Key developments: The federal appeals court struck down the SAVE repayment plan in March, prompting the Education Department to give 7.5 million borrowers 90 days to choose a new plan, with half likely seeing payments jump from a median $110 to $500‑$674 per month. At the same time, the tax‑free forgiveness provision that was part of the 2021 American Rescue Plan expired at the end of 2025; advocacy group Protect Borrowers warns that 2‑3 million borrowers could face average tax bills of up to $12,000 as forgiven debt becomes taxable. Additionally, Public Service Loan Forgiveness (PSLF) is stalling—thousands of borrowers report delayed employment‑certification processing and paused payment‑count updates, leaving many unable to finalize forgiveness.
Why it matters: The abrupt loss of SAVE’s low‑payment option threatens affordability for millions, potentially pushing borrowers into default. The emerging "tax bomb" could erode the financial relief of forgiveness, especially for low‑income borrowers, and may trigger renewed legislative pushes to restore tax exemption. PSLF delays undermine a key incentive for public‑service careers, risking workforce shortages in education, health, and other nonprofit sectors.
What to watch next: • Final notices and the proportion of borrowers auto‑placed onto the Standard Repayment Plan. • Congressional action on reinstating tax‑free treatment of forgiven student debt. • The Education Department’s response to PSLF processing glitches and any regulatory changes to speed up certification. [[1, 2, 3]]