President Biden announced that an additional 125,000 Americans have been approved for $9 billion in debt relief through fixes the U.S. Department of Education has made to income-driven repayment (IDR) and Public Service Loan Forgiveness (PSLF), granting automatic relief for borrowers with total and permanent disabilities. The latest announcement brought the full approved debt cancellation by the administration to $127 billion for nearly 3.6 million Americans.
The pause on student loan payments and 0% interest ended on Sept. 1, 2023, and payments restarted in October. Through the latest updates to the administration of student loan repayments and previous provisions, many borrowers may be eligible for one or more forms of student loan debt relief.
This announcement does not impact GI Bill benefits. However, for many veterans, service members and their families, this new plan may mean relief from the burden of student loans.
Public Service Loan Forgiveness (PSLF)
If a government or nonprofit organization employs you, you might be eligible for the PSLF Program. The PSLF Program forgives the remaining balance on your direct loans after you’ve made the equivalent of 120 qualifying monthly payments under an accepted repayment plan while working full-time for an eligible employer.
According to the IRS, student loan amounts forgiven under PSLF are not taxable income. Any debt forgiven due to PSLF won’t create a federal tax liability for you, but your state may tax you. For more information, check with the IRS or a tax advisor.
Income-Driven Repayment (IDR) Plan
Most federal student loans are eligible for at least one income-driven repayment plan. If your federal student loan payments are high relative to your income, you may want to repay your loans under an income-driven repayment plan.
Earlier this year, the SAVE plan was launched. If eligible, this plan makes borrowers’ monthly payments as low as $0 and prevents balances from growing because of unpaid interest.
Using the Department of Education’s Loan Simulator, borrowers can calculate student loan payments and choose a loan repayment option that best meets their needs and goals. You can also use it to decide whether to consolidate your student loans.
Total and Permanent Disability Discharge (TPD)
If you’re 100% disabled, you may qualify for a discharge of your federal student loans and/or Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligation.
Veterans with one or more service-connected disabilities totaling 100% or who are totally disabled based on an individual unemployability rating may qualify. Individuals can also qualify if receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI). You must also provide additional documentation to the Department of Education regarding your disability status.
The amount of your loan forgiven due to TPD discharge may be considered income for state tax purposes. Consult with your state tax office or a tax professional before filing your tax return.
Loans discharged between Jan. 1, 2018, and Dec. 25, 2025, will not be taxed as federal income. Borrowers can learn more about TPD online.
Resources for active-duty members
If you are currently serving, there are specific resources and information that you should know. Payments made on student loans while on active-duty service may qualify for PSLF. Also, any interest on student loans obtained prior to your military service is capped at 6% during periods of active duty.
Explore more articles for the veteran community here.