Student Loan Debts May Be Cancelled for Disabled Veterans

The Department of Education announced in April, 2018 that it would be partnering with the Department of Veteran Affairs to identify disabled veterans whose student loan debts could qualify for forgiveness. Borrowers who qualify for debt forgiveness would be informed by mail and would also be sent a Total and Permanent Disability Discharge form. This is the avenue through which borrowers with serious disabilities can have their debts forgiven.

How Will Discharging Student Loan Debts Help Disabled Veterans?

This kind of an outreach program is hugely needed at this time. According to the president of the non-profit organization Veterans’ Education Success, Carrie Wofford, there are many disabled veterans who are unaware of the fact that they could be eligible for having their student loan debts forgiven. Wofford states that according to data from the Consumer Financial Protection Bureau, there are tens of thousands of disabled Veterans who are struggling financially or even destitute, who aren’t even aware that they have a legal right to have their student loan debts waived.

Automation of the Discharge of Student Loan Debts

Under the new tax laws, federal income taxes are waived on forgiven student loan debts for permanently disabled people. This is a big step in the right direction for taking care of disabled Veterans’ student loan debts. Advocacy groups across the country have called for the federal government to automate the discharge of debts, however, the challenge was the tax law. According to previous tax laws, discharged student loan debts were treated as taxable income. This caused a massive roadblock to the automation of the discharge of loans since unsuspecting borrowers could end up being hit by a massive tax bill. However, now, thanks to the new tax laws, this will no longer be a problem and automation can now be looked at as an option.

Building on Obama’s Efforts

This program has been built on an effort that started during the Obama administration that was targeted at helping severely disabled people. In 2016, the Department of Education teamed up with the Social Security Administration to identify borrowers who were in the disability category of Medical Improvement Not Expected (MINE). The project found 387,000 people who qualified for the student loan debts to be waived. The team also found that of this number, 179,000 had defaulted on their loans and were in danger of having their Social Security benefits impacted. This project however did not focus on disable veterans would be being paid out benefits from the Veterans Affairs office rather than the SSA.

While the Education Department and Veterans Affairs Department did sign an agreement to carry out this initiative, the program did not go any further. This effort was finally re-started in April this year. Wofford stated that she hoped the collaboration between the two government agencies would also result in the automatic student loan debts discharge for severely disabled veterans, thereby eliminating the need for them to apply for a benefit that by law is their privilege.