“It’s gone forever,” Trump said of the debt.
Veterans are eligible to have the government discharge their federal student loans if the Department of Veterans Affairs deems them totally and permanently disabled. Few have taken advantage of the discharge, in part because it has never been widely publicized.
The Education Department announced a partnership with VA in December 2016 to identify eligible veterans, who would then need to sign and return an application to complete the process. Work on the project, however, did not get underway until April 2018. The Education Department did not immediately respond to requests for comment on the delay.
Still, the effort has fallen short of its potential. A Freedom of Information Act request made by the advocacy group Veterans Education Success found that the Education Department contacted more than 42,000 disabled veterans, 25,000 of whom were in default on their student loans. Yet barely 8,500 had signed and returned the application for a discharge as of May 2018.
To date, the partnership between the Education Department and VA has resulted in the federal government providing more than $650 million in student loan relief to more than 22,000 eligible veterans.
The nonprofit Student Borrowers Protection Center said many veterans may have been reluctant because of the perceived tax implications of loan forgiveness. Until recently, the federal government treated money forgiven through a disability discharge as taxable income. The tax overhaul signed into law last year put an end to the government counting as taxable income student debt that is forgiven because of death or disability.
When the federal tax burden was lifted, consumer advocates and state attorneys general urged Education Secretary Betsy DeVos to automatically cancel the debts amassed by disabled veterans. The department said potential state and local tax liabilities tied to forgiveness remained a concern.
On Wednesday, the Education Department noted that veterans can opt out of the automatic discharge in the event they are worried about the state tax implications.
“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 Wednesday. “We will continue to prioritize the needs of our nation’s veterans and provide them the help and support they have earned and deserve.”