Veterans Groups Want Government to Expedite Forgiveness of Student Loans

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Student loan forgiveness

Led by Veterans Education Success, a bipartisan group dedicated to ensuring career and education success for military families, a collection of 22 veterans groups has sent a letter to Education Secretary Betsy DeVos. The letter urges her to direct the Department of Education (DoE) to follow an executive order signed by President Donald Trump that ordered the department to forgive all outstanding student loans held by permanently and totally disabled veterans.

More than 40,000 severely disabled veterans are still waiting on the DoE to automatically forgive their student loan debts, as directed by the administration. The average loan balance eligible for forgiveness is around $30,000. Of those 40,000 veterans, more than 25,000 are in default on their loans and face collection actions, including withholding of federal and civilian pay, disability benefits and tax refunds; bad credit reports; and other financial hardships.

On Aug. 21, 2019, Trump issued an executive order directing the DoE to work with the Department of Veterans Affairs and Social Security Administration to identify student loan borrowers who receive disability payments and automatically forgive their outstanding student loan debt.

Previously, disabled veterans had to request forgiveness from their lender.

Student loan forgiveness for disabled persons has been around since 1986, when President Ronald Reagan signed Public Law 110-315, the Higher Education Opportunity Act.

In 2016, President Barack Obama tweaked the law to allow disabled persons who were employed to have their student loans forgiven. Previously, only permanently and totally disabled persons who were unable to hold a job due to their disability were eligible to have their loans discharged.

Trump's 2019 executive order also exempted totally and permanently disabled persons from paying federal taxes on the amount of their forgiven loans. Before that, the amount of a forgiven loan was treated as income and the amount was taxable.

The veterans groups urge DeVos to speed up the process and suspend loan collections, return money collected from disabled veterans in error, suspend any existing wage or benefit garnishments, and correct erroneous credit reports.

While Trump's executive order directed the federal government to have an "expedited" process to forgive disabled veterans' federal student loans, the DoE has not taken any public action on debt forgiveness nearly six months after the executive order was issued, the veterans group said.

According to the law, student loan forgiveness is available for:

  • Veterans the VA has determined are unemployable due to a service-connected disability.
  • Borrowers receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits.
  • Borrowers certified as "totally and permanently disabled" by a physician.

For more information, see the Department of Education's student aid website.

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