Student-loan forgiveness is back on — but a tax change could be a 'financial disaster' for some borrowers

The good news: student-loan forgiveness is back on. The bad news: borrowers who get it could face thousands of dollars in new taxes next year.

On Monday, Sen. Elizabeth Warren led a group of her Democratic colleagues in sending a letter to Treasury Secretary Scott Bessent, exclusively viewed by Business Insider, calling on him to use his authority to prevent a "tax bomb" from hitting student-loan borrowers next year. The lawmakers are referring to a 2021 provision in the American Rescue plan that made student-loan forgiveness tax-free, and the provision is set to expire in January 2026.

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