Student Loan Forgiveness & Repayment Plans: The 2025 Complete Guide for Kentucky Borrowers

As we move through 2025, Kentucky student loan borrowers face an evolving landscape of federal and state-based programs offering relief, new repayment options, and improved pathways to becoming debt-free. This authoritative guide covers the latest updates in federal loan forgiveness, the brand-new SAVE plan, revamped income-driven repayment (IDR) offerings, and Kentucky-specific assistance to help you manage and eliminate your student debt.

Key 2025 Updates: Forgiveness Programs & Repayment Plan Changes

• SAVE Plan: The Biden-Harris administration’s Saving on a Valuable Education (SAVE) plan is fully implemented for federal borrowers in 2025, slashing monthly payments and offering shorter paths to cancellation.
• Public Service Loan Forgiveness (PSLF): Streamlined application processes, faster forgiveness timelines for qualifying teachers, nurses, and other public servants in Kentucky.
• Revised Income-Driven Repayment: Expanded access, lower discretionary income calculations, and new forgiveness rules.
• Kentucky-Specific Debt Relief: Unique state programs targeting healthcare, education, and rural service workers.

Understanding the SAVE Plan in 2025

The Saving on a Valuable Education (SAVE) plan, a major component of federal student loan reform, fully launched in July 2024 and now governs the most affordable and accessible payment options in 2025. Here’s what it means for borrowers in Kentucky:

• Monthly Payments Cut: Payments on undergraduate loans are capped at 5% of discretionary income (down from 10%)—one of the lowest rates ever.
• Spousal Income Protection: Married borrowers filing taxes separately now have their spouse’s income automatically excluded from payment calculations.
• Quicker Forgiveness: Borrowers with original balances under $12,000 can receive loan forgiveness after just 10 years of qualifying payments.
• No Interest Accrual: Unpaid monthly interest is no longer added to your balance if you make scheduled payments—even if your payment is $0.
• Parent PLUS Loans: Remain not directly eligible for SAVE, but consolidation may unlock other IDR options for some.

Who Qualifies for the SAVE Plan?

Eligible loans: All Direct Loans from the U.S. Department of Education, including undergraduate, graduate, and consolidated loans, can enroll. FFEL and Perkins Loans must be consolidated into a Direct Consolidation Loan first.

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Test Your Expertise: The Complexities of the 1031 Exchange

As a sophisticated real estate investor, you understand that the 1031 Exchange is a cornerstone strategy for tax deferral and wealth accumulation. But beyond the basics, the intricacies of the 1031 Exchange rules can pose significant challenges. This quiz is designed to test your in-depth knowledge and highlight critical nuances that separate casual investors from true experts in 1031 Exchange transactions.

Instructions: Choose the best answer for each question.

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Question 1: Understanding "Like-Kind" in a 1031 Exchange

Which of the following scenarios most likely qualifies as a like-kind property exchange under IRS Section 1031, allowing for 1031 Exchange tax deferral?

a) An investor exchanges a portfolio of publicly traded REIT stocks for a commercial retail building. b) An investor exchanges their primary residence, used for personal living for 15 years, for a duplex intended for rental income. c) An investor exchanges raw land held for appreciation in Texas for a stabilized apartment complex in Florida, both held for investment. d) An investor exchanges a classic car collection (personal property) for a single-family rental home (real property).

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Question 2: Navigating the 45-Day Identification Period for a 1031 Exchange

An investor sells a multi-family property on June 15th for a 1031 Exchange. According to the strict timelines, by what date must they identify their replacement properties to comply with the 1031 Exchange requirements?

a) July 30th of the same year, as the 45-day period includes weekends and holidays. b) August 29th of the same year, allowing for an extra 45 days if needed. c) December 12th of the same year, aligning with the 180-day completion period. d) January 1st of the following year, if they plan to file for an extension.

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Question 3: The Role of a Qualified Intermediary (QI) in a 1031 Exchange

Why is the engagement of a Qualified Intermediary (QI) absolutely critical for the validity of a 1031 Exchange?

a) The QI provides investment advice and helps the investor choose the best replacement property for their 1031 Exchange strategy. b) The QI acts as a liaison with the IRS, directly negotiating tax liabilities related to the 1031 Exchange process. c) The QI holds the proceeds from the relinquished property's sale, preventing the investor from having "constructive receipt" of funds, which would invalidate the 1031 Exchange. d) The QI provides legal and tax advice to ensure the 1031 Exchange is perfectly compliant

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Question 4: Understanding "Boot" and its Impact on a 1031 Exchange

An investor sells a commercial building with $500,000 in equity for a 1031 Exchange. They purchase a replacement property for $450,000, effectively reducing their debt by $50,000. What is the tax implication of this scenario within the 1031 Exchange framework?

a) The entire 1031 Exchange is disqualified because the investor "traded down" in value. b) The $50,000 in reduced debt is considered "boot" and will be immediately taxable as partial gain in this 1031 Exchange. c) There are no immediate tax implications, as the primary goal of the 1031 Exchange is only about the "like-kind" nature of the properties. d) The investor can defer the $50,000 as long as they pay off other personal debts with the funds, still qualifying for a full 1031 Exchange.

