Taxability of discharged student loan of disabled person

[joanie3444]

Taxpayer is a totally disbled attorney. She is getting long-term disability from employer and Social Security disability. Will

never be able to return to work. In 2012 she was forgiven a federal student loan of $78000 because of her disability.

Is this forgiven debt taxable in that she is disabled?

Joann

[Jack from Ohio]

Short answer is the same as all other discharged debts not involved in a bankruptcy.

Taxable unless she meets the insolvency rules at the time the loan was forgiven.

[Gail in Virginia]

This was previously discussed on this forum, and some reference links were posted that you might find helpful. I tried to post a link, but every time that I clicked the button to add a link, the forum grayed out and I could not post. If you can't paste the above link and get to the previous discussion, just search for "student loan disability" and this thread and the previous discussion should be the only ones that come up.

[kcjenkins]

This is the best answer I know of, and is a good one to print out to hand to a client in this sort of situation. When I did I highlighted the next to last paragraph. Ended the discussion.

http://www.finaid.org/loans/20080919treasurylevinforgiveness.pdf