Today’s Wall Street Journal Tax Report, by Martin A. Vaughan:

Law students, be civic minded … but also be tax wise.

Yale Law School last week announced it is expanding its student-loan-forgiveness program to include students in public-service jobs making up to $60,000. Yale is one of more than 100 law schools nationwide that offers to forgive student debt, as an incentive for graduates to work for the government or a nonprofit when they graduate. But law students should be aware of possible tax consequences of such a gift, says Heather Jarvis of Equal Justice Works, an organization to promote public-interest law. "It’s an unsettled area of tax law," Ms. Jarvis says.

Most schools have structured their programs so that the loan amounts forgiven wouldn’t be treated as income, she said. But a 2006 court decision threw some doubt on whether law-school programs qualify for a tax exclusion. Other schools structure their loan-forgiveness programs as a grant. In those cases, lawyers in the programs will owe some tax on the grant amounts.

In the meantime, school administrators including Associate Dean Ellen Aprill of Loyola Law School — who blogged about the issue on the TaxProfBlog Web site — and University of Virginia Law School Dean John Jeffries — have asked the IRS to clarify its guidance.