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A tuition reduction is when an individual is allowed to study at no cost or for a reduced tuition. A qualified tuition reduction is not considered taxable income unless a portion of the reduction represents payment for teaching, research, or other services. In order for a tuition reduction to be qualified it must be received from and used at an eligible educational institution (an institution that maintains a regular faculty and curriculum and has a regularly enrolled student body at the location where it provides its educational activities). The tuition reduction does not have to be used at the same eligible institution that provided the reduction if it is for a college-level or above degree. Therefore, a tuition reduction that falls within the parameters will not be included in the calculation of MAGI for household income. If an individual receives a tuition reduction for education below the college-level (primary, secondary, or high school), one of the following requirements must be met for the reduction to not be considered taxable income and not included in the calculation of MAGI: • The individual is an employee of the educational institution • The individual was an employee of the educational institution, but retired or left on disability • The individual is a widow or widower whose spouse died while an employee of the educational institution or who retired or left on disability • The individual is the dependent child or spouse of an individual described in requirements 1 through 3 above. 2860.35.00 EDUCATION EXPENSE DEDUCTIONS (MED 3) The following sections discuss the deductions allowed for the calculation of MAGI for household income. 2860.35.05 STUDENT LOAN INTEREST DEDUCTIONS (MED 3) If an individual’s MAGI is less than $75,000 there is a special deduction of up to $2,500 allowed for interest paid on student loans. This special deduction is allowed when the following requirements are met: • The student loan was taken out solely to pay qualified education expenses. • The student loan was not from a related person or made under a qualified employer plan. • The student is the individual applying for Medicaid or his or her spouse or dependent. • The student is enrolled at least half-time in a degree program.

The deduction is allowed for both required and voluntary interest payments.