Question:
My mother took out a Parent PLUS Loan on my behalf in my freshman year. She died last month just after I graduated from college. Is her PLUS Loan forgiven? Are there any potential tax consequences to me or my dad if the PLUS Loan is forgiven?
Answer:
If the borrower of a federal student loan dies, the loan is canceled. Your mother’s loan is eligible for what is known as a Death Discharge. When a debt is discharged, it means that the balance will be brought to zero and no further collection activities will occur.
Sometimes when a debt is canceled (for reasons such as discharge or forgiveness) the discharged amount may be considered taxable income. In order to determine if this discharged debt would be considered to be taxable, please contact the Internal Revenue Service or a tax professional.
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