In 2024, over a million student loan borrowers received debt relief. Tax implications to consider.

• If your federal student loans are forgiven in 2024, you may be wondering about any potential tax implications.
• Nearly $180 billion in federal student loans has been cleared for 4.9 million people under President Joe Biden's education debt cancellation program.
• Here's what to know about that relief come tax time.

If your federal student loans are forgiven in 2024, you may be wondering about any potential tax implications.

Nearly $180 billion in federal student loans has been cleared for 4.9 million people under the Biden administration. Over 1 million people had their debt cleared in 2024.

If your debt was excused last year, here's what you need to know at tax time.

No federal taxes on relief through 2025

The American Rescue Plan Act of 2021 made student loan forgiveness tax-free at the federal level until the end of 2025, according to higher education expert Mark Kantrowitz. This means that you won't owe any taxes on any federal education debt that is cleared throughout 2024.

The Biden administration has primarily delivered loan relief through one of those avenues.

Public Service Loan Forgiveness (PSLF), Income-Driven Repayment (IDR), and Borrower Defense are three different loan forgiveness programs that erase student debt for various reasons. PSLF leads to debt erasure for public servants after a decade of qualifying payments, while IDR plans conclude in debt cancellation after a certain period of payments, typically 20 years or 25 years. Borrower Defense wipes away the debt for students who've been defrauded by their schools.

Consumers would likely bear the brunt of the cost of Trump tariffs.

The cancellation of private student debt should not result in a federal tax bill under the terms of the American Rescue Plan, according to Carolina Rodriguez, director of the Education Debt Consumer Assistance Program in New York. This provision is set to expire on December 31, 2025.

Kantrowitz argued that student debt should never be taxed, especially if it is excused in bankruptcy.

You could owe taxes to your state

Although the federal policy on student debt may provide loan forgiveness, borrowers could still be subject to state taxes.

Some states have implemented tax forgiveness for specific types of student loans, according to Kantrowitz. This may be due to differences in state and federal tax codes or a lack of updates to reflect the American Rescue Plan.

It's important to consult with a tax professional or your state to determine if receiving relief triggers any liability.

If the federal government's student loan forgiveness tax policy expires, many states may follow suit and reinstate their own forgiven debt tax.