Is student loan forgiveness taxable?

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Mark Kantrowitz

By Mark Kantrowitz

June 18, 2018

Under current law, some types of student loan forgiveness and discharge are taxable and some types are tax-free.

The Internal Revenue Code of 1986 treats the cancellation of debt as taxable income to the borrower per 26 USC 61(a)(12). The cancelled debt will be reported on IRS Form 1099-C (instructions) as income if it exceeds $600.

Tax-free student loan forgiveness and discharge

There are, however, a few exceptions for student loan forgiveness and discharge.

See also: Complete Guide to Student Loan Forgiveness 

Taxable student loan forgiveness and discharge

The cancellation of the remaining debt after 20 or 25 years in repayment in an income-driven repayment plan is considered taxable income to the borrower under current law. However, it is likely that such borrowers are insolvent, with total debts exceeding total assets.

If a borrower is insolvent, the IRS may exclude all or part of cancelled debt from income. Borrowers who are insolvent should read IRS Publication 4681 and file IRS Form 982.

If a borrower is not insolvent, the borrower may be able to negotiate an offer in compromise with the IRS by filing IRS Form 656. Otherwise, taxpayers can request a payment plan of up to six years by filing IRS Form 9465.


A 2008 letter from Eric Solomon, then Assistant Secretary for Tax Policy, U.S. Department of the Treasury, summarizes the taxability of various forms of loan forgiveness.

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