On July 4, 2025, President Trump signed into law the congressional budget reconciliation bill known as the “One Big Beautiful Bill Act” (OBBBA). The OBBBA delivers over $4 trillion in tax cuts to billionaires and large corporations, while making unprecedented cuts to Medicaid, the Supplemental Nutrition Assistance Program (SNAP), federal student aid, and many other programs that working families rely upon to make ends meet.
Among the many enormous policy changes made by the OBBBA, Congress made permanent the exclusion of cancelled student loan debt due to death or permanent disability from federal taxable income. In the Tax Cuts and Jobs Act of 2018, Congress originally exempted loans cancelled due to death or permanent disability from federal taxation from December 31, 2017, until December 31, 2025. Congress later expanded this federal tax exemption to include all cancelled federal student debt, including through Income-Driven Repayment (IDR) plans, as part of the American Rescue Plan Act of 2021. While the OBBBA permanently extended the exclusion of cancelled debts for death and disability, millions of borrowers who are currently on track to earn debt relief under an IDR plan after January 1, 2026, will see a massive increase in their federal income tax liability and therefore have to pay thousands of dollars in additional taxes.
The following memo provides an overview of the additional tax costs that working families could face if Congress and the Trump Administration fail to act.
Read the Memo: How the “One Big Beautiful Bill Act” Law Will Raise Taxes for Thousands of Student Loan Borrowers