Canceled Student Loan 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 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. Which Loans Qualify? To qualify for tax-free treatment, your loan must 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. The loan must have been made by a qualified lender to assist the borrower in attending an educational institution. Qualified lenders. These include the following. The government -- federal, state, or local, or an instrumentality, agency, or subdivision thereof. A tax-exempt public benefit corporation that has assumed control of a state, county, or municipal hospital and whose employees are considered public employees under state law. An educational institution if the loan is made: As part of an agreement with an entity described in (1) or (2) under which the funds to make the loan were provided to the educational institution, or Under a program of the educational institution that is designed to encourage students to serve in occupations or areas with unmet needs, and where the services required of the students are for or under the direction of a governmental unit or a tax-exempt section 501(c)(3) organization. In satisfying the service requirement in (3)(b), the student must not provide services for the lender organization.    Refinanced loan. If you refinanced a student loan with another loan from an educational institution or a tax-exempt organization, that loan can also be considered as made by a qualified lender. It is considered made by a qualified lender if it was made under a program of the institution or organization designed to encourage students to serve in occupations or areas with unmet needs, and where the services required of the students are for or are under the direction of a governmental unit or a tax-exempt section 501(c)(3) organization. Section 501(c)(3) organization. This is any corporation, community chest, fund, or foundation organized and operated exclusively for one or more of the following purposes. Charitable. Religious. Educational. Scientific. Literary. Testing for public safety. Fostering national or international amateur sports competition (but only if none of its activities involve providing athletic facilities or equipment). The prevention of cruelty to children or animals. Educational institution. This is an organization with a regular faculty and curriculum and a regularly enrolled body of students in attendance at the place where the educational activities are carried on.