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Defrauded College Students Will No Longer Be Taxed on Their Canceled Loans

Student loan borrowers whose education debt has been canceled because their college closed or engaged in fraud will no longer face a tax bill, relief that arrives as applications for forgiveness continue to grow.

On Wednesday, the Internal Revenue Service issued guidance shielding borrowers from having their discharged federal and private loans treated as taxable income. The measure is effective for education loans canceled on or after Jan. 1, 2016. Anyone affected by the new policy may claim a credit or refund for an overpayment of taxes.

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