1099 NEC for Student Loan Forgiveness payment

[user17617056218]

I am a W-2 employee as a professor and an independent contractor in anesthesia. I report my income accordingly. I received a 1099 NEC as part of a student loan forgiveness program for educators in higher education. Do I need to pay taxes on this as another “job”? 

[Hal_Al · Accepted solution]

Q.  Do I need to pay taxes on this as another “job”? 

A. Yes, probably. The IRS considers anything on a form 1099-NEC to be self employment income. 

That said, it depends on why you got a 1099, who sent it to you,  and what you did to
"earn" the loan forgiveness.  You should ask the issuer why they sent a 1099-NEC.  Usually, a 1099-C is sent for taxable loan forgiveness.  

Generally,  most student loan forgiveness is tax-free at the federal level (some states may tax it) through December 31, 2025. This includes programs like Public Service Loan Forgiveness (PSLF) and Income-Driven Repayment (IDR) plans per a  provision of the American Rescue Plan Act (ARPA). Although erroneous 1099-C's are somewhat common, for non taxable loan forgiveness,  a 1099-NEC is  unusual.  Most likely, the issuer believes it is taxable income to you and the income is classified as non employee compensation (NEC). 

[Olivia342]

Yes, it’s taxable. The 1099-NEC means it’s treated as self-employment income, so you must report it on Schedule C and pay income and self-employment tax unless the program specifically says it’s tax-exempt.