Cancellation of Student Loans

Under certain conditions, loans forgiven by schools and foundations don’t result in taxable income.

The exclusion rules that formerly applied just to loans made by the government or by certain corporations in charge of public hospitals have been expanded to include loans made by certain educational institutions. These conditions apply:

• The loan must have been made by an educational institution as part of a program to encourage students to serve in occupations or areas with unmet needs.
• The occupation you serve in must be "for or under the direction of a governmental unit or a tax-exempt section 501(c)(3) organization."

For more information, see:

• IRS Publication 525: Taxable and Nontaxable Income
• IRS Publication 970: Tax Benefits for Education