Betsy Mayotte, founder of the nonprofit Institute of Student Loan Advisors, has made a career of providing free student loan advice. So she gets questions about all things student debt-related — including taxes.
“I work with a lot of borrowers that are afraid of pursuing forgiveness because they have this vision of the IRS coming after them for, you know, a six-figure tax bill,” she said.
But for now, she said, that fear is unfounded. In 2021, as part of the American Rescue Plan, Congress temporarily changed the law so that student loan forgiveness is not considered taxable income.
“So if the forgiveness happens by the end of 2025, there will be no federal tax on it,” explained Mayotte.