How Student Loan Tax Forgiveness Traps Cost Borrowers Thousands

Lucas and Luna uncover a hidden pitfall in student loan forgiveness programs: the tax bomb. When your loans are forgiven under an income-driven repayment plan after 20 or 25 years, the IRS treats the forgiven balance as taxable income. Lucas explains the mechanics, the surprise bill borrowers face, and how to plan for it using side savings or a tax professional. Luna shares a real-world story of a teacher who got a $30,000 tax bill after Public Service Loan Forgiveness worked perfectly. They discuss why the American Rescue Plan's tax-free period expired in 2025, what current law means for 2026, and whether legislative changes are on the horizon. This episode is essential for anyone on an IDR plan who assumed their loan balance would simply disappear. #StudentLoans #TaxForgiveness #TaxBomb #IDRPlans #PublicServiceLoanForgiveness #PSLF #IncomeDrivenRepayment #LoanForgiveness #IRS #TaxPlanning #PersonalFinance #DebtPayoff #FexingoBusiness #BusinessPodcast #Finance #StudentDebt #Education #BorrowerAdvocacy Keep every episode free: buymeacoffee.com/fexingo