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Question 5: Advanced 1031 Exchange Strategies & Flexibility

An investor aims to sell a highly appreciated single-tenant retail property and replace it with multiple smaller, diversified multi-family units to spread risk. Which of the following 1031 Exchange identification rules best allows for this diversification strategy, maintaining eligibility for a 1031 Exchange?

a) The "Three Property Rule," where the investor can identify up to three properties of any value, regardless of the relinquished property's value, for their 1031 Exchange. b) The "200% Rule," allowing identification of any number of properties, provided their aggregate fair market value does not exceed 200% of the relinquished property's value for the 1031 Exchange. c) The "95% Rule," which states that if more than three properties are identified, the investor must acquire at least 95% of the aggregate value of all identified properties to qualify for the 1031 Exchange. d) All of the above are valid identification rules within a 1031 Exchange, offering flexibility for various investment strategies.

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The Ultimate DSCR Loan for Rental Property Quiz

Are you looking to expand your real estate investment portfolio? A DSCR loan might be the perfect tool to help you achieve your goals without relying on traditional income documentation. Test your knowledge with this quiz to see if you're ready to master the intricacies of a DSCR loan for rental property.

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Page 1 of 5

What is the primary factor a lender considers when approving a DSCR loan for rental property? A) The borrower's personal income and debt-to-income (DTI) ratio. B) The borrower's credit score and employment history. C) The property's potential rental income compared to its monthly expenses, known as the Debt Service Coverage Ratio. This is the key metric for a DSCR loan for rental property eligibility and approval. D) The total value of the borrower's existing investment properties and personal savings.

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How does a DSCR loan for a rental property differ from a conventional mortgage for a personal residence? A) A conventional mortgage requires a DSCR calculation, whereas a DSCR loan for a rental property does not. B) A DSCR loan for a rental property primarily focuses on the property's cash flow, allowing investors to qualify without traditional income verification, unlike a conventional mortgage which is based on personal income and liabilities. C) A conventional mortgage has a higher interest rate and stricter requirements than a DSCR loan for a rental property. D) A DSCR loan for a rental property is only available for commercial properties, not residential rental properties.

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What is an ideal Debt Service Coverage Ratio (DSCR) for a lender when evaluating a DSCR loan for a rental property? A) A DSCR of 0.75, indicating the property generates 75% of the income needed to cover its debt service. B) A DSCR of 1.00, meaning the property's income exactly equals its debt service. C) A DSCR of 1.25 or higher, as this indicates the property's income is greater than its expenses, making it a strong candidate for a DSCR loan for a rental property and providing a buffer for unexpected costs. D) A DSCR of 2.00, which is the standard minimum for all investment properties, regardless of location or market conditions.

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Which of the following expenses are typically included in the calculation of the Debt Service Coverage Ratio for a DSCR loan for a rental property? A) The property's mortgage payment (principal and interest), property taxes, and insurance, which are the core components used to determine if the property can support the debt. B) The property's mortgage payment, property taxes, insurance, and the borrower's personal credit card debt. C) The property's monthly rental income and all utility bills, regardless of who pays them. D) Only the principal and interest payment of the loan, as other expenses are not considered in a DSCR loan for a rental property calculation.

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Who would most benefit from using a DSCR loan for a rental property? A) A first-time homebuyer with a W-2 salary and a high debt-to-income ratio, who is looking to purchase a primary residence. B) A seasoned real estate investor with multiple properties who wants to expand their portfolio without using personal income to qualify, making a DSCR loan for a rental property the ideal financing solution for their needs. C) Someone looking to finance a primary residence with a low down payment and a government-backed loan. D) An individual with a very low credit score who cannot qualify for any other type of loan.

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SAVE Plan Application Steps

1. Log into your Federal Student Aid (FSA) account at studentaid.gov/idr/.
2. Review loan eligibility and estimate payments using the Loan Simulator.
3. Complete the IDR Plan Request, selecting SAVE as your preferred plan.
4. Submit proof of income (tax return or pay stubs) and sign the application.
5. Stay updated through your loan servicer’s portal for acceptance and next steps.

Public Service Loan Forgiveness (PSLF): 2025 Updates for Kentucky

PSLF remains the gold standard in federal forgiveness for Kentuckians working in qualifying public service roles. Here’s what’s new and effective for 2025:

• Expedited Reviews: The Department of Education now performs semi-automated verifications, reducing wait times for approvals.
• Expanded Employer List: Kentucky’s K-12 schools, state agencies, public hospitals, and nonprofits have been added to the official PSLF Help Tool database, making it easier to check eligibility.
• Partial Forgiveness Paths: Borrowers can now receive partial forgiveness if they change careers after 5+ years of public service, rather than losing all progress.

