in federal tax policy this year.
This comes after a provision of the American Rescue Plan Act expired Dec. 31. That measure, signed into law in 2021 by former President Joe Biden, temporarily excluded student loan debt from federal income taxes…