U.S. Sen. Rob Portman (R-OH) recently led a bipartisan call for steps to be taken to ensure that permanently disabled veterans are relieved of federal student loan debt.
Current law allows for the discharge of student loan debt for permanently disabled veterans, but lack of coordination between the Department of Veterans Affairs (VA) and Department of Education has potentially allowed thousands of qualifying veterans to slip through the cracks.
Portman, along with U.S. Sens. Angus King (I-ME) and Chris Coons (D-DE), called on the secretaries of the VA and the Department of Energy to perform a data match to identify permanently disabled veterans that could have student loan debt discharged.
The Department of Education and the Social Security Administration conducted a similar data match earlier this year that found approximately 389,000 beneficiaries of Social Security Disability Insurance were eligible for discharge of federal student loan debt, and nearly half of them were in default, the senators noted.
“This kind of streamlining is critical to protecting Americans with permanent and total disabilities from unnecessary financial hardship, but was limited to the two agencies in question,” the senators wrote in a letter to the secretaries. “We believe the VA and Department of Education should conduct a similar data match to ensure no veterans are denied the benefits for which they are qualified.”
Still, the lawmakers said, improving the loan discharge process for borrowers with disabilities must go beyond administrative streamlining, and requires Congress to act.
“Under current law, the Internal Revenue Service (IRS) treats the amount of student loans forgiven as income, which must be reported on an individual’s tax return and could potentially result in a tax liability,” the senators wrote. “Instead of helping veterans and their families through loan forgiveness, this misguided policy simply replaces one financial burden with another, as some families are hit with thousands of dollars in immediate tax liability.”
In response, the lawmakers introduced legislation, the Stop Taxing Death and Disability Act, S. 2800, to exempt loans discharged due to disability or death from being treated as income.
Congress also recently recognized the complexity of the loan discharge process for disabled veterans, the senators wrote.