Gardner, Bipartisan Colleagues Urge Administration to Discharge Outstanding Federal Student Loans for Permanently Disabled Americans
Washington, D.C. – U.S. Senators Cory Gardner (R-CO), Chris Coons (D-DE), Rob Portman (R-OH), Angus King (I-ME), Susan Collins (R-ME), and Tammy Duckworth (D-IL), along with U.S. Representatives Ron Kind (D-WI), Brian Fitzpatrick (R-PA), Jim Langevin (D-RI), and Don Young (R-AK), continue to lead a bipartisan effort to urge the U.S. Secretary of Education, Betsy DeVos, the U.S. Secretary of Veterans Affairs, Robert Wilkie, and the Commissioner of Social Security, Andrew Saul, to immediately discharge outstanding federal student loans for totally and permanently disabled Americans.
Under federal law, individuals who are totally and permanently disabled are eligible to have their federal student loans forgiven. The 2017 Tax Cuts and Jobs Act made clear that federal student loans that are discharged by the Department of Education due to the total and permanent disability of a borrower are no longer required to be included in the gross income of the borrower. Since Congress has removed the potential tax consequence associated with this type of loan forgiveness, the Senators and Representatives have been urging the Department to automatically discharge outstanding federal student loans for totally and permanently disabled Americans, including veterans.
In response to these efforts and efforts of other members of Congress, on August 21, 2019 President Trump signed a Presidential Memorandum that directs the Secretary of Education and Secretary of Veterans Affairs to discharge federal student loan debt for totally and permanently disabled veterans. However, the memorandum does not apply to tens of thousands of totally and permanently disabled individuals, many of whom will continue to carry student loan debt which they are legally entitled to have forgiven.
The letter is copied below and is available here.
Dear Secretary DeVos, Secretary Wilkie, and Commissioner Saul:
We write to follow up on our letter sent to your agencies on February 15, 2018, urging the U.S. Department of Education (ED) to automatically discharge outstanding federal student loans for borrowers who are totally and permanently disabled, including veterans. On August 21, 2019 President Trump signed a Presidential Memorandum that directs the Secretary of Education and Secretary of Veterans Affairs to discharge federal student loan debt for totally and permanently disabled veterans. We are pleased that the Administration has decided to carry out our request for veteran-matched borrowers. However, the memorandum does not apply to the tens of thousands of totally and permanently disabled individuals matched through Social Security Administration (SSA) data, many of whom will continue to carry student loan debt which they are legally entitled to have forgiven. Therefore, we again urge ED to automatically provide federal student loan borrowers the relief they are entitled to receive.
Under the Higher Education Act of 1965, individuals who are totally and permanently disabled (TPD) are eligible to have their outstanding federal student loans forgiven. Under the Tax Cuts and Jobs Act of 2017, federal student loans that are discharged due to death or TPD are tax exempt. Despite the existing legal benefit, many borrowers, in applying for relief, face significant challenges that are both administratively burdensome and unnecessary. ED currently utilizes data provided through matching agreements with the Department of Veterans Affairs (VA) and the SSA to identify TPD borrowers. Once notified, those borrowers must apply for discharge. As the President noted in his announcement, the process “has been overly complicated and difficult” and “has inflicted significant hardship and serious harm on these veterans.”
Considering ED’s authority to automatically discharge the loans of VA-matched borrowers, we urge ED also to collaborate with the SSA to grant automatic discharges—which should not be contingent upon any borrower administrative work at the point of discharge or any point thereafter—and to streamline the process for borrowers receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits. According to data provided to our staff by ED, as of March 2019, only 40% of borrowers identified by the SSA match have had their loans discharged. If ED were to limit the scope of automatic discharges to only those identified in the VA match, many veterans would still be excluded from automatic forgiveness. This is because not all veterans have a service-connected disability that is 100% disabling or an individual un-employability rating.
ED has previously cited concerns about state or local taxes as a barrier to relief associated with an automatic federal discharge. However, 41 states, including D.C., conform to the new federal treatment of discharged loans based on death and disability. Also, in carrying out the new automatic discharge for eligible veterans, ED stated it is going to provide the option for veterans to decline loan discharge within 60 days of notification of their eligibility. This makes clear that potential state tax liabilities can be eased with an opt-out and indicates that such an approach could be used for SSA-matched borrowers.
Additionally, by not extending the automatic discharge to borrowers matched through SSA data, the process will still inflict hardship on eligible borrowers who have missed out on a positive identification because of minor discrepancies in information in federal databases.
Finally, we ask that you reply to staff requests for comprehensive data made on February 5, 2019 on the number of borrowers who have been matched through agreements with the SSA and VA. Access to this information is critical for us to find solutions for our constituents.
On this issue, the bottom line is simple: Now that Congress has removed the tax consequence associated with loan forgiveness, ED should automatically discharge outstanding federal student loans for all totally and permanently disabled Americans. These Americans should no longer face costly delays or bureaucratic barriers to receiving a benefit that they are entitled to receive under the law. We appreciate your attention to this important matter and request a response by October 30, 2019.
Cory Gardner is a member of the U.S. Senate serving Colorado. He sits on the Energy & Natural Resources Committee, the Foreign Relations Committee, the Commerce, Science, & Transportation Committee, and is the Chairman of the Subcommittee on East Asia, the Pacific, and International Cybersecurity Policy.
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