"You may owe tax on a student loan that was forgiven!
We recently wrote about how people are getting negative credit surprises, because they didn't know that their student loan forgiveness had expired. When the reinstated payments weren't made, their credit score dropped dramatically. Now, some did receive forgiveness on their student loan, but for anyone living in California (or thirteen other states) and using the Income Driven Repayment Plan, also known as IDR forgiveness, these forgiven loans are not tax-free. The federal government allows you not to pay tax on your forgiven student loan, but you must include IRS form 982 for the year you receive the 1099-C form for the cancellation of debt. If you don't do that, the IRS will assume you owe tax on the forgiveness. Keep in mind, both for state and federal taxes; if you don't pay on time, you'll then be hit with interest and penalties on top of the tax that you didn't know you owed."
Reference: Brent Wilsey, Wilsey Asset Management