I would not expect a tax shield from the interest as that would be double dipping. Normally principal forgiveness is considered a gain and is a taxable event. I wonder if the 6 months of payment by the government will be treated as such or if there is an exception to the rule. It would seem odd to me in this situation if it was taxable as the goal is provide relief to borrowers.

Michael, I have not traced this all the way though H.R. 748, but SecredactedM) of the Bill provides for Loan Deferment. Under SecredactedM)(iv) of the Bill the Administrator shall provide guidance on the deferment process not later than 30 days after the date of enactment.. Nothing in this section suggests forgiveness, just deferral.

However, Secredactedof the Bill provides for subsidy for a covered loan that is defined in Secredacteda) of the Bill (the definition also excludes certain loans), SecredactedC) provides that the Administrator shall pay the principle, interest, and any associated fees that are owed on a covered loan in a regular servicing status. SecredactedC)(3) provides that the borrower is relieved of the obligation to pay the amount.

I recommend you talk with you tax advisor to help you trace all this through the Bill and determine how this applies to your specific fact pattern.