The Ministry of Education had announced loan forgiveness for more than 21,200 borrowers.
According to new court documents, loan forgiveness falls under income-driven repayment plans.
However, this relief is short-lived as far-reaching changes to the student loan system come into force.
March’s discharges will consist of 800 PAYE borrowers, 9,900 ICR borrowers and 10,500 IBR borrowers. All income-driven discharges except those under the SAVE plan are processed. The SAVE program will be discontinued as soon as possible.
But borrowers who receive forgiveness in 2026 will have to face new changes.
Writing off student loans is now taxable again. When the American Rescue Plan Act’s tax exemption expired on December 31, 2025, Congress declined to extend it.
This means that regardless of whether that portion of the loan is forgiven or canceled, the IRS still treats the forgiven amount as taxable income.
The authorities decide to exempt those who reached their repayment milestone by January 1, 2026.
Under new changes, the SAVE plan will end, and borrowers who were enrolled in it will have until July to switch to another plan.
Those who do not want to switch will automatically be placed in a standard plan.
From July onwards, the new Repayment Assistance Plan (RAP) will come into effect, allowing for lower payments each month as well as interest allowances. However, the borrower must make payments for at least 30 years before receiving any forgiveness, which is more than double the 20 or 25 years currently required by the existing programs.
Students who have taken out a loan from July onwards are no longer eligible for PAYE, ICR and IBR programmes. Instead, their only choice would be RAP.
The scenario is not much different for the estimated 2 million students who are about to graduate this spring. The grace period remains the same at six months.
