President Trump Signs Order to Erase Student Loan Debt for Disabled Veterans

    Lawmakers, economists and activist all have made headlines debating solutions to the $1.6 trillion student debt crisis burdening the lives of 44 million Americans.

    Some plans go as far as to cancel every cent of student loan debt, while others recommend tilting relief in favor of low-income or less fortunate borrowers.

    In August of 2019, President Trump took the latter approach and called on the Department of Education to automatically cancel “every penny” of student loan debt held by veterans deemed totally and permanently disabled.

    This, according to President Trump, will benefit 25,000 veterans with an average student loan debt of $30,000, through a process called Total and Permanent Disability (TPD) Discharge.

    The problem here is that the Higher Education Opportunity Act (HEOA), which flew through Congress with bipartisan backing in 2008 and was signed into law under President George Bush, already cancels the debt of disabled veterans.

    So, what exactly does President Trump’s memorandum do?

    What Trump’s Executive Order Means for Veterans

    Trump’s order proposes to make it simpler for disabled veterans to discharge their loans.

    His plan calls on the Department of Education to seek out veterans eligible for discharge, rather than force veterans to appeal to the government for a discharge that is already their right by law.

    In the decade since HEOA was passed, thousands of disabled veterans are still encumbered by student loans. This is because the discharge requirements are notoriously convoluted.

    To qualify for discharge, you must prove you are disabled and incapable of seeking gainful employment in one of three ways:

    1. By submitting a doctor’s certification from a certified M.D educated in the U.S.
    2. By supplying a notice of award for Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) that shows your next scheduled disability review will be within five to sev en years from the date of your most recent SSA disability determination
    3. By submitting VA documentation that shows you are permanently and completely disabled as the result of a service-related injury.

    Of the 50,000 veterans eligible for a loan discharge under the HEOA, only half have qualified. The problem in some cases may be a lack of information. Some veterans are unaware the program even exists, while others who know of the program are fuzzy on the details or how to go about applying.

    “It seemed complicated,” John Baughman, a disabled army veteran who served two tours as an infantryman in the Middle East, told, “because there was very little information about the process and what I was eligible for.

    “Once I discovered what I was eligible for, obtaining the form was relatively simple. I did have to wait a long while before my loan was finally discharged. If I didn’t petition to have my payments deferred, I would have still had to pay into them [until] they were discharged.”

    Other veterans have a harder time navigating the system. At least 25,000 disabled veterans have defaulted on around $168 million in student loans.

    Trump has also waived federal taxes on student loan discharges and is calling on states to follow suit. Prior to this, if a veteran’s loans were discharged, it was considered income and they would be taxed. It was similar to how consumers who opt for debt settlement still have to pay taxes on the “forgiven” debt.

    Trump’s memorandum may be a positive step for disabled veterans having trouble navigating the intricacies of the system, but what about everyone else?

    According to the Department of Veterans’ Affairs, disabled veterans hold roughly $1.008 billion in student loans. That’s less than 1/10,000th of the $1.6 trillion student loan debt amount plaguing America.

    Trump’s executive action will streamline the mechanisms of a law already in place, but it will do little to ease the burden of the 43.9 million Americans still waiting for help with student loan debt?

    Student loan forgiveness programs from Elizabeth Warren and Bernie Sanders, two of the many democratic presidential candidates, promise complete or partial student loan forgiveness. Whether either one wins the presidency and gets a chance to make good on their promise, is an uncertainty. Getting their proposals passed through a divided Congress is even less a certainty.

    What Would Happen if We Forgave all Student Loan Debt?

    Consumers worry that forgiving all student loan debt might have a catastrophic effect on the economy, leading to scary things like budget deficits and inflated taxes.  The idea that we can just forgive and forget about $1.6 trillion sounds absurd.

    OK, then how about just forgiving the interest? How about putting a time line on repayment of 10 years with no interest? If you don’t pay it back by then, a nice, affordable interest rate of 3%-4% on the balance of your student loan?

    Putting money back into the pockets of consumers may actually spur the economy.

    Under the current system, borrowers weighed down by student debt are putting off important life events that have positive economic effects, like buying a home or starting a small business.

    According to a study conducted by the Levy Institute, student debt forgiveness could boost real GDP by an average of $86 billion to $108 billion per year. It could also add 1.2 million to 1.5 million jobs a year, after the first few years following forgiveness.

    It makes very little sense that students seeking education, which benefit our country by supplying it with a robust and knowledgeable workforce, should commit to decades of life crippling debt.

    It makes even less sense to hold graduates to these commitments when the benefits of forgiveness could prove a boon to the economy.

    What You Can Do Now about Your Student Loan Debts

    All that being said, the 2020 election is still over a year away, and the implementation of policies meant to erase $1.6 trillion in debt may take years to work out.

