Generally, if you are responsible for making loan payments, and the loan is canceled (forgiven), you must include the amount that was forgiven in your gross income for tax purposes. However, if you fulfill certain requirements, two types of student loan assistance may be tax free. The types of assistance discussed in this chapter are:
Student loan cancellation, and
Student loan repayment assistance.
Student Loan Cancellation
If your student loan is canceled, you may not have to include any amount in income. This section describes the requirements for tax-free treatment of canceled student loans.
Qualifying Loans
To qualify for tax-free treatment, for the cancellation of your loan, your loan must have been made by a qualified lender to assist you in attending an eligible educational institution and contain a provision that all or part of the debt will be canceled if you work:
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something to know:
Generally, if you are responsible for making loan payments, and the loan is canceled (forgiven), you must include the amount that was forgiven in your gross income for tax purposes. However, if you fulfill certain requirements, two types of student loan assistance may be tax free. The types of assistance discussed in this chapter are:
Student loan cancellation, and
Student loan repayment assistance.
Student Loan Cancellation
If your student loan is canceled, you may not have to include any amount in income. This section describes the requirements for tax-free treatment of canceled student loans.
Qualifying Loans
To qualify for tax-free treatment, for the cancellation of your loan, your loan must have been made by a qualified lender to assist you in attending an eligible educational institution and contain a provision that all or part of the debt will be canceled if you work:
For a certain period of time,
In certain professions, and
For any of a broad class of employers.
see: http://www.irs.gov/publications/p970/ch05.html