Student Loan Forgiveness (2026)

We lined up Education Department notices, servicer announcements and court filings for every date on that timeline, and three changes affect the most people. First, the end of SAVE: more than seven million borrowers were still enrolled when transition notices began on July 1. Each borrower gets 90 days from their own notice to pick a new plan, and the notices go out in waves, so a neighbor’s deadline may be months away from yours. If you do nothing, your loans move to the Standard plan, or the new tiered Standard plan for loans first disbursed on or after July 1, and a bill typically follows within a month or two.

Second, the arrival of RAP. It’s now the only income-driven plan available for loans made on or after July 1, including new consolidation loans. Borrowers with older loans can choose between RAP and Income-Based Repayment. ICR and PAYE are closing: existing enrollees can stay until July 1, 2028, but must move to IBR or RAP by then or be placed automatically.

Third, taxes. The pandemic-era law that made most student loan forgiveness federally tax-free expired at the end of 2025. Starting this year, forgiveness under IBR, ICR, PAYE and RAP generally counts as taxable income. PSLF, Teacher Loan Forgiveness, and disability and death discharges stay tax-free under federal law.

Supporters of the new system say RAP is simpler, guarantees that on-time payers see their principal shrink, and ends balances that grow from unpaid interest. Critics point out that RAP has no $0 payment, sets payments on gross income with no living-expense allowance, and makes forgiveness take 30 years, which is longer than the plans it replaces. Both points are visible in the numbers below.

RAP is simpler than the older plans but not necessarily cheaper. Your payment starts as a percentage of your adjusted gross income, from 1% for AGI between $10,000 and $20,000, rising one point for each additional $10,000, up to 10% above $100,000. If your AGI is $10,000 or less, the yearly base is a flat $120. Divide by 12, subtract $50 for each dependent on your tax return, and the result can’t drop below $10 a month.

Two features make RAP different from anything before it. If your full, on-time payment doesn’t cover the month’s interest, the unpaid interest is waived, so your balance can’t grow. And if your payment reduces principal by less than $50, the Department adds a matching principal payment of up to $50. For many lower-income borrowers that means the balance finally goes down, but it also means a payment every month, since there’s no $0 option. Married borrowers who file jointly are assessed on combined income, with an adjustment if both spouses have federal loans. Separate filers are assessed on their own income.

Borrowers with new loans who don’t choose RAP, and SAVE borrowers with post-July loans who miss their deadline, land in the tiered Standard plan. It’s a fixed payment with no forgiveness at the end, and its length depends on how much you owe. That doesn’t make it a bad plan. For a borrower with a moderate balance and a good income, a fixed payoff in 10 or 15 years can cost less in total than decades of income-based payments. It just isn’t a forgiveness plan, and the tiered version isn’t a qualifying plan for PSLF.

The estimator uses RAP’s published formula and IBR’s standard formula: 10% of income above 150% of the federal poverty guideline for newer borrowers, or 15% for those who first borrowed before July 1, 2014. It uses this year’s guideline for the 48 contiguous states, $15,960 for one person plus $5,680 for each additional person. It doesn’t apply IBR’s cap at the 10-year Standard payment, so high earners with small balances may pay less on IBR than shown. Alaska and Hawaii use higher guidelines, which lowers IBR payments there.

When we ran a range of incomes through both formulas, a pattern held. At low incomes, IBR often comes out at $0 while RAP charges at least $10, sometimes more. In the middle of the income range, RAP is frequently a bit cheaper, especially for families with dependents. And the forgiveness clock is shorter on IBR, at 20 or 25 years against RAP’s 30. If you’re pursuing PSLF, the lowest payment usually wins, since both plans qualify and the 120-payment count is the same.

The employer question is settled for now. In late 2025 the Department finalized a rule letting it disqualify employers it found to have a “substantial illegal purpose,” set to take effect July 1. Federal courts in Washington, D.C., and Massachusetts vacated the rule on June 30, a day before it would have kicked in. The government appealed in August, then on October 21 filed to dismiss its appeals in the D.C. and First Circuits. The result: any qualifying 501(c)(3) nonprofit or government employer still counts, exactly as before. The Department could try a new rulemaking, so keep certifying employment regularly; a certified record is your best protection against future changes.

SAVE borrowers need to watch two things. Months in the SAVE forbearance don’t count toward PSLF automatically, so every month you delay choosing a new plan is a month that doesn’t move your count. And if you plan to buy back those months later, the cost has gone up. The Department now calculates buybacks for periods after July 1, 2024 using IBR, PAYE or ICR formulas instead of SAVE’s. In one published example, a single borrower earning $75,000 would have paid about $215 a month under SAVE but about $640 under IBR, turning a 20-month buyback from roughly $4,300 into about $12,800.

Buyback itself is slow but moving. The backlog peaked around 90,000 requests and fell to about 88,000 in the Department’s May status report. In one month the Department reviewed roughly 7,000 requests, approving about 6,600. Borrowers report waits of six to 18 months. To qualify, you generally need at least 120 months of qualifying employment, and the buyback must complete your 120 payments. Periods in school, grace, default or bankruptcy can’t be bought back, and neither can time on RAP or the tiered Standard plan.

One newer problem: in August, some borrowers saw PSLF payment counts drop. The Department said some changes were system corrections, but borrowers with legitimate credit were affected too. Download your PSLF payment history from StudentAid.gov every few months and keep copies of every certification, so you can dispute an unexpected drop with evidence.

The size of the bill depends on how much is forgiven and your other income in that year. One published illustration: a borrower earning $50,000 who has $80,000 forgiven would see taxable income jump to $130,000 for that year, pushing the federal tax bill from about $3,800 to nearly $20,000, with state tax potentially adding thousands more. The Department has said that borrowers who reached their forgiveness milestone before January 1 but were discharged afterward won’t owe federal tax on it under an interim arrangement.

There’s one important safety valve. If you’re insolvent when the debt is forgiven, meaning your total debts exceed the total value of your assets, some or all of the forgiven amount can be excluded from income using IRS Form 982. Many borrowers who reach 20 or 25 years of income-driven payments have modest assets, so the insolvency exclusion may shrink or erase the bill. Run the numbers with a tax professional in the year before your expected discharge.

States are a patchwork. Some, including New York, Illinois, Massachusetts, Connecticut and Ohio, generally follow federal income rules and so may tax IDR forgiveness automatically. California and Minnesota have excluded IDR forgiveness. Mississippi taxes forgiveness broadly, including PSLF, while Arkansas excludes PSLF but taxes IDR forgiveness. New Jersey broadly excludes canceled debt, and nine states have no personal income tax at all. Check your state’s current rule before assuming either way.

In week one, log in to StudentAid.gov and write down every loan, its type and its servicer, plus your current repayment plan and status. Many people discover they hold a mix: some Direct Loans, an old FFEL loan, a Parent PLUS loan. Each type has different options, so this inventory decides everything else. In week two, open the Loan Simulator and compare IBR, RAP and Standard on those real loans, and note the monthly payment and the forgiveness date for each.

In week three, act on the biggest risk. If you were on SAVE, choose a plan. If you work in public service, certify your employment. If you’re in default, call the Default Resolution Group. If you’re disabled, contact the disability discharge servicer. In week four, set up autopay on your new plan, save a copy of your payment counts, and put a reminder in your calendar for your annual income recertification. Missing recertification is one of the most common reasons income-driven payments jump unexpectedly.