President Trump has a plan to help disabled veterans have their student loans permanently discharged.
Here’s what you need to know.
Student Loan Forgiveness: A New Partnership
The U.S. Department of Education will partner with the U.S. Department of Veteran Affairs to help streamline the process for disabled veterans to have their student loan debt cancelled.
“Our nation’s veterans have sacrificed much for our country,” U.S. Secretary Betsy DeVos said in a statement. “It is important that, in return, we do all we can to give them the support and care they deserve. Simplifying the loan forgiveness process and proactively identifying veterans with federal student loans who may be eligible for a discharge is a small but critical way we can show our gratitude for veterans’ service.”
Beginning this month, the Education Department will match borrowers on the National Student Loan Data System (NSLDS®), who have federal student loans or aid through the Teacher Education Assistance for College and Higher Education (TEACH) Grant Program, to the Veterans Affairs database.
The goal is to identify disabled veterans (from the Veterans Affairs Department) who have federal student loan debt (from the Education Department).
How It Works and How To Apply
Borrowers who are identified will be sent a letter that explains eligibility for student loan discharge as well as a Total and Permanent Disability Discharge application. The borrower then signs and returns the application to apply for the discharge.
Borrowers can also apply by email or phone.
Monday – Friday: 8:00 AM – 8:00 PM (ET)
Saturday: 8:00 AM – 7:00 PM (ET)
Completed applications should be mailed to: U.S. Department of Education, P.O. Box 87130, Lincoln, NE 68501-7130.
A Total and Permanent Disability application can be completed online.
Your Rights If You Have Student Loan Debt And Are Permanently Disabled
The Consumer Financial Protection Bureau estimates that tens of thousands of disabled veterans may not know that they are eligible for student loan forgiveness.
Since the formation of the federal student loan program, borrowers who are considered totally and permanently disabled have been eligible to have their federal student loans forgiven.
Student loan forgiveness in this context includes:
- Veterans who the Department of Veterans Affairs 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
Importantly, cancellation of your student loans here are only for federal student loans. If you have private student loans, check with your lender regarding options for permanent discharge. Many private student lenders offer similar permanent discharge benefits.
In 2016, the Education Department collaborated with the U.S. Social Security Administration to identify borrowers with disabilities who were eligible for permanent discharge.
The joint effort found 387,000 borrowers with disabilities, who collectively owed over $7.7 billion in federal student loans. About half of those those borrowers were in default on their student loans (and evidently not aware of the student loan forgiveness program).
According to the Veteran Affairs Department, more than 800,000 severely disabled veterans are unemployable due to a service-connected disability.
Good News: No Tax Bill
The good news is that, under the new tax law, disabled veterans will not owe any federal income taxes on discharged student loan debt.
Previously, cancelled student loan debt counted as income, and thus was taxable under federal tax law.
A positive step to help America’s heroes for their selfless service.