Faster Loan Forgiveness for Disabled Veterans

Education Department says it will grant automatic loan forgiveness to disabled veterans -- a step that had been urged by Democrats and state attorneys general.

August 22, 2019
 
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President Trump and Education Secretary Betsy DeVos in Louisville, Ky.

President Trump said in Louisville, Ky., Wednesday that he would wipe out “every penny” of student loan debt held by disabled veterans.

At an event organized by the veterans group AMVETS, Trump signed a memorandum directing the Education Department to automatically discharge federal student loans held by veterans who qualify as permanently disabled.

Democratic lawmakers and state officials had urged Education Secretary Betsy DeVos for months to take that step.

DeVos and Acting Veterans Affairs Secretary Robert Wilkie announced last year that their agencies would begin identifying and reaching out to veterans who may qualify for the benefit. Since then, more than 22,000 borrowers have received a total of $650 million in loan forgiveness.

But in a letter to DeVos in May, attorneys general for 51 states and territories wrote to say that the process remained inadequate and said requiring veterans to affirmatively seek loan discharge would create insurmountable obstacles for many.

Under the process outlined in the White House memorandum Wednesday, veterans will receive loan forgiveness automatically unless they decide to opt out -- a decision some might make because of issues like state tax liability. Congress in 2017 eliminated federal tax liability for veteran loan forgiveness.

“Supporting and caring for those who have sacrificed much in service to our country is a priority for President Trump and the entire administration,” DeVos said in a statement.

Education Department data provided last year to the group Veterans Education Success showed that more than 42,000 borrowers were eligible for the loan forgiveness benefit, known as Total and Permanent Disability discharge. Of those eligible veterans, more than 25,000 had defaulted on roughly $168 million in student loans -- a sign of both how much veterans were struggling with loan payments and how underutilized the loan forgiveness program had been.

Borrowers enter default when they go more than 270 days without making a payment on their student loans, which has negative repercussions for their credit and blocks their ability to take out other federal student aid.

In response to those Education Department figures, several veterans' groups called on DeVos to make the loan forgiveness process automatic.

“It is not fair to ask severely disabled veterans to have to complete paperwork, especially given that some catastrophic disabilities will interfere with their ability to complete the paperwork,” those groups wrote in a November letter. “Further, the fact that more than half of veterans eligible for student loan forgiveness are currently in default is absolutely egregious -- the government needs to do more to help those who have sacrificed so much for our country.”

Washington senator Patty Murray, the ranking Democrat on the Senate education committee, also encouraged DeVos in November to provide automatic loan forgiveness to qualifying veterans in a letter that outlined a process like the one announced by the Trump administration Wednesday.

The Education Department said that it would notify 25,000 eligible veterans about the automatic loan discharge. It will continue notifying qualifying veterans on a quarterly basis.

The announcement was applauded by veterans' groups and advocates for student borrowers. Some, however, said it showed the federal government could be doing more to automate loan forgiveness for other borrowers. Georgetown University law professor John Brooks noted on Twitter that any totally disabled person is eligible to have their student loans discharged.

Carrie Wofford, president of Veterans Education Success, called the announcement a welcome development.

"We look forward to working with the Education Department and the Department of Veterans Affairs to educate eligible veterans and to ensure a successful rollout of this program and to determine how it will make whole the 25,023 totally and permanently disabled veterans who were wrongly put into default, harming their credit scores, offsetting their tax returns and withholding their VA disability living allowance," she said.

Ted Mitchell, president of the American Council on Education, said the group would push the Trump administration to streamline other loan forgiveness programs as well.

"While we commend the administration, we will continue to call on it to take action to address the similarly egregious loan cancellation problems in the Public Service Loan Forgiveness and TEACH Grant programs," he said.

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