Some student loan borrowers who have their remaining balances forgiven this year could face thousands of dollars in additional federal taxes. And certain borrowers will be paying nearly $12,000 more, according to a new report from Protect Borrowers.

The nonprofit estimates that borrowers receiving forgiveness through income-driven repayment, or IDR, could incur roughly $6,000 to nearly $12,000 in additional federal taxes and lost tax credits, depending on their income and family size.

A temporary federal exemption that prevented many forms of canceled student loan debt from being treated as taxable income applied to discharges after December 31, 2020, and before January 1, 2026. However, it was not extended for IDR forgiveness beyond 2025.

“Depending on the amount forgiven and the borrower's income, their tax amount could significantly increase, as any amount covered from income-driven repayment plans would be taxable,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.

“The result could be a tax bill double or triple the usual one an individual would face and would create an extra burden at a time when many Americans are feeling the sting of inflationary pressures all around them.”

Income-driven repayment plans are designed to make federal student loan payments more manageable by basing monthly bills partly on borrowers' incomes and family sizes. Depending on the plan, borrowers may have their remaining balance forgiven after making qualifying payments for 20 or 25 years.

The problem for borrowers now reaching the end of that journey is that a $50,000 student loan balance disappearing does not necessarily mean the federal government treats the transaction as having no financial value.

Generally, the IRS considers canceled or forgiven debt taxable unless an exclusion or exception applies. And if the canceled debt is taxable, it generally must be reported as income for the year in which the cancellation occurred.

For five years, student loan borrowers benefited from this unusually broad exception, but now the financial consequences may be coming back to haunt them.

Protect Borrowers estimates 2 million to 3 million borrowers could become eligible for IDR cancellation and potentially be exposed to the resulting federal "tax bomb" over the coming decade.