Majority of Veterans Eligible for Loan Forgiveness Are in Default

November 13, 2018

The Education Department and the Department of Veterans Affairs announced earlier this year that they would work together to notify student veterans of their eligibility for discharge of their federal student loan debt because of permanent disability.

The results of those efforts show that most eligible veterans have stopped making payments on their student loans, according to a response to a Freedom of Information Act request from veterans' organizations. The Education Department and VA determined that more than 42,000 veterans are eligible for the benefit. But of those veterans, well over half -- 25,023 borrowers -- had defaulted on their student loans as of mid-April.

Borrowers enter default on their student loans when they go more than 270 days without making a payment. That can have serious repercussions, including a hit to the borrower’s credit score, wage garnishment and the inability to access other federal student aid.

Six veterans' groups, including Veterans Education Success and Vietnam Veterans of America, sent Education Secretary Betsy DeVos a letter last week urging her to make loan forgiveness automatic for any veteran who qualifies. Senator Patty Murray, a Washington Democrat and the ranking member on the Senate education committee, has also repeatedly called for automatically discharging those loans.

The Republican tax law passed last year removed any federal tax liability for permanent disability discharge. But the Education Department argued in its response to the FOIA request that it was still concerned about state tax liabilities that would arise from automatic loan discharge. 

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