Tax on student loan forgiveness

Forgiven debt generally counts as taxable income in the year it is forgiven. A temporary rule kept student loan forgiveness federally tax-free through 2025; from 2026, balances forgiven under income-driven plans are generally taxable again, while Public Service Loan Forgiveness and discharge for death or disability remain tax-free. An insolvency exclusion can reduce the taxable amount, and state rules vary.