The Department has updated their page to confirm that the tax liability (the “tax bomb”) on IDR forgiveness will be determined by the date you reached the required number of payments, not the date they actually process your forgiveness.

This is old news, but many were waiting for official confirmation from the department.

The page says:

“Will I be taxed if my loans are discharged under the IBR, ICR, or PAYE Plan?

Debt discharged under an IDR plan could create a federal tax liability for you, depending on the effective date of the discharge. The American Rescue Plan Act included a provision temporarily modifying the tax treatment of discharged student loan debt. Specifically, the law excludes from gross income qualifying student loan amounts that are discharged on or after Jan. 1, 2021, and before Jan. 1, 2026.

If your loans are discharged on or after Jan. 1, 2021, and before Jan. 1, 2026, you won’t be taxed by the federal government. If a borrower meets their IDR repayment milestone before Jan. 1, 2026, but their loans are discharged on or after Jan. 1, 2026, then that discharge is not subject to federal tax.

However, the amount discharged could be taxable in some states. We will notify you when your loan is identified as eligible for discharge under the IBR, ICR, or PAYE Plans. You will be provided 21 days to opt out of discharge.” https://studentaid.gov/announcements-events/idr-court-actions