I have heard and read conflicting information. Once the 10 years of qualifying payments are completed, and you adequately provide the documentation about your full time public sector employment, and say $100,000.00 is forgiven, is that forgiven amount considered income that year and do you have to pay income taxes on the forgiven amount?

Nope.  Public Service Loan Forgiveness is NOT taxable as income to borrowers according to an information letter issued by the IRS and a letter to congress issued by the Dept of the Treasury.  Those letters are not technically binding legal precedent, but they do indicate the government’s interpretation of the law and are enough to make me sleep good at night!

On the other hand, 25-year IBR forgiveness IS taxable to borrowers under current law.  My hope is that we will be successful in changing the tax code to fix that, but borrowers are cautioned to plan ahead.