If schools and foundations forgive your loans, it might not result in taxable income. The government expanded exclusion rules to include loans certain educational institutions make.

For the exclusion rules to apply:

• An educational institution must have made the loan.
• The loan was part of a program to encourage students to serve in occupations or areas with unmet needs.
• The occupation you serve in must be "for or under the direction of a governmental unit or a tax-exempt Section 501(c)(3) organization."

To learn more, see:

• IRS Publication 525: Taxable and Nontaxable Income
• IRS Publication 970: Tax Benefits for Education