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2860.35.10 TUITION AND FEES DEDUCTION (MED 3) Tuition and fees for qualified educational expenses for higher education are considered a deduction in the calculation of MAGI. Worker should refer to www.irs.gov for rule changes and/or exception. 2865.00.00 LOANS For MED 1, 2, 4 AGs, a loan in the month of receipt is exempt providing there is a verifiable repayment schedule in effect. A source with which to repay the loan need not exist for the loan to be exempt.41
When income proceeds are received as repayment on a loan only the amount received as interest is considered countable.42 For MED 3 AGs, loans are not taxable income. However, if a loan is canceled or forgiven, other than a gift, the amount canceled or forgiven is considered taxable income and is included in the calculation of MAGI for household income. 2865.05.00 STUDENTS LOAN CANCELLATIONS AND REPAYMENT ASSISTANCE (MED 3) Student loan cancellation and student loan repayment assistance may not be considered taxable income if certain requirements are met. The cancellation of a student loan will not be considered taxable income and not be considered in the calculation of MAGI if: • The loan was made by a qualified lender to assist the individual in attending an eligible educational institution. A qualified lender is the United States, a State, a tax- exempt state/county/municipal hospital whose employees are considered public employees under state law, an eligible educational institution (if the loan was made as part of an agreement with one of the lenders or was made under a program designed to encourage students to serve in occupations with unmet needs or areas with unmet needs). • A condition of the loan was that all or part of the loan would be cancelled if the individual worked for a certain period, in a certain profession, and for any of a broad class of employers.
The cancellation of a student loan does not qualify as tax-free if the loan was made by an educational institution and is canceled because of services performed for the educational institution.