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Student Loan Discharged for Investigation

Hello,

 

Back in May of 2024, my student loans were discharged due to my college being investigated by the Department of Education for falsifying information and sold their campus when they weren't supposed to. Most of my loans have been removed and I still have two sitting in there, but I didn't make many payments due to the pause on payments, when the payments resumed, my balance had always been $0 due each month but still made small payments here and there as I wasn't sure about the interest. Until I later found out why, which was the investigation, and the department of treasury sent me a small check for the small amount I paid in the beginning of 2024.

 

My question is that there is a section that includes a check box for "student loan discharged". I don't know the full amount anymore that was discharged. So, I'm not sure what to do at this step. Is this a step I need to complete?

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3 Replies
Shannon B1
Expert Alumni

Student Loan Discharged for Investigation

Yes, in your situation (with the school being fraudulent and closed), your student loan forgiveness is usually not taxable due to the Rescue Act, which expired at the end of 2025. However, your state might still treat it as income.

 

The check from the Department of the Treasury is not taxable because it is a refund.

 

Here’s a TurboTax Help Article with more information on student loan forgiveness.

Student Loan Discharged for Investigation

Thanks for your response,

 

I see Federally yes, I can't put any information down on Student Loan Forgiveness as it's not taxable, but I've been reading that the state of MN does consider it. I moved to MN in May of 2024 but lived in SC for the first portion of 2024, SC doesn't have the option for the loan forgiveness. However, MN does, and I was able to enter in the correct amount that has been discharged during Tax year 2024, and after the fact, my return for MN almost doubled and as I'm not complaining about a higher refund, my worry is this might come back to bite me. It didn't ask for 1099-C which I believe is for the fed tax portion. It accepted what I entered, just want to make sure the information I'm getting on this is entered in properly.

Am I to leave it like I entered it with the amount that was removed?

LeticiaF1
Employee Tax Expert

Student Loan Discharged for Investigation

In Minnesota, if your ‌discharged education loans weren't taxed by the federal government, they aren't taxed on your Minnesota return. You don't need to make an adjustment.‌ You can only subtract qualified education loans discharged that are taxable federally. ‌Per the Minnesota Department of Revenue the types of discharged student loans that may qualify include‌:

 

  • Minnesota Teacher Shortage Loan Repayment Program
  • Income-based repayment plans
  • Income-contingent repayment plans
  • Pay As You Earn (PAYE) or Revised Pay As You Earn (REPAYE) programs

@Darth2438 

 

 

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