The bureaucratic misstep, first reported by Politico, has cast a pall over an initiative the White House heralded as a tremendous achievement.
At a Veterans Day ceremony at Arlington National Cemetery last week, Vice President Pence said, “With the stroke of a pen, the president wiped out $750 million owed by more than 25,000 heroes.”
But so far, the education debt of only a small fraction of those veterans has been canceled as a result of the president’s order.
Veterans have long been eligible to have the government discharge their federal student loans if Veterans Affairs deems them totally and permanently disabled. But because the option has never been widely publicized, few have taken advantage of the discharge.
In December 2016, the Education Department announced a partnership with VA 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.
Veterans groups said the initial response was lackluster. 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, yet barely 8,500 had signed and returned the application for a discharge as of May 2018. The project had begun making headway by the time Trump announced his order in August, with 22,000 eligible veterans receiving more than $650 million in student loan relief.
Advocacy groups said the slow response from veterans may have reflected concerns about 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 forgiven because of death or disability.
After the federal tax burden was lifted, state attorneys general and consumer advocates urged Education Secretary Betsy DeVos to automatically cancel the debts amassed by disabled veterans — without the cumbersome process of completing forms. The department said potential state and local tax liabilities tied to forgiveness remained a concern. Still, Trump moved ahead.
“They have made a sacrifice that is so great,” Trump said in a speech to the AMVETS national convention in Louisville the day he announced the executive order. “The debt of these disabled veterans will be entirely erased. It’s gone forever.”