Federal Student Loan discharge for permanent and total disability

DragonFly757

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#1
My husband nearly completed his aerospace engineering degree before he got called back to active duty. Because of his military service he wasn't able to return to school to finish the program...and in the interim was wounded in Iraq. He has been unable to work or go to school since his injury.

In the meantime, his federal students loans were still needing to be paid. They went into default and ruined his credit rating. We notified the SL provider of our circumstances and they "consolidated" his loans into one...but they extended no other options for us to hold off on payments. He had exhausted any and all forbearances that he had available to him.

After doing some research I found that if he is permanent and totally disabled, unable to go to school or work, he can apply to have his student loans discharged and forgiven. I just found this application doing a web search this morning.

http://www.ed.gov/offices/OSFAP/DCS/forms/disable.pdf

There is a three-year conditional discharge applied and then it is determined for final discharge after your conditional period ends. No payments are due while on the conditional discharge period and any payments made while on the program will be refunded upon final discharge.

I am upset that his SL provider was told that he was unable to work and didn't refer him to this program. I had to dig it up myself. It seems to be a highly regarded secret or something. :mad:

SO.....here you go folks...use it if you qualify! I am getting this submitted to his physicians ASAP and will let you know the outcome.
 

DragonFly757

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#2
It's long, but you may thank me later for knowing the info in advance.

I am the only one who can stop me...: The Department of Education needs some education

Note how I posted about this info on the 19th, right here on the forums. That was the day I called the Department of Education and asked them "How come you never told us about this?" My call was logged AFTER I posted this link on the PEB forum.

Now they claim they informed ME about this program and it was a failure on my part not to have submitted it four years ago.

I. Am. Angry.
 

DragonFly757

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#3
Good news!

I ended up calling the Ombudsman in the DC Department of Education office. They streamlined the process and I was able to get DH's loans FULLY discharged within two weeks of having the RIGHT person taking over the case. :)

Success!!!
 

DragonFly757

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#4
Hey all,

I am still mulling over this issue with the Disability Discharge program and how we weren't told about it. Although I was successful in getting the full discharge of DH's SL's....I am finding that other people (veterans or not) who are fully disabled are NOT given the information about this program. I can attest to FIVE different arms of the DOE that have failed to disclose the program AFTER they were notified that the person having difficulty paying their SL's disclosed their disability as a cause of the repayment difficulties.

I need your help.

I am taking this higher so that others will NOT suffer from this information being withheld.

Who here has had difficulty repaying their student loans now that they are on disability?

Who has disclosed that the disability is affecting their ability to repay and were NOT told about the discharge program?

I want to help anyone who has had this happen to them or who needs to get through the process.

Feel free to PM me if you prefer not to discuss on the board. All information will be kept confidential.

Thanks!

Torrey
 

carnelli53

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#5
Dragonfly,

While this is not all surprising to me, it is certainly unacceptable.

In my opinion the Soldier's and Sailors Civil Relief Act of 1940 should be amended to protect servicemembers from certain credit hazards (i.e. student loans going into default) while engaged in service, it protects servicemembers from civil suits until the end of their term (so one can focus on their duties). While this may have a different modern application, the fundamental spirit of the bill is to protect those serving this country from things that could distract them from serving the country!

An amended S&S Relief Act should also require the information you have introduced on this thread (and more) to be disseminated among servicemembers leaving active duty because of retirement, medical reasons, or just a plain ETS. I hope everything has turned out okay with your husband's loans, I know how much of a pain that can be!

I may be a person who falls into the category you are asking about (disabled not told about discharge relief). I will say that I'm under the Army SLRP and have been placed on the TDRL. I have one year left to the day for 1 more SLRP payment. I'm going to see how it pans out (my reasoning is I should be entitled to this benefit so long as I'm on the TDRL).

With that being said, thanks for what you're doing, I think it's despicable how this information is essentially 'hidden' from those who need it the most.
 

DragonFly757

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Thanks for the quick reply! Part of me prayed there would be no one responding because the problem really wasn't as bad as I predicted. But...I usually have pretty spot-on predictions and was right that there would be others who can relate in some way. I am sorry that you've had to deal with this.

I am going to wholeheartedly agree with you that the SCRA needs to be amended, but I am actually working on a similar, yet different, act to go to the House floor that would work in conjunction with the SCRA. It will take the SCRA further AND focus on the protected class of military consumers facing disabilities.

This SL issue is just a small part of the reasons why we need to have a new bill for our wounded or disabled veterans. When I see that ALL disabled applicants (veteran or not) that have been denied access to the right to know the information or denied an opportunity to use this program as an option....I get very, very angry. This particular element affects veterans but it also affects our everyday citizens who have dealt with a traumatic event in their life rendering them unable to repay their debts due to life-changing disabilities.

Seeing for myself the subversive actiivites with multiple lenders and SL entities, I was able to prevail in getting the loans discharged because I learned more about the system than they wanted me to know. LOL. I know people that went through the same channels I did and are STILL stuck in a system that is not working for them as it was intended. I hope that my tenacity that got the approval on a fast track (if you even want to call it that) will enable me to speak for those who are denied the opportunity to benefit from something they are qualified for and in our veteran's case...have EARNED.