PSLF Eligibility Requirements (2025)

• Employment with a qualifying government or non-profit Kentucky employer.
• 120 qualifying monthly payments (10 years), now tracked more rigorously via online PSLF Help Tool submissions.
• Active Direct Loans in good standing (consolidate FFEL/Perkins, if needed).
• Enrollment in an acceptable repayment plan, such as SAVE or other IDRs.

PSLF Application Process

1. Confirm employment eligibility using the PSLF Help Tool.
2. Submit annual Employment Certification Forms (ECF) via your FSA account.
3. After making 120 qualifying payments, submit the official PSLF forgiveness application online.

Kentucky PSLF Success Story

Michael, a Louisville social worker, owed $66,000 in federal loans. By working for a qualifying non-profit agency, enrolling in an IDR plan, and submitting annual ECFs, he achieved $48,500 in tax-free loan forgiveness after 10 years. “The new PSLF tracking tools made my last two years straightforward,” Michael notes.

Income-Driven Repayment (IDR): Beyond SAVE

✅ Small Business Resources 

• SBA – Small Business Administration
  https://www.sba.gov

• SCORE Mentors (Free Mentoring & Workshops)
  https://www.score.org
• Small Business Development Centers (SBDC)
  https://americassbdc.org

Are You an SBA Real Estate Loan Expert?

Test your in-depth knowledge on using SBA Loans for owner-occupied commercial Real Estate acquisition. These questions delve into the critical details that can impact your business's growth and financial strategy.

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Page 1 of 5

For an existing commercial property, what is the minimum owner-occupancy percentage required for an SBA 7(a) real estate loan, and does this specific scenario qualify?

A manufacturing company plans to acquire a 30,000 sq ft industrial real estate facility using an SBA 7(a) Loan. The company initially needs 18,000 sq ft for its operations and intends to lease out the remaining 12,000 sq ft.

A) 60%; Yes, it qualifies. B) 51%; Yes, it qualifies. C) 75%; No, it does not qualify. D) 60%; No, it does not qualify, as they are leasing out a portion.

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Which of the following sets most accurately represents additional cost categories that can typically be financed within an SBA 504 Loan for a commercial real estate project?

Hint: Beyond the straightforward purchase of a commercial real estate property, an SBA 504 Loan is highly effective for comprehensive projects.

A) Business inventory, working capital, and employee salaries. B) Building renovations, long-term machinery essential to operations within the property, and soft costs like architectural fees. C) Advertising expenses, short-term equipment leases, and utility deposits. D) Personal real estate investments, vehicles for personal use, and stock market investments.

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Between an SBA 7(a) Loan and an SBA 504 Loan, which program generally offers the lowest typical borrower down payment for a commercial real estate acquisition, and what is that common minimum percentage for established businesses?

A highly profitable professional services firm in a competitive market wants to purchase its office real estate with minimal upfront capital. The firm's owners prioritize cash flow and liquidity.

A) SBA 7(a) Loan; 15% B) SBA 504 Loan; 10% C) SBA 7(a) Loan; 5% D) SBA 504 Loan; 20%

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For new construction, what is the initial minimum owner-occupancy percentage required, and what is the maximum timeframe to meet the full owner-occupancy threshold, for an SBA Real Estate Loan?

A fast-growing tech startup plans to construct a new 50,000 sq ft headquarters using an SBA Loan. They will immediately occupy 35,000 sq ft and have a definitive plan to occupy the remaining 15,000 sq ft within two years as their team expands.

A) Initial 51%, full 80% within 5 years. B) Initial 60%, full 80% within 3 years. C) Initial 75%, full 100% within 1 year. D) Initial 51%, full 100% within 2 years.

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What is this crucial requirement, and what fundamental principle does it underscore for the lender?

When securing an SBA Loan for a commercial real estate purchase, principal owners with a 20% or greater ownership stake are almost universally required to provide a specific type of assurance beyond the collateral of the real estate itself.

A) A fixed-rate interest payment commitment, demonstrating long-term stability. B) A first-lien position on all personal assets, ensuring full recovery. C) A personal guarantee, signifying the owners' personal commitment to loan repayment. D) A business plan with projected revenue growth of at least 15% annually, showing future viability.

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While SAVE is now the most generous, Kentucky borrowers still have access to other IDR plans (PAYE, IBR, ICR) in 2025. These plans provide critical safety nets:

• PAYE: Payments set at 10% of discretionary income; forgiveness after 20 years; requires a recent loan and financial hardship qualification.
• IBR: For older loans; payments capped at 10–15% depending on loan year; 20–25 year forgiveness timeline.
• ICR: Accepts most federal loans (including Parent PLUS after consolidation); payments capped at 20% of discretionary income or fixed over 12 years.

