Forging the Path to Debt Freedom – How Veterans Can Qualify for Student Loan Forgiveness

Many Veterans and service members with student loans can qualify for loan forgiveness programs. For example, the National Defense Student Loan Discharge program cancels federal Perkins loans for borrowers who served at least one year in areas of imminent danger or hostile fire.

Until recently, the process for applying to get your loans discharged was complicated. Now, the Department of Education is implementing a streamlined process.

Qualifications

The simplest way to qualify for student loan forgiveness is to serve in public service. This includes working for the federal government, some states, and specific nonprofit organizations. It also consists of the military. Other types of loans, such as private or non-federal ones, aren’t eligible for student loan forgiveness programs. Moreover, student loan forgiveness for veterans is a crucial initiative to alleviate financial burdens for those who’ve served their country.

The government’s Public Service Loan Forgiveness Program forgives borrowers’ remaining loan balance after they’ve made 120 qualifying, on-time payments while in an income-driven repayment plan. These plans include the Revised Pay As You Earn, the Pay As You Earn Plus, the Income-Based Repayment, and the Income Contingent Repayment plans.

Veterans with a total and permanent disability (TDIU) rating can apply to have their debt discharged, but this process is complicated and lengthy. It can take years to get a TDIU decision, and the process is different for each person. ED is working to improve the process by matching people with a TDIU with their student loan records.

Requirements

A few requirements must be met for loan forgiveness. For example, borrowers must have been enrolled in an income-driven repayment plan, such as PAYE or Revised Pay As You Earn, for at least five years before qualifying for loan forgiveness. Additionally, borrowers must pay their principal balance, and the Department of Veterans Affairs must have determined their total and permanent disability status.

Several student loan programs, including PSLF and Perkins loan cancellation, can help you meet the requirements for debt forgiveness. You may also receive cash benefits that can go toward your balances.

Most company is working to make significant changes to student loan programs. You can learn more by signing up for updates from the Department of Education. Also, if you are considering the Army National Guard, ask your recruiter about its student loan assistance program in repayment aid for three years of service.

Timeline

Military service personnel serve their country with great dedication and commitment. Once their tours of duty end, they deserve to be welcomed home and not hampered by debt. That’s why loan forgiveness programs are designed to help.

Several of these programs are in place for veterans, but meeting the requirements cannot be easy. The first step is determining whether you qualify for Total and Permanent Disability (TPD) loan discharge.

This program forgives Direct Loans you obtained before entering the military or while on active duty. It also cancels Perkins loans.

The Education Department initially attempted to forgive TPD through an executive order, which drew lawsuits. The administration is now relying on the negotiated rulemaking process to change the law, but it could take months or even years before this is complete. ED will use a database to match borrowers with TPD ratings with the loan information submitted for income-driven repayment plans or the Free Application for Federal Student Aid, known as FAFSA.

Fees

Until recently, student loan forgiveness was only available for those who were 100 percent disabled or received a finding of individual unemployability (IU) from the VA. That means the IRS considered the forgiven debt taxable income, which could cause a substantial financial shock for wounded warriors who weren’t expecting that tax bill in the mail.

Currently, several different types of federal programs offer student loan forgiveness to borrowers. The Public Service Loan Forgiveness program, for example, allows borrowers to have their remaining balances discharged after making 120 qualifying on-time payments while working in the government or at specific nonprofit organizations.

Forgiveness or discharging your remaining student loan balances can help lower your debt burden and make it easier to manage repayment. However, those who benefit from student loan forgiveness programs tend to be higher-income households with greater educational attainment than those who receive other transfer payments from the government, such as SNAP benefits, SSI cash assistance, and housing support.