A new change to the Department of Education (DOE) will make student loan forgiveness for disabled military Veterans a much easier process. So easy, they no longer have to do anything.
Last Wednesday, President Trump announced disabled military Veterans won’t need to file paperwork to qualify for Total and Permanent Disability discharge (TPD) anymore – making it so they’ll automatically receive benefits. The White House says the move will eliminate “every penny” of federal student loans for permanently disabled military Veterans. [1]
“Supporting and caring for those who have sacrificed much in service to our country is a priority for President Trump and the entire administration,” says Betsy DeVos, U.S. Secretary of Education, in a press release from the DOE. “We will continue to prioritize the needs of our nation’s Veterans and provide them the help and support they have earned and deserve.”
What about Total and Permanent Disability discharge has changed?
Proving eligibility for student loan forgiveness due to permanent disability has required Veterans to file paperwork even after their disability status has been confirmed. Veteran advocates have criticized the process as red tape for the severely disabled. [2]
In response to complaints, last year, the education department established a data matching process in coordination with the Department of Veterans’ Affairs to identify totally and permanently disabled military Veterans. [3]
Since then, the White House estimates 50,000 Veterans throughout the country are eligible for student loan forgiveness. But only 22,000 have applied for TPD.
Trump says the move will save eligible Veterans an average of $30,000 in student loan repayment.
Crushed by student loan debt and worried you’ll never pay it off? There is help available.
Are military Veterans responsible for taxes on canceled student loan debt?
The education department will give Veterans 60 days to opt out, which some will, due to taxes or the ability to take out student loans in the future.
Agency officials have expressed concern that canceling Veterans’ federal student loan debt can lead to state and local tax burdens for those who qualify.
The Tax Cuts and Jobs Act of 2017 removed the tax liability for those who have their federal loans eliminated through TPD.
In 2018, the CFPB created regulations for qualifying borrowers to have their debt eliminated free from federal income taxes. [4] The Trump Administration is urging all 50 states to exempt those Veterans from state and local taxes, too.
Will new rules affect Total and Permanent Disability discharge for civilians?
Military Veterans aren’t the only Americans who may qualify for a TPD discharge, but the new rules won’t affect them.
If you’re suffering from an impairment that impedes your ability to work, you may qualify for TPD. Here’s how to find out if you’re eligible:
- Prove you are disabled. You need certification from a licensed physician stating that you suffer from a physical or mental impairment that stops you from working. The disability must have affected you for the past five years or could for the next five years.
- Do you receive federal assistance<? Contact the Social Security Administration by mail with proof you currently receive income or disability insurance from the agency.
To apply for TPD contact Nelnet, that’s the financial services company that assists the DOE with the program. You can reach it at 888-303-7818, or email [email protected]. You can fill out an application here.
Nelnet then checks to see if your loans are eligible for forgiveness. It will contact your lenders to suspend your payments for 120 days. Then you need to send a finished application by mail to the education department’s address:
U.S. Department of Education
P.O. Box 87130
Lincoln, NE 68501 -7130
Expect to wait at least a month while your application is reviewed.
Will new Total and Permanent Disability discharge rules affect private lenders?
No. The new regulations will only affect borrowers with federal student loans. However as Debt.com has previously reported, some private lenders are more generous with student loan forgiveness than most.
The following lenders provide loan forgiveness for permanently disabled borrowers:
- Discover
- Sallie Mae
- Wells Fargo
Remember, you’re going to need documented proof your impairment deems you with a permanent disability.
For more information on applying and qualifying for student loan forgiveness, read Debt.com’s in-depth report Student Loan Forgiveness Program.
Read more about how the Servicemembers Civil Relief Act (SCRA) assists active-duty Service Members with financial issues and debt.
