collection abandonment

The US Dept. of Education frequently uses the following advice to defaulted student loan borrowers;

If you are on a structured payment plan ie., affordable and reasonable payments, and pay dutifully for 25 years, at the end of that period any monies owing will be forgiven.
However, unless you reduce the principal considerably, you may owe more than you did at the beginning of the period and any amount forgiven will be taxed as income.

1. In a case such as the above, the debt is disputed and never verified, therefore how can one be taxed on it?

2. It seems to me that there would have to be judgment somewhere on the debt in order for the IRS to have any claim to tax.

3. I think the DOE is blowing smoke.

All comments invited and respected.

permafrost

That's what I was thinking.

[weishaupt1776]

If you sign a note with that language which you mentioned, you best sign it All Rights Reserved.

The heart of the problem lies within receiving a government benefit.

When you volunteer for a gov benefit, you are now under their guardianship under the parens patrie doctrine.

The note does not mention the terms as I stated. I have never seen them codified either. It is a general expression, such as;

"If you fail to satisfy the note, it can affect your future borrowing capabilities, etc."

I guess my question better stated would be;

If a creditor/collector stated that the debtor will be taxed on any remaining debt after same abandons collection efforts, could it be construed as threatened legal action of which creditor/collector has no foundation to pursue.

Thanks for your response.

pf