Loan Forgiveness Programs
PSLF requirements, IDR forgiveness timelines, Teacher Loan Forgiveness, NHSC programs, and tax implications starting 2026.
Key Numbers
PSLF
120 Pmts, Tax-Free
IDR Forgiveness
20–30 Yrs, Taxable
Teacher
Up to $17,500 (5 Yrs)
NHSC
Up to $120K (2–3 Yrs)
Federal student loan forgiveness programs eliminate remaining debt after meeting specific requirements. The main pathways are Public Service Loan Forgiveness (PSLF), income-driven repayment (IDR) plan forgiveness, and profession-specific programs for teachers and healthcare workers.
Program Comparison
| Program | Time Required | Amount Forgiven | Tax-Free? |
|---|---|---|---|
| PSLF | 10 years (120 payments) | Unlimited | Yes |
| IDR (IBR new) | 20 years | Remaining balance | No (2026+) |
| IDR (IBR old) | 25 years | Remaining balance | No (2026+) |
| RAP (new plan) | 30 years | Remaining balance | No (2026+) |
| Teacher Forgiveness | 5 years | $5,000–$17,500 | Yes |
| NHSC Loan Repayment | 2–3 years | Up to $120,000 | Yes |
IDR tax bomb starting January 1, 2026: The American Rescue Plan Act exemption expired December 31, 2025. IDR forgiveness is now treated as taxable income — a borrower with $50,000 forgiven could owe $10,000+ in federal taxes. PSLF forgiveness remains permanently tax-free.
Public Service Loan Forgiveness (PSLF)
PSLF forgives the remaining balance on Direct Loans after 120 qualifying monthly payments while working full-time for a qualifying employer. Forgiveness is always tax-free at the federal level with no cap on the amount forgiven.
PSLF Requirements
| Requirement | Details |
|---|---|
| Qualifying Loans | Direct Loans only (subsidized, unsubsidized, PLUS, consolidation). FFEL/Perkins must be consolidated into Direct Loans first; pre-consolidation payments do not count. |
| Qualifying Employers | Government (federal, state, local, tribal), 501(c)(3) nonprofits, AmeriCorps, Peace Corps, military service |
| Repayment Plans | IBR, PAYE, ICR, RAP (starting July 2026), or standard 10-year plan |
| Employment | Full-time (30+ hrs/week). 120 payments need not be consecutive. Only payments after Oct 1, 2007 count. |
| Annual Certification | Submit PSLF form (Employment Certification) annually via StudentAid.gov/pslf. MOHELA is the current PSLF servicer. |
PSLF Application Steps
| Step | Action | Notes |
|---|---|---|
| 1 | Consolidate non-Direct loans | FFEL and Perkins → Direct Consolidation Loans |
| 2 | Enroll in an IDR plan | IBR typically provides lowest payments |
| 3 | Submit ECF annually | Use PSLF Help Tool at StudentAid.gov |
| 4 | Track progress | Monitor qualifying payment count in My Aid dashboard |
| 5 | Apply after 120 payments | File forgiveness application through MOHELA |
July 2026 rule change: New regulations allow the Department of Education to disqualify employers with a “substantial illegal purpose.” The rule is currently facing legal challenges. ED estimates fewer than 10 employers disqualified per year, and prior qualifying payments are protected.
IDR Forgiveness & Tax Impact
Income-driven repayment plans forgive remaining balances after 20–30 years of payments. Starting in 2026, this forgiveness is taxable as ordinary income, potentially creating a significant “tax bomb” for borrowers with large forgiven amounts.
Forgiveness Timeline by Plan
| Plan | Forgiveness | Status |
|---|---|---|
| IBR (new) — after July 1, 2014 | 20 years | Available |
| IBR (old) — before July 1, 2014 | 25 years | Available |
| PAYE | 20 years | Ends July 2028 |
| ICR | 25 years | Ends July 2028 |
| SAVE | 20–25 years | Terminated (settlement pending) |
| RAP (new) | 30 years | Starts July 2026 |
Estimated Tax on IDR Forgiveness (2026+)
The American Rescue Plan Act exemption expired December 31, 2025. All IDR forgiveness after that date is taxed as ordinary income.
