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April 18, 2018

Following Push from King, Collins, Department of Education Agrees To Discharge Outstanding Federal Student Loans for Permanently Disabled Veterans

WASHINGTON, D.C. – In response to efforts by U.S. Senators Angus King (I-Maine) and Susan Collins (R-Maine), the Department of Education has announced that they will streamline student debt forgiveness for permanently disabled military veterans.

“No one in America who has become permanently disabled should have to endure the pain and financial hardship of a surprise tax bill on a forgiven federal student loan – least of all our veterans,” said Senator King. “This is the right thing to do, and I hope that the Administration will extend the same compassion to others affected by this misguided policy by beginning to automatically discharge outstanding loans for those who have become permanently disabled.”

“The brave men and women who have served our country have sacrificed so much to protect our nation’s freedom and they deserve our continued respect, support, and care when they return home,” said Senator Collins.  “In the past, far too many disabled veterans faced the burden of making payments on student debt that is eligible to be forgiven.  Fortunately, a provision in the new tax law clarifies that loan forgiveness for these individuals is tax exempt.  I am pleased that, following our advocacy, the U.S. Department of Education will now simplify the loan forgiveness process and proactively notify disabled individuals and veterans who may be eligible for this cost-saving program.”

In February, Senators King and Collins joined a group of their colleagues in sending a letter to urge the U.S. Secretary of Education, the U.S. Secretary of Veterans Affairs, and the Acting Commissioner of Social Security to immediately discharge outstanding federal student loans for totally and permanently disabled Americans, including veterans. The letter, which was led by Senators King, Chris Coons (D-Del.) and Rob Portman (R-Ohio), was also signed by Senator Collins, Tammy Duckworth (D-Ill.) and Cory Gardner (R-Colo.).

Under the recently enacted Tax Cuts and Jobs Act, federal student loans that are discharged by the Department of Education due to the death or total and permanent disability of a borrower or the death of a borrower’s child are no longer required to be included in the gross income of the borrower.  Therefore, loan forgiveness in these cases is tax exempt.  Now that Congress has removed the potential tax consequence associated with this type of loan forgiveness, the Senators are urging the Department to immediately begin discharging student loans for eligible individuals. 

The Senators’ letter is available here.

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