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Yes.
Some, but not all, federal student loans are paid off under income-dependent repayment plans, whereby an individual’s income determines the amount of their monthly payments. Any remaining balance for such loans is forgiven at the end of the repayment period, which is either 10, 20 or 25 years, depending on plan type. The borrower must remain in good standing throughout the repayment period.
Any forgiven loan balance will not be federally taxable income through 2025 because of the American Rescue Plan.
In July 2023, the Department of Education began notifying over 800,000 borrowers that their loans have been forgiven. Those borrowers have already made repayments for the full period specified by their loan terms, but those repayments were not accounted for accurately as a result of “historical failures in the administration” of the loan program.
Over 12,000 of the eligible borrowers are Wisconsin residents, totaling $576 million in relief.
This Fact Brief is responsive to conversations such as this one.
Sources
Federal student aid: Federal student aid
Federal student aid: Payment Count Adjustments Toward Income-Driven Repayment and Public Service Loan Forgiveness Programs
CNBC: Here’s how Biden’s $39 billion in student loan forgiveness may impact your taxes
White House: President Biden announces student loan relief for borrowers who need it most
U.S. Department of Education: Biden-Harris administration releases state-by-state data on $39 billion in loan forgiveness for 804,000 borrowers as a result of fixes to income-driven repayment plans
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