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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
may be able to exclude this amount from gross The cancellation of your loan won’t required of the students are for or under the di-
income if the loan was one of the following. ! qualify for tax-free treatment if it is can- rection of a governmental unit or a tax-exempt
• A loan for postsecondary educational ex- CAUTION celed because of services you per- section 501(c)(3) organization.
penses. formed for the private educational lender that
• A private education loan. made the loan or other organization that provi- Student loan repayment assistance. Stu-
• A loan from an educational organization ded the funds. dent loan repayments made to you are tax free
described in section 170(b)(1)(A)(ii). if you received them for any of the following.
• A loan from an organization exempt from Loan from an educational organization de- • The National Health Service Corps
tax under section 501(a) to refinance a stu- scribed in section 170(b)(1)(A)(ii). This is (NHSC) Loan Repayment Program.
dent loan. any loan made by the organization if the loan is • A state education loan repayment program
See Pubs. 4681 and 970 for further details. made: eligible for funds under the Public Health
• As part of an agreement with an entity de- Service Act.
Loan for postsecondary educational expen- scribed earlier under which the funds to • Any other state loan repayment or loan for-
ses. This is any loan provided expressly for make the loan were provided to the educa- giveness program that is intended to pro-
postsecondary education, regardless of tional organization; or vide for the increased availability of health
whether provided through the educational or- • Under a program of the educational organi- services in underserved or health profes-
ganization or directly to the borrower, if such zation that is designed to encourage its sional shortage areas (as determined by
loan was made, insured, or guaranteed by one students to serve in occupations with un- such state).
of the following. met needs or in areas with unmet needs You can’t deduct the interest you paid
• The United States, or an instrumentality or where the services provided by the stu- ! on a student loan to the extent pay-
agency thereof. dents (or former students) are for or under CAUTION ments were made through your partici-
• A state, territory, or possession of the Uni- the direction of a governmental unit or a pation in any of the above programs.
ted States; or the District of Columbia; or tax-exempt section 501(c)(3) organization.
any political subdivision thereof. Deductible debt. You don't have income from
• An eligible educational organization. Educational organization described in sec- the cancellation of a debt if your payment of the
tion 170(b)(1)(A)(ii). This is an educational
Eligible educational organization. An eligi- organization that maintains a regular faculty and debt would be deductible. This exception ap-
ble educational organization is generally any curriculum and normally has a regularly enrolled plies only if you use the cash method of ac-
counting. For more information, see chapter 5
accredited public, nonprofit, or proprietary (pri- body of students in attendance at the place
vately owned profit-making) college, university, where it carries on its educational activities. of Pub. 334.
vocational school, or other postsecondary edu- Price reduced after purchase. In most ca-
cational organization. Also, the organization The cancellation of your loan won’t ses, if the seller reduces the amount of debt you
qualify for tax-free treatment if it was
must be eligible to participate in a student aid ! owe for property you purchased, you don't have
made by an educational organization, a
program administered by the U.S. Department tax-exempt section 501(c)(3) organization, or a income from the reduction. The reduction of the
CAUTION
of Education. private education lender (as defined in section debt is treated as a purchase price adjustment
An eligible educational organization also in- 140(a)(7) of the Truth in Lending Act) and was and reduces your basis in the property.
cludes certain educational organizations loca- canceled because of the services you per-
ted outside the United States that are eligible to formed for either such organization or private Excluded debt. Don’t include a canceled debt
participate in a student aid program adminis- education lender. See Exception, later. in your gross income in the following situations.
tered by the U.S. Department of Education. • The debt is canceled in a bankruptcy case
The educational organization should Section 501(c)(3) organization. This is under title 11 of the U.S. Code. See Pub.
TIP be able to tell you if it is an eligible edu- any corporation, community chest, fund, or 908.
cational organization. foundation organized and operated exclusively • The debt is canceled when you're insol-
for one or more of the following purposes. vent. However, you can't exclude any
Private education loan. A private education • Charitable. amount of canceled debt that is more than
the amount by which you're insolvent. See
loan is a loan provided by a private educational • Religious. Pub. 908.
lender that: • Educational. • The debt is qualified farm debt and is can-
• Is not made, insured, or guaranteed under • Scientific. celed by a qualified person. See chapter 3
Title IV of the Higher Education Act of • Literary. of Pub. 225.
1965; and • Testing for public safety. • The debt is qualified real property business
• Is issued expressly for postsecondary edu- • Fostering national or international amateur debt. See chapter 5 of Pub. 334.
cational expenses to a borrower, regard- sports competition (but only if none of its • The cancellation is intended as a gift.
less of whether the loan is provided activities involve providing athletic facilities • The debt is qualified principal residence in-
through the educational organization that or equipment). debtedness, discussed next.
the student attends or directly to the bor- • The prevention of cruelty to children or ani-
rower from the private educational lender. mals. Qualified principal residence indebted-
A private education loan does not include Exception. In most cases, the cancellation ness (QPRI). This is debt secured by your
an extension of credit under an open end of a student loan made by an educational or- principal residence that you took out to buy,
consumer credit plan, a reverse mortgage ganization because of services you performed build, or substantially improve your principal
transaction, a residential mortgage trans- for that organization or another organization residence. QPRI can't be more than the cost of
action, or any other loan that is secured by that provided the funds for the loan must be in- your principal residence plus improvements.
real property or a dwelling. cluded in gross income on your tax return. You must reduce the basis of your principal

Private educational lender. A private educa- Refinanced loan. If you refinanced a stu- residence by the amount excluded from gross
income. To claim the exclusion, you must file
tional lender is one of the following. dent loan with another loan from an eligible ed- Form 982 with your tax return.
• A financial institution that solicits, makes, ucational organization or a tax-exempt organi-
or extends private education loans. zation, that loan may also be considered as Principal residence. Your principal resi-
• A federal credit union that solicits, makes, made by a qualified lender. The refinanced loan dence is the home where you ordinarily live
or extends private education loans. is considered made by a qualified lender if it’s most of the time. You can have only one princi-
• Any other person engaged in the business made under a program of the refinancing organ- pal residence at any one time.
of soliciting, making, or extending private ization that is designed to encourage students Amount eligible for exclusion. The ex-
education loans. to serve in occupations with unmet needs or in clusion applies only to debt discharged after
areas with unmet needs where the services

Page 22 Publication 525 (2022)