| Amount Forgiven | Approx. Income | Est. Tax Bill |
|---|---|---|
| $40,000 | ~$50K | $8,000–$10,000 |
| $100,000 | ~$100K (MFJ) | $20,000–$26,000 |
| $150,000 | ~$80K | $42,000–$52,000 |
Planning for IDR Forgiveness Taxes
| Strategy | How It Helps |
|---|---|
| Save for the tax bill | Set aside 25–30% of expected forgiveness amount for taxes |
| Insolvency exclusion | If liabilities exceed assets at forgiveness, forgiven debt may be excluded from taxable income (IRS Form 982) |
| Switch to PSLF | PSLF forgiveness is permanently tax-free — explore eligibility at qualifying employers |
| IRS installment plan | If unable to pay the tax bill in full, IRS installment agreements are available |
State taxes vary: Most states follow federal treatment, but some (including Wisconsin, Mississippi, Indiana, North Carolina, and Arkansas) may tax forgiven student loans regardless of federal exemptions.
Teachers, Healthcare & Other Programs
Several federal programs offer forgiveness or repayment assistance for specific professions, particularly teachers and healthcare workers serving in underserved areas.
Teacher Loan Forgiveness
| Requirement | Details |
|---|---|
| Maximum forgiveness | $17,500 for math, science, and special education teachers; $5,000 for other qualifying teachers |
| Service | 5 complete, consecutive years full-time at a low-income school (Title I eligible) |
| Eligible loans | Direct or FFEL Stafford loans only (not PLUS or Perkins); must have been issued after Oct 1, 1998 |
| Qualifications | “Highly qualified” — bachelor’s degree, full state certification, no emergency/provisional credentials |
| Tax treatment | Tax-free at the federal level |
Teacher Loan Forgiveness and PSLF cannot be credited for the same service period. If pursuing PSLF with more than $17,500 in loans, PSLF typically provides the greater benefit.
NHSC Loan Repayment Programs (2026)
| Program | Service | Award (Full-Time) |
|---|---|---|
| NHSC LRP (Primary Care) | 2 years | Up to $80,000 |
| NHSC LRP (Behavioral/Dental) | 2 years | Up to $55,000 |
| NHSC Rural Community LRP | 3 years | Up to $105,000 |
| NHSC SUD Workforce LRP | 3 years | Up to $80,000 |
| NHSC Students to Service | 3 years | Up to $120,000 |
NHSC awards are tax-free at the federal level. 2026 award amounts include a $5,000 Spanish-language enhancement. Continuation contracts allow up to $20,000/year for extended service. 2026 applications open through March 31, 2026.
Nurse Corps & Other Programs
| Program | Award | Key Details |
|---|---|---|
| Nurse Corps LRP | 60% of loan balance (2 yrs) + 25% (optional 3rd yr) | RN/APRN at Critical Shortage Facility or nursing faculty; taxable |
| Perkins Loan Cancellation | Up to 100% | Teachers, nurses, military, Peace Corps, law enforcement (Perkins loans only) |
| Federal Employee Repayment | Up to $10,000/yr ($60,000 max) | Federal agency employees; taxable as wages |
| AmeriCorps Education Award | Up to $7,395 per term (2025–26) | National service; can be used for loans or tuition; taxable |
| State-specific programs | Varies by state | Many states offer repayment for teachers, healthcare workers, attorneys in underserved areas |
Choosing a program: Large balance + public service career → PSLF (unlimited, tax-free). Teacher with ≤$17,500 debt → Teacher Forgiveness (5 yrs vs. 10). Healthcare in shortage area → NHSC (fastest path, high awards). Not in public service → IDR forgiveness (plan for taxes).
Sources
- 1.Federal Student Aid — Public Service Loan Forgiveness (PSLF)
- 2.Federal Student Aid — Income-Driven Repayment Plans
- 3.Federal Student Aid — Teacher Loan Forgiveness
- 4.HRSA — NHSC Loan Repayment Program (2026 Application Guidance)
- 5.HRSA — Nurse Corps Loan Repayment Program
- 6.IRS — Topic 431: Canceled Debt – Is It Taxable or Not?
- 7.U.S. Department of Education — SAVE Plan Settlement & Repayment Changes (Dec 2025)
This content is for educational and informational purposes only and does not constitute financial, tax, or legal advice. Consult a qualified professional for guidance tailored to your situation.