Former TREA Deputy Legislative Director Mike Saunders now works for Veterans Education Success (VES), a non-profit group that is fighting on behalf of veterans in the educational arena.
Mike recently authored an article dealing with disabled veterans and their tax liability if their student loan debt is forgiven. He has given TREA permission to reprint his article. We realize this will not apply to many of TREA’s members but they may have children or grandchildren who may find this information to be very helpful.
Veterans: Know Your Rights!
100% Disabled or IU Veterans Can Now Have Their Student Loans Forgiven – FEDERAL TAX FREE
In the past, veterans who were 100 percent disabled or had a finding by the Department of Veterans’ Affairs of Individual Unemployability (IU) could get their student loans forgiven, but unfortunately it was considered to be taxable income by the IRS. That meant an unexpected tax bill for people who were often completely unprepared to pay such a large amount of money, and for some people this increase in reported annual income made them ineligible for means-tested programs like Medicaid or Supplemental Security Income (SSI).
Good news: This is no longer the case. Now, any student loans forgiven due to disability are no longer considered income. VA and the US Department of Education are working together to make it easier for you to apply.
This is the case regardless of how old you are or how long ago you took out student loans – be sure to tell everyone you know!
As always, free lawyers at Veterans Education Success can help if you have questions about your student loans or GI Bill.
How Many Veterans Qualify?
VA and the US Education Department estimate there are more than 42,000 veterans with severe disabilities who hold a total of more than $1 billion in outstanding student loans and who may be eligible for IU student loan forgiveness.
Sadly, MORE THAN 25,000 of those veterans were in default with $168 million in outstanding loans. Defaulting on your loans hurts your credit score and can cause a lot of financial trouble. If you are facing default, get some free help from national veteran organizations or Veterans Education Success lawyers.
Are You Eligible? Is Anyone You Know Eligible?
The Department of Education and the Department of Veterans Affairs (VA) have teamed up to notify severely disabled veterans who have student loans that they may be eligible to have their federal student loans forgiven, with no federal income tax penalty.
The Department of Education will be sending letters to veterans who may be able to apply for federal tax-free forgiveness of their student loans. To see what these letters will look like, click here. The letters will say that they are from the Department of Education and Nelnet, the servicer administering the IU student loan forgiveness process. If you get a letter from someone else, beware because it could be a scam.
The Department of Education and Nelnet manage a website, disabilitydischarge.com, to provide resources and more information on how to start your discharge application online. Even though it is a “.com” website, this is the website that Nelnet uses to help Department of Education Borrowers. You can trust this website.
- This is a free service and you do not have to pay any fees for the application.
- Ignore any services claiming they can help you to get your student loans forgiven for a fee, as they are scams.
- Free lawyers are available to help you at Help@VeteransEducationSuccess.Org
If You Get One of These Letters
- Apply online at disabilitydischarge.com (if you received the letter, you do not have to submit documentation of your service-connected disability since the Department of Education already has obtained this information from the VA).
- You can call Nelnet seven days a week at 1-888-303-7818 from 8 a.m. to 8 p.m. Eastern Time or email firstname.lastname@example.org for any questions or to get the process started.
Once the Department of Education receives your application, they will instruct the bank or other loan holder to suspend collection activity on your current student loans for 120 days while your application is being reviewed to determine if you qualify for student loan forgiveness.
More good news – you can even get back payments you already made! When your student loans are forgiven, your loan servicer must refund all loan payments made after the effective date of the VA’s determination of your service-connected disability. If you have questions about TPD or the process, feel free to reach out to your student loan servicer for more information.
If You Are Eligible but Didn’t Receive a Letter
- The Department of Education will work with the VA to conduct a new match of veterans with severe disabilities with the student loan database to identify more borrowers that may be eligible. Veterans will receive notices on a staggered basis each quarter.
- If you or someone you know may be eligible for TPD student loan forgiveness and haven’t received a notification letter, you can find more information or start a TPD student loan forgiveness application at www.disabililtydischarge.com, following the steps above. You will have to provide evidence of your service-connected disability online.
Tell Us If You Are Designated IU by the VA AND in Default on Your Student Loans
If you are 100 percent disabled or have been determined to be Individually Unemployable (IU) by the VA and you are in default on your student loans – YOU HAVE RIGHTS. The Department of Education should have notified you of them BEFORE you defaulted on your student loans.
If this happened to you, please reach out to Mike Saunders at Veterans Education Success (email@example.com, cell: 703-597-9423). We want to help you get your money back and force the Department of Education to do a better job of notifying veterans of their rights. This should not have happened to you!