I just got off the phone with fedloan which currently services my REPAYE loan. I am about half way through my 120 on time income based payments, and I just need to verify my employment and income. The CSR was very nice and had done 13 years in the Army. He warned me that when I make my last REPAYE payment and apply for the PSLF (Public Loan Forgiveness) a 1099-E and 1099-C will be issued in the year you make the last payment. This means I will be on the hook for paying taxes on the amount forgiven. This amount forgiven will be treated as income on top of regular income. This article here confirms our grim suspicion, but the FAQ here says that it is not the case.
I am not sure who to believe here, but if you got your loans forgiven or know some one that has after 10 years in the service, please comment below regarding the process and if you got hit with a 1099-C for cancelation of debt.