Last month with a stroke of his pen, President Trump removed bureaucratic barriers and opened the way for permanently disabled American veterans to erase any student loan obligations. Under the U.S. Education Department’s total and permanent disability discharge option, disabled service members already qualified for student debt forgiveness. However, as we reported in our July newsletter, more than 50 state attorneys general criticized federal Education Department rules that required disabled veterans fill out paperwork to become eligible for federal student loan forgiveness.
Now, under the terms of the President’s memorandum the student loan debts of an estimated 25,000 disabled veterans have been automatically canceled. The average balance that will be erased is around $30,000. Veterans will not be required to pay federal taxes on their forgiven debt.
Disabled Veteran student debt represents a small fraction of about $1.6 trillion in overall student loan debt in the United States, which has become a key political talking point as we head toward the 2020 Presidential election.