Student loan warning issued over potential tax of up to $10,000

Source: msn/Newsweek

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U.S. senators have issued a warning for student loan borrowers, as tax bills of up to $10,000 may hit in 2026.

Beginning January 1, student loan debt forgiveness could carry a high tax liability. While student debt forgiveness was exempt from federal income tax since the passage of the American Rescue Plan in 2021, that provision will expire at the end of 2025.

Why It Matters

Millions of Americans enrolled in federal student loan forgiveness programs risk facing potentially large federal tax bills beginning in 2026 due to legislative and regulatory changes set to take effect. Lawmakers and advocacy groups have raised alarms that these unforeseen costs could devastate borrowers who have long counted on income-driven repayment (IDR) programs to eventually deliver debt relief after decades of payments.

The concern centers on the expiration of federal tax exemptions for forgiven student debt and the ongoing overhaul of repayment programs, which together may leave borrowers financially exposed just as their relief arrives. The impact could be especially severe for low- and middle-income recipients, many of whom have limited savings and are unprepared for a sudden spike in their taxable income.

Read more: https://www.msn.com/en-us/money/personalfinance/student-loan-warning-issued-over-potential-tax-of-up-to-10000/ar-AA1Qkgkl