President Trump Signs Executive Order Cancelling Student Loan Debt for Disabled Veterans
IMPORTANT: Refinancing federal student loans with a private lender, including SoFi, would mean forfeiting access to federal programs like the FREED Veterans Act, income-driven repayment plans, and other federal loan forgiveness or loan cancellation options.
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Veterans learn a lot when they volunteer to serve in a branch of the U.S. Armed Forces. They can learn teamwork, loyalty, and discipline. Veterans might learn skills from how to run a nuclear submarine to cooking chow in a theater of war to dressing a wound in the field. And they probably learn how to make a plan and stick to it.
But what happens if they become disabled during their service? What happens if their best laid plans are thrown to the wind and they’re unable to fulfill student loan obligations as the result of an injury in the line of duty?
As of Wednesday, August 21, 2019, these vets, those with student loan debt struggling with disabilities as a result of their service, might be able to breathe a little easier.
President Trump signed an executive order that effectively removed the barriers for some 25,000 disabled vets to cancel their student loan debt. He announced the measure at the 75th annual American Veterans convention in Louisville, KY and signed the order on stage. The president said this action would save these veterans an average of $30,000 each.
These veterans were eligible for student debt relief on certain federal loans previously, but the process was cumbersome and only 20% of those eligible applied. The memorandum that accompanied the executive order said, “For the last decade, veterans seeking loan discharges have been required to submit an application to the Secretary of Education with proof of their disabilities obtained from the Department of Veterans Affairs.
The process has been overly complicated and difficult, and prevented too many of our veterans from receiving the relief for which they are eligible.”
Why Did it Take So Long For These Vets to Get Relief?
Congress was working on a plan to eliminate these debts with the Federally Required Earned Education-Debt Discharges (FREED) Veterans Act, introduced by Rep. Conor Lamb of Pennsylvania in the House on June 28, 2019.
The legislation would “automatically forgive these loans and eliminate the paperwork barrier that prevents eligible veterans from attaining student loan debt relief.”
The FREED act also sought to eliminate the bureaucracy that kept these veterans for applying for or getting forgiveness.
“More than 42,000 eligible veterans have been identified by the Department of Education, yet only 20% of those eligible have applied for the program,” according to the press release from Lamb. Those veterans, the 42,000 who were identified, collectively owed over $1 billion in federal student loans.
That program they are referring to was called Total and Permanent Discharge (TPD). It relieved disabled veterans “from having to repay a William D. Ford Federal Direct Loan (Direct Loan) Program loan, Federal Family Education Loan (FFEL) Program loan, and/or Federal Perkins Loan (Perkins Loan) Program loan or complete a TEACH Grant service obligation on the basis of your total and permanent disability.”
The FREED Vets Act, and a companion Senate Bill, didn’t make it out of committee before the announcement of President Trump’s executive order, but they might still come up for a vote.
Trump’s Student Loan Executive Order Supported By Veterans’ Groups
There’s been some outcry for help for these wounded warriors. Five veterans groups—the Ivy League Veterans Council, High Ground Advocacy, the Retired Enlisted Association, Veterans Education Success and Vietnam Veterans of America—sent a letter to Secretary of Education Betsy Devos on Nov. 9, 2018, asking for the TDP student debt relief process to be automated.
They wrote , “We appreciate the Department’s collaboration with VA to identify eligible veterans, but we believe it is unfair to ask severely disabled veterans to fill out paperwork to receive their statutorily-protected right to student loan forgiveness.”
A similar letter was sent to Devos by 51 attorneys general of states and territories on May 14, 2019. This letter echoed many of the concerns voiced by the veterans groups. “The Department of Education continues to require eligible veterans to take affirmative steps to secure the loan forgiveness that is their statutory right.
“And the requirements imposed by the Department may prove insurmountable obstacles to relief for many eligible veterans due to the severe nature of their disabilities,” they wrote .
While this group of disabled veterans have gotten a reprieve, there are some other ways veterans can take advantage of programs meant to help them out with student loan debt while they’re serving and once they’ve separated.
Existing Debt Relief for Veterans and Active Duty Military
Servicemembers Civil Relief Act Benefits
The Servicemembers Civil Relief Act (SCRA) gives servicemembers benefits that might affect their interest rates for federal and private student loans. Under SCRA , “servicemembers can reduce their interest rate to 6% on all pre-service obligations, including student loans, while they are on active duty.” You can apply for this rate up to 180 days after leaving service, and the new rate will be retroactively applied.
This reduction in interest rate is automatic for federally serviced loans. Your loan provider should check if you are eligible and apply the new rate automatically. The rate does have to be requested for private loans.
Veterans who served in a hostile area and received special pay for it might qualify for a 0% Direct Loan interest rate during that deployment if that loan was made on or after Oct. 1, 2008. With proper documentation, this option may also be applied retroactively—those interested should reach out to their loan servicer to learn more.
Public Service Loan Forgiveness Program
Veterans who have separated from the military might be eligible for loan forgiveness thanks to the Public Service Loan Forgiveness (PSLF) program, depending on their career path after serving.
Branch-Specific Benefits
Some branches of the military offer their members benefits that may not be available to other branches.
• Army College Loan Repayment Plan : The Army may repay part of a servicemember’s qualifying student loans. “Only specified Military Occupational Specialties (MOSs) qualify for the LRP.”
• Navy and Army health professions loan repayment plans: These programs help repay loans for doctors, dentists, and other healthcare professionals in the Navy and Army, respectively.
• Air Force Judge Advocate General’s Student Loan Repayment Program : Air Force lawyers might be eligible for some student loan relief. “Under this program, eligible JAGs can apply for up to $65,000 toward student loan repayment,” according to information on AirForce.com.
What’s Next for Veterans and the FREED Vets Act?
Lamb said he’s pleased with President Trump’s executive order, but still wants to see the FREED Vets Act passed. He said , “We’ve been pushing the administration to take this action since December of last year, and I’m glad that they have, but we have more work to do.
I introduced the FREED Vets Act to make student debt forgiveness for disabled veterans automatic, both now and in the future, regardless of who is in the White House. I’m going to keep working with my colleagues in both parties to get it passed, and yesterday’s executive order gives me more confidence that the president will sign our bill into law as soon as it reaches his desk.”
SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
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