✅ Real Estate Investor Resources

• AirDNA (Short-Term Rental Data)
  https://www.airdna.co

• Rentometer (Rent Comps)
  https://www.rentometer.com
• Zillow Research & Data
  https://www.zillow.com/research

DSCR Loan IQ Quiz!

Test your knowledge of Debt Service Coverage Ratio (DSCR) loans!

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Page 1 of 3

What is the primary factor a lender focuses on when approving a DSCR loan for an investment property? a) The borrower's personal debt-to-income (DTI) ratio b) The property's ability to generate enough income to cover its mortgage payments c) The borrower's credit score history over the past 10 years d) The total number of investment properties the borrower already owns

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If a property has a Net Operating Income (NOI) of $5,000 per month and its total monthly debt service (PITI) is $4,000, what is its DSCR? a) 0.8x b) 1.0x c) 1.25x d) 5.0x

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Which type of borrower most commonly benefits from using a DSCR loan? a) First-time homebuyers purchasing a primary residence b) Investors with a strong W-2 income and minimal tax deductions c) Self-employed individuals or those with complex income who want to avoid traditional income verification d) Homeowners looking to refinance their primary residence for a lower interest rate

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New for 2025: Automated annual income recertification through IRS data-sharing—borrowers no longer have to submit pay stubs manually each year, reducing administrative errors and sudden payment jumps.

Choosing the Best Repayment Plan

1. Use the Federal Student Aid Loan Simulator to compare options.
2. Review eligibility based on loan type, origination date, and income.
3. Reassess each year—life events (like job loss or starting a family) may qualify you for lower payments.

Income-Driven Repayment in Action

Sarah from Lexington owed $44,000. After job changes reduced her income, she switched from IBR to SAVE in early 2024. Her payment dropped to $95/month, and her remaining balance will be forgiven after 15 years thanks to the new accelerated timeline for lower debt amounts.

Kentucky State-Based Student Loan Forgiveness Programs

In addition to federal relief, Kentucky offers several state programs targeting high-need professions:

• Kentucky State Loan Repayment Program (KSLRP): For health professionals. Provides up to $60,000 in loan repayment for serving in Health Professional Shortage Areas (HPSAs) in Kentucky.
• Kentucky Teacher Loan Forgiveness: For educators serving in low-income schools or critical shortage subjects; offers up to $17,500 in federal loan forgiveness in addition to federal TLF.
• Kentucky Bar Foundation Student Loan Forgiveness: For legal aid attorneys serving indigent clients; typical awards between $4,200 and $7,000 per year in forgiveness.

KSLRP Application Steps

1. Check eligibility and service area requirements at the KSLRP official site.
2. Gather documentation: license, current employment contract, loan records.
3. Submit the application during the award cycle window (typically spring/summer).
4. Sign a service commitment contract; maintain full-time employment at an eligible site during award period.

Kentucky Forgiveness Success Story

Dr. Ana, a primary care physician in Hazard, enrolled in KSLRP and PSLF. She combined $30,000 in state repayment assistance with $85,000 in PSLF forgiveness, erasing $115,000 in medical school debt after 7 years of full-time rural practice.

Addressing Common Borrower Questions in 2025

• Do I qualify for any forgiveness if my payments were paused during the COVID-19 emergency?
  Yes. All months during the federal payment pause (March 2020–August 2023) count as qualifying for PSLF and IDR forgiveness if other criteria are met.
• Can I refinance federal loans to private for a lower rate and keep forgiveness eligibility?
  No. Refinancing with a private lender permanently forfeits federal protections and access to forgiveness programs.
• My loan servicer changed. How do I check my PSLF/IDR progress?
  Log into your FSA account and download your complete payment history. Contact your new servicer and ensure all records are accurate and up to date.
• Is loan forgiveness taxable in Kentucky?
  Federal loan forgiveness is tax-free through 2025. State tax policy has conformed (no Kentucky tax on federal forgiveness through at least tax year 2025).

2025: The Year to Tackle Your Student Debt in Kentucky

Kentucky borrowers in 2025 have more tools, better rights, and expanded debt relief options than ever before. Whether you qualify for SAVE, PSLF, state programs, or other IDR relief, it’s critical to reassess your options, recertify annually, and take proactive steps with the latest application processes.

• Consult Kentucky’s Higher Education Assistance Authority (KHEAA) for state program updates and local counseling resources.
• Bookmark studentaid.gov for all federal application and support tools.

Your student loan situation is unique. Expert guidance, annual reassessment, and staying tuned to policy changes is your best path to a debt-free future in Kentucky.

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