Weigh in on Student Loan Forgiveness

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In several Creditbloggers posts, we have talked about the new student loan relief program, Income Based Repayment, or IBR. For those who are eligible, the Income-Based Repayment (IBR) program forgives any remaining debt — including interest — after 25 years. While most borrowers will pay off their debt before then, those that don't will be hit with a tax bill at the end of the repayment period. That's because the IRS considers forgiveness of debt taxable income.

The folks at are asking citizens to take action on a new bipartisan bill in the U.S. House of Representatives, H.R. 2492, that would prevent the taxation of debt forgiven through IBR. Loan forgiveness is supposed to wipe the slate clean for responsible borrowers, not create a new financial obligation. Current law exempts some kinds of loan forgiveness from taxation, including Public Service Loan Forgiveness, but not IBR. They are asking you to take a moment to write to your representative and urge them to support H.R. 2492 and ensure that there's really a light at the end of the tunnel for responsible borrowers.

It will take just two minutes to send a message to your Congressional Representative to support this measure to waive tax bills on forgiven student loan debt under the IBR program.

Gerri Detweiler – Personal finance author and Credit Advisor for, Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author of Reduce Debt, Reduce Stress: Real Life Solutions for Solving Your Credit Crisis.
  • Shannon E Oltarzewski

    I have already been paying my loans for over 20 years. Is there any forgiveness out there for me or does the 25 years start after I start the IBR program?

  • Gerri

    The 20-years of payments you have already made don’t likely qualify, but there may be some relief going forward. Here are some details from the website:
    The Department of Education has indicated that the following types of payments will count towards IBR’s 25-year forgiveness period, as long as you are in IBR at some point during those 25 years.
    * Payments made in the Income Contingent Repayment plan (ICR) before July 1, 2009.
    * All payments made on or after July 1, 2009 in the IBR, Income Contingent Repayment (ICR), and Standard (10-year) Repayment plans.
    * Periods when the borrower has a calculated payment of zero in IBR or ICR (this occurs when your income is at or below 150% of the poverty level for your family size).
    * Periods on or after July 1, 2009, when the borrower has been granted an economic hardship deferment.
    It’s rather complicated, so I would strongly recommend you visit to learn details and find out whether you qualify.

  • Jay

    I have been paying in the income contingent program for at least 13 years and just switched to the graduated repayment plan because it was less per month. I was told by the operator at Sallie Mae that this would count toward the 25 year forgiveness period. Is this true. I worry that they don’t always know that much about this topic. Thanks: Jay

  • Gerri

    Jay, I would check with the folks at as they are the most knowledgeable source I have found on the IBR program. Do let us know what you find out!

  • Hopeless

    20+ years of paying when I could – $17000 in loans – paid over $30000 – still owe over $30000… This is absolutely ridiculous that even though the original amount is paid, I’ll end up paying 3X the original loan amount… So depressing… Sorry dear daughter. Mom and Dad can’t help you with college cause Sallie Mae is still raping us on iterest for our student loans…

  • Bob Fellner

    “with forgiveness after 20 rather than 25 years of responsible payments”
    What does “responsible” mean in this case? I have tried IBR twice and then went into default again because I couldn’t afford the high monthly payments. The majority of the 25 years I did not make payments.

    • Gerri


      My understanding is that there are limited circumstances where IBR looks at retroactive payments in determining the 25 years needed to earn forgiveness. If you were taking advantage of the Income Continent Repayment plan or in deferment due to an economic hardship, those time periods could count.

      IBR is not a perfect solution to the student loan mess by any means. But hopefully with the lower monthly payment requirements you’ll be able to qualify and be successful this time around and at least see a light at the end of the tunnel.

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