I would greatly appreciate being able to share your example as a way to emphasize that this is not random or a rare occurance. They have shown a pattern of denying this option to the disabled and it must clearly stop.

It's one thing to deny the benefit because someone didn't qualify during the whole process....but it's an entirely different issue when you deny the process in which one may have actually qualified!

I will be posting on this matter as I move along the process. If I could know that some would be willing to step forward and say "Yes, this happened to me" so the powers that be can see the evidence of the problem, I think we can make the changes we need together.

Then I can continue working on the new Bill that is very specific to our disabled vets to bring consumer rights to the veterans who can use it most.

Thanks again!

Torrey
 

carnelli53

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I would greatly appreciate being able to share your example as a way to emphasize that this is not random or a rare occurance.
You can feel free to use my case as an example in any way you see fit, just PM me and I'd love to give you details on my trials and tribulations with student loan issues and the military.

While the subject-matter I am about to share does not relate to disabled veterans particularly, it does have a lot to do with 'benefits' that we receive upon entering service. These 'benefits', as you will see, can actually end up being more of a pain in the neck than anything - due to the bureaucratic laziness involved when panning up the legislation.

I would like to share a letter I have written to two Congressman. One of the letters was written to a Congressman from Texas (one of my old high school buddies worked for him so I thought it might expedite the process). I will leave his name out since I am not one of his constituents. I wrote the following to Representative Joseph Courtney from Connecticut. I only wrote it about two weeks ago so I've received no response yet.

As requested, here is more information on my predicament with the Army SLRP taxation policy. Currently the Army Student Loan Repayment Program (SLRP) is setup to work where a soldier will sign a contract for at least three years of service. After each year of service the Army will pay the specified lenders 33 and 1/3 or $1500 dollars towards the principal debt, whichever is greater. The Army makes it clear that this income is taxable in the year it is paid. The Army also makes it clear that if you served in a combat zone at any point during the year (towards a payment) than those months will not be counted as taxable income (IRS Publication 3). What the Army does not make clear is that they do not withhold any tax liability from these lump sum payments to the lenders. The soldier is expected to withhold the proper amount of federal taxes with using only what I can understand as a non-existent sense of foresight, considering I can not find any information pertaining to this in Army regulations, my contract, or the SLRP policy letters.

After some careful research I stumbled upon the U.S. Office of Personnel Management, located at U.S. Office of Personnel Management, this site provided links to 5 U.S.C. 5379, 5 CFR Part 537, and 5 U.S.C. 2105. On their tax answers and questions page provided by the IRS, one of the questions states, "What are the Federal employment tax obligations of an agency that repays a student loan incurred by an agency employee?" The answer being:

  1. Pay the employer's share of social security and Medicare taxes on the loan repayment;
  2. Withhold and pay Federal income tax withholding (and appropriate State and local income tax withholding) on the loan repayment;
  3. Withhold and pay the employee's share of social security and Medicare taxes on the loan repayment; and
  4. Report the loan repayment and taxes withheld and paid as required under Federal law and applicable State and local laws.
United States Code, Title 5, Part 3, Subpart A, Chapter 21, Section 5 (5 USC 2105) states the following, "(a) For the purpose of this title, "employee", except as otherwise provided by this section or when specifically modified, means an officer and an individual who is— ...(C) a member of a uniformed service..." Which erases any doubt as to whether or not these rule only apply to civilian employees of the Federal Government.

United States Code, Title 5, Part 537, Section 106 (5 USC 5379) only mentions, "Employee responsibility. Loan payments made by an agency under this part do not exempt an employee from his or her responsibility and/or liability for any loan(s) the individual has taken out. The employee also is responsible for any income tax obligations resulting from the student loan repayment benefit." This language is ambiguous as to what exactly the employee is responsible for in terms of the tax liability. The IRS has stated, as shown above, that the agency is responsible for withholding federal taxes. I believe this language simply asserts the employee is liable for paying the taxes insofar as a given amount is withheld by the agency to cover the tax liability on student loan payments.

H.R. 4555 (2002) sought to erase any doubt about the tax liability of servicemen receiving loan repayment. The law would have made these payments tax exempt much like law school repayment programs are for civilians serving in the private sector, civilians who didn't get shot at on a daily basis defending their country for the better part of a year. Unfortunately this bill did not pass, I can not find any information as to why it didn't pass. But I believe this bill should be re-introduced on the basis that civilians who are under similar programs have tax exemptions from the IRS and also because their is a very sizable demographic of people in the military that are under this program and would benefit from it greatly.

