Despite the GI Bill and other education benefits the Armed Services offer, as of 2008, servicemembers were averaging more than $25,500 in student loans to earn their degrees. The Consumer Financial Protection Bureau issued a report titled The Next Front? Student Loan Servicing and the Cost to Our Men and Women in Uniform, where they laid out the challenges for those serving to deal with their debt. These included confusion over repayment plans and barriers when seeking protection under the Servicemembers Civil Relief Act (SCRA). All of these complications are made worse when the servicemember is disabled and much more so when the disability is permanent and total. A new piece of legislation has been proposed to help these veterans. First, let’s look at the existing legislation.
The federal government allows discharge of federal student loans for those with established and proven permanent and total disability. However, this program has had some hiccups along the way. Regulations made final in 2012 that apply to applications for loan discharge received after mid-2013 carry some caveats. These include allowing disabled veterans to apply directly to Department of Education for forgiveness of Perkins and FFEL loans as they do for Direct Loans. This was hoped to streamline the process.
To be approved for discharge, veterans need to submit a Department of Veteran Affairs letter of determination that states that you are 100% permanently disabled or unemployable. Without this letter, applications that included physician’s letters and documentation took two to three years to process. Even with this system in place, many disabled veterans were lied to about the availability of the program, were stonewalled and and otherwise experienced delays and ongoing harassment from debt collectors.
This process has been streamlined somewhat and is now operating with better functionality, but the discharge program only covered federal loans. But Wisconsin Republican Representative Reid Ribble and fellow Wisconsinite co-sponsor Democratic Representative Ron Kind have proposed new legislation to further protect totally disabled veterans. HR 4314 seeks to amend Title 38 of the US Code to establish a student loan repayment program for totally disabled veterans.
This legislation is quite unlike the forgiveness plan already in place in several ways. Most importantly, it tackles private student loans owed by totally disabled veterans. The legislation would establish a repayment plan that would pay the private student loans directly to the lender on behalf of the totally disabled veteran. The government would pay the amount owed as of the day that the veteran became totally disabled.
In addition, though, the government would also pay directly to the veteran the difference between the balance owed at the time they became disabled and the lesser amount now owed. Essentially, this means that if the veteran has continued to make payments after they were they rendered totally disabled so that the loan balances were lower than on the date of disability, the veteran is paid back those amounts they paid in plus interest at the rate of the Social Security increase during each year between disability and application to this repayment program. Loans must have been used toward an undergraduate degree.
This would be a huge boon to totally disabled veteran student loan debtors who are eligible for relief of federal loans under the forgiveness program but are still struggling financially because of private student loans. If you care about disabled veterans, contact your representative and tell them to get HR 4314 out of committee, on the floor for a vote and to vote yes. Currently the bill is with the House Veterans’ Affairs Committee.