[olivia3boys]

He does have an option to avoid the forgiveness. After it is applied automatically, he can call up his loan servicer and ask them to adjust the account upwards again to reverse it, and they will.

[T Ruth]

That might be a problem for this lawsuit, but I would guess that under state law, such action would not negate forgiveness of indebtedness income. Rather, it would be a gift by the individual to the loan processer. It may also be a gift under federal law, and depending on the amount, may require the borrower to file a federal gift tax return, using up some of his lifetime gift tax exemption. That would also constitute damages that would sustain standing.

Thus, my guess is that under state law, the borrower would have forgiveness of indebtedness income followed by a taxable gift. If the state also has an estate and gift tax, that would be additional damages.

Further, I would think that if such adjustment is discretionary with the loan servicer, then the borrower cannot count on it. I would think the law would not presume the discretionary action of a private actor.

Further, would the loan processor get a windfall double payment, or would the loan processor have a duty to repay the government? If the loan processor has a duty to repay the government, it is not likely that the loan processor would undertake a lot of paperwork and unnecessary additional payment processing for no gain.