One more request I would ask of the Congressman is to intervene on behalf of serviceman and woman under these programs who are being unfairly taxed. I personally have a tax liability of several thousand dollars, the Army made the payment without subtracting any tax liability or contacting me and at least telling me I would be responsible for it. The reasonable person will understand that taxes will be deducted from the payment, but that the paying agency will withhold on behalf of their employee. The IRS even told the U.S. Office of Personnel Management that the preceding policy is true. Apparently not in the Army, this is another example of the bureaucratic laziness that is ever so rampant in a military. Army policies and procedures have gone unchecked for too long during the Bush Administration. The new administration is telling us this is a time for change, so show it to me.
I suppose now that I am a disabled veteran and Army "retired" (well under twenty years of service I might add) that this issue is now a disabled veterans issue. I would like to think that there is more than one person (me) who entered the Army under the SLRP and prior to meeting my initial obligation was discharged due to a service-connected disability. I do mention a large demographic of servicemembers under these programs, but realistically there is many more who join the service to get money for college - not have it repaid. I believe the latter is immaterial. I have been placed on the TDRL and still have one year of 'service' required for the final and last payment of the SLRP. I will be fighting with the folks at DoD on this issue when I finally get out of the active military in a few weeks.
 

b72treadwell

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#9
Hello, I am having the same issues with my student loans and with the SLRP problem as well. I was actually sent a letter from the IRS and am now being audited because of this. I was not told that there was anything about taxes owed and also wasn't given anything showing it for either of the tax years I am being audited for. The Dod made two payments on my behalf before I was injured and retired from the Army. I was in for 2 1/2 years and was injured and then retired. I have called DFAS about my remaining student loans and what was paid and all I am told is to "read my contract". Nothing else. I have called several times trying to get information because the IRS is telling me this shouldn't even be claimed as "income" and apparently it is being sent to the IRS as income. So, they are claiming I now owe them upwards of $8000.00 for student loan payments that were counted as income. I am on disability, am unable to work and have a doctors letter saying that and when I call to talk to the DFAS or my lender, they say there is nothing they can do about it. I have not been told anything about the fact that it could be forgiven. I also am not sure what to do about the SLRP issue. I just keep calling these people trying to get information and trying to get a deferment if possible, but I have not been able to even get that at this point. If you would like you use me as an example, by all means feel free. I am not sure really what to do at this point about any of it. Thanks for the information.
 

Nebulous3

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#11
Greetings...I was recently awarded 100% TDIU P&T disability through the VA. By happenstance I discovered the federal student loan discharge benefit. Upon completing the application I phoned the US DEPT of ED Federal Direct Loans Servicing Center for instructions on where to send the application. The representative told me my doctor would submit it after he completes section 4. This, of course, initiated the conversation that according to the application rules, as a 100% disabled / unemployable veteran I am not required to have a physician complete section 4, but instead simply attach my award letter. Upon hearing this the receptionist became very rude and even stated my application would be rejected. I read the rule to her twice verbatim, but she simply failed to acknowledge it. I eventually forced the address out of her. I highlighted the rule on the application (to avoid further confusion), attached my award letter and sent it off. We'll see how it plays out. I venture it may be an uphill battle as the disabled veteran's exception was only added as of February 2009.
 

Nebulous3

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#13
OneFavor...it's right on the application itself. Check this link:

http://www.hhloans.com/Forms/19.pdf

This link includes a download of the application and the official department of ed notification to loan service centers from FEB 2009:

http://www.ifap.ed.gov/dpcletters/GEN0901FP0901CB0901.html

Two more helpful links:

http://www.ifap.ed.gov/dpcletters/GEN0907.html

http://www.studentloanborrowerassistance.org/loan-cancellation/disability-and-death/

It also applies to federal Stafford and Perkins loans...I believe. Good luck!
 

DragonFly757

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#14
Hello everyone,

I got the attention of the GAO offices in DC about this issue. I will be meeting with them on the 25th to discuss this further. ANYONE willing to share their story needs to contact me by email so I can forward your information.

torrey757 at aol dot com

Together we can get this resolved!
 

b72treadwell

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#15
Hello,

I just wanted to find out what information you need. I will send my information to you, I just need to know exactly what you need. You can reach me at b72treadwell at hotmail if you want to write me there as well. Thank you....
 

DragonFly757

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#16
Hi, and thanks for stepping up to help!

Basically, it revolves around ANYONE who has suffered financially because of their student loan issues.

There are a few different elements that I would like to discuss. I am looking for:

Anyone who has had difficulty repaying their student loans now that they are on disability...and...

Anyone who has disclosed that the disability is affecting their ability to repay and were NOT told about the discharge program by their lenders....and...

Anyone who applied for the student loan discharge program and had problems with the application process...and....

Additionally, anyone with SLRP issues in conjunction with these issues.

If you had issues outside those I listed above and would like to bring attention to the problem...I want to hear from you!

Please email me at:

Torrey757 at aol dot com.

Thank you SO much. This is something I am very passionate about, military consumer issues resulting from injuries on and off the battlefield. You do NOT have to be combat wounded to be considered. Everyone is equal here when it comes to the financial difficulties we face while recovering in a military treatment facility and face medical retirement.

I want to hear from everyone on this. :)
 

DragonFly757

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#17