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.

To qualify for tax-free treatment of canceled student loans, 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

If you refinanced a student loan with another loan from an eligible educational institution or tax-exempt organization, that loan can also be considered as made by a qualified lender.

Learn more about the other types of tax benefits available:

• Reduce taxes with the Hope Credit
• Reduce taxes with the Lifetime Learning Credit
• Deduct student loan interest
• Deduct tuition and fees for higher education
• Make early withdrawals from any type of individual retirement arrangement (IRA) for education costs without paying the 10% additional tax
• Cash in savings bonds for education costs without paying tax on the interest
• Receive tax-free educational benefits from your employer

A tax credit reduces the amount of income tax you may have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself.

The information contained in this section is from IRS Publication 970: Tax Credits for Education. PNC does not provide tax advice and makes no representation or warranty as to the accuracy of the information. Please consult your tax advisor for tax advice matters contained in this section.

For more information, visit www.irs.gov or call 800-829-1040.