President Donald Trump on Wednesday directed the Education Department to more easily forgive the federal student loans owed by veterans with disabilities, making a move Education Secretary Betsy DeVos had resisted for months.
Veterans and other student loan borrowers who are “totally and permanently” disabled are entitled under existing law to have their federal student loans canceled by the Education Department. But they previously had to fill out paperwork to have their loans discharged — a bureaucratic obstacle that veterans’ advocates slammed as too burdensome for many severely disabled veterans.
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Trump said he was “taking executive action to ensure that our wounded warriors are not saddled with mountains of student debt,” vowing to “eliminate every penny of federal student loan debt owed by American veterans who are completely and permanently disabled.”
“The debt of these disabled veterans will be entirely erased,” Trump said during remarks at a veterans convention in Louisville, Ky. “It will be gone.”
The move will wipe out “hundreds of millions” in student loan debt owed by more than 25,000 disabled veterans, Trump said. The average amount forgiven would be about $30,000, he said.
DeVos last year took steps to more easily identify which veterans were eligible for the benefit and send them letters. But her agency still required eligible veterans to fill out paperwork before actually canceling the loans, despite bipartisan calls to change the process.
Under the new “expedited” process announced by the Trump administration on Wednesday, the Education Department will automatically identify veterans eligible for loan forgiveness and give them the option to opt out for 60 days before moving ahead with canceling the debt.
The Trump administration had for months resisted bipartisan requests to eliminate the required paperwork and automatically wipe out the student loan debt of disabled veterans.
A bipartisan group of lawmakers in 2018 called for automatic loan forgiveness for disabled borrowers. And in May, the attorneys general of 51 states and territories called on DeVos to stop requiring that disabled veterans fill out that paperwork and instead automatically cancel the debt.
At the time, Education Department spokesperson Liz Hill said that “while ‘automatic discharge’ may seem like a simple solution, there are long-term impacts we want all veterans to have the chance to consider before their loans are discharged.”
Hill said in an email Wednesday that the agency was changing its position on the automatic loan forgiveness “now that the things we were worried about have been taken care of.”
Department officials had expressed concern about the state and local tax consequences that veterans could potentially face in some states as a result of the federal loan forgiveness. The department also cautioned that a loan discharge, under existing regulations, could impede a veteran who wants to take out additional federal student loans in the future.
The Republican tax law in 2017 removed any federal tax liability associated with loans canceled through the “total and permanent disability” loan discharge program. Trump on Wednesday noted that veterans wouldn’t face a federal tax bill on the canceled amount. “That is big stuff,” he said.
Trump on Wednesday called on all 50 states to immediately “waive all applicable state taxes” on the forgiven loans.
“We’re still concerned about a tax liability in several states but POTUS has called on them to eliminate that burden,” Hill said in an email on Wednesday. “We’ve also figured out a way for veterans to continue their education post-loan forgiveness. With those things taken care of, we think an opt-out is appropriate.”
DeVos joined Trump for his speech in Kentucky on Wednesday. “I want to thank Secretary DeVos for her leadership in making veterans’ debt forgiveness a top priority for the Department of Education,” Trump said.
“I appreciate the President’s strong leadership on this issue and his willingness to provide much-needed student loan relief,” DeVos said in a statement. “We will continue to prioritize the needs of our nation’s veterans and provide them the help and support they have earned and deserve.”
The Education Department said that even under the existing process for forgiving the debt of disabled veterans that involves paperwork, DeVos had granted more than $650 million in loan forgiveness to more than 22,000 veterans since April 2018.