    Rather than wait for politics to play itself out in Washington, consumers could benefit a lot more from educating themselves on how student loan debt will affect us in the years to come.

    There are a lot of strategies consumers can implement. For starters, you can try credit counseling from a nonprofit agency to get free, personalized advice on budgeting.

    With good credit, you may be able to qualify for a refinanced student loan. Even cutting your interest rate by a single percentage could save you thousands down the line.

    If you are really struggling with your payments, consider applying for one of the income-driven repayment plans for borrowers with federal loans. These plans can stretch your loan repayment schedule from 10 to 20, sometimes 30 years. They can also readjust your payment amount to fit your income.

    Contrary to popular belief, you don’t have to prove financial need to qualify for an income-contingent repayment plan (ICR) or the revised pay as you earn plan (REPAYE).

    One of the downsides to income driven plans is that interest can quickly spiral out of control. This is where the REPAYE’s perks shine above the rest.

    Under this plan, the government will cover all of the unpaid interest on subsidized loans for three years. After the first three years, the Department of Education will continue to cover 50% of the unpaid interest accrued on subsidized loans. It also covers 50% of the unpaid interest on unsubsidized loans throughout the entire repayment period.

    Keep in mind, the government is only agreeing to pay the interest if your monthly payments fall short of covering it.

    If you earn enough to cover your interest payments, you may be better off going with the REPAYE plan, which still offers complete loan forgiveness after twenty years of payments.


    Bents Dulcio
    Staff Writer

    Bents Dulcio graduated from Florida State University in 2016 with a degree in Political Science, and knows a thing or two about Millennial student loan debt. While in school, he developed a passion for classic literature, reading books by authors from Homer to Adam Smith and developed a penchant for dealing with tight financial circumstances. Bents used the student loan money to pursue a semester of language study in France that helped convince him to become a writer. Bents still hits the books – he read 70 in the past year – and still knows how to cut corners financially.

    In debt? We can help!

    • Amount
    • Type
    • Contact

    How much do you owe?

    What can we help you with today?

    Related Articles

    Google search bar with phrase student loan benefit

    Google Is the Latest Company to Offer Student Loan Repayment Benefits

    If the biggest employee benefit you receive is when your company bothers to fill the toilet paper rolls in the employee bathroom, you might not want to read this: Google is paying off student loans for its employees.Well, it's not wiping out the debt ...

    Continue Reading
    Woman deciding whether or not to pay down student loans during COVID-19

    Paying Down Student Loans Before the COVID Suspension Is Lifted

    If you are paying on a federal student loan, you probably already know that the government CARES Act has provided benefits that suspends payment and interest requirements through December 31. That has been a godsend to those who lost their jobs in the wake of ...

    Continue Reading
    Campaign buttons for Trump and Biden

    Trump vs. Biden: How Their Plans for Student Loan Debt Compare

    Americans with student loan debt have a $1.6 trillion question on their minds: What would President Trump or a President Biden do about all that money these 45 million borrowers owe?And what are the chances either would forgive their debt?Okay, that's ...

    Continue Reading
    Elizabeth Warren giving a speech

    Democratic Presidential Candidates Plan to End Student Debt Crisis

    It’s impossible not to notice that student loan debt has emerged as a big issue in the campaigns for the 2020 Democratic Party presidential nominations.Massachusetts Sen. Elizabeth Warren brought it to the forefront in the spring of 2019 when she ...

    Continue Reading
    Caution on Student Loan Forgiveness Programs

    Confusion Clouds Future of Student Loan Forgiveness Programs

    Here’s a warning for anyone who must borrow money for college. There’s an assault under way on the most cost-effective and popular student-loan repayment programs.Lines are being drawn and people are choosing sides. The ability for borrowers to ...

    Continue Reading
    Teacher in Classroom with Students

    The Future of the Public Service Loan Forgiveness Program

    President Trump’s latest budget proposal to Congress calls, once again, for the elimination of the Public Service Loan Forgiveness (PSLF) program.This is the second time Trump has recommended eliminating the program that promised to forgive the balance ...

    Continue Reading
    FAFSA Benefits Students

    Changes to FAFSA Benefits Students

    You’re a college student, and life feels grand. You have your classes picked out for next semester, and you’ve signed a lease through next year. Everything is falling into place. The last thing on your mind is filling out the Free Application for Federal ...

    Continue Reading
    College Graduate Budget Computer

    College Graduates Should Budget (And Save!) Right Away

    When Ryan Dwyer received his undergraduate history degree from the University of South Florida in 2016, he felt a sense of accomplishment. His hard work had paid off with society’s definition of the ticket to a brighter future.But the degree has simply ...

    Continue Reading
    Get Help Now

    Overwhelmed with debt? You have options for lower monthly payments!