The IRS considers some discharged student loans to be taxable while others are not.  Some discharged student loans are taxable because the money you no longer owe on the loans is considered income. It’s as if someone gave you a financial gift to pay off the loans.  The discharge amount must be noted on a 1099-C form, better known as a Cancellation of Debt. This form is typically required anytime you have a student loan with a balance of $600 or higher discharged. However, at this time, student loans that are discharged because of the death of the primary borrower are exempt from being taxed. This law may change, so consult your tax expert to learn if it is still in place.