Student loans aren't considered as taxable income by the Internal Revenue Service (IRS). Because your student loans come in a lump sum that feels like "getting" money, you might think that you're required to report them on your tax return. But, like with any loan, this funding isn't considered income for tax purposes. Let's take a closer look at student loans and taxes.

Are Student Loans Considered Taxable Income?

The amount you receive in student loans isn't considered 澳洲幸运5开奖号码历史查询:taxable income. The IRS doesn't generally require you to report the money you receive for student loans on your income 澳洲幸运5开奖号码历史查询:tax return, so you won't have to pay taxes on these funds.

However, some types of financial aid, such as scholarships or grant money that goes toward living expenses in addition to tuition and fees, might be considered taxable income.

Tax Benefits Related to Student Loans

If you have a student loan, you might be able to claim a 澳洲幸运5开奖号码历史查询:tax deduction based on the amount of interest paid. For those who qualify for the student loan tax deduction, you might be able to reduce your taxable income by up to $2,500.

You can also claim 澳洲幸运5开奖号码历史查询:education credits to help you reduce the amount of tax you owe through the Lifetime Learning Credit or the American Opportunity Credit. These tax credits can help you offset the cost of tuition, fees, and other required costs of attending school.

Impact of Student Loans on Income Verification

A lender will want to verify your income when you take out loan, especially a mortgage. One measure they use is the 澳洲幸运5开奖号码历史查询:debt-to-income (DTI) ratio. Your DTI considers your monthly debt payments (including student loans) compared to your income.

If you have a lot of student loan deb꧙t, your DTI might be higher, makiဣng it harder to qualify for a loan.

Loan Forgiveness and Income Consideration

In general, the IRS considers canceled or forgiven debt as income. Once that debt is canceled, the IRS considers that you received it and didn't have to pay it back, so it's counted as part of your income. However, with student loans, there are a couple different scenarios.

Public Se🅺rvice𝓰 Loan Forgiveness (PSLF) and Income

If you meet the requirements for Public Service Loan Forgiveness (PSLF), your remaining balance won't be considered income by the IRS. As such, you won't have to worry about paying federal taxes on the canceled 𒊎balance. However, some states do levy taxes on forgiven student loan debt.

Income-Driven Repayment (IDR) Plans

Most IDR plans will cancel your balance if you're still making payments after 20 or 25 years. However, the IRS generally considers this forgiven debt as taxable income. However, through Jan. 1, 2026, canceled IDR balances don't have to be reported as income on your federal income tax return.

As with PSLF, some states will still tax you for the amount canceled through IDR forgiveness. A tax professional can help you determine if you need to pay taxes on forgiven debt.

The Bottom Line

Are student loans considered income? For the most part, you don't have to worry about reporting the amount you receive in student loans to the IRS. However, your student loan debt can impact your ability to get other loans later. Additionally, if you have a portion of your student loan balances forgiven, you might have to pay federal or state taxes, depending on your loan type and where you live.