Hi Heather,

Like so many others, my monthly payment under IBR does not even cover all of the interest compounding on the back of my loan. I’m not sure how much it ever will. At the end of the 25 years, if I still have all of the principle and some of the interest on my loan, and all of it gets forgiven, will I be taxed on both the principle and the interest or does the interest get waived at that point?

Thanks,
Stephanie

I’m not a tax expert and I need to get more information about this.  My instinct is that tax would be assessed on both the principle and interest, but then I wonder about interest that has not capitalized and whether that would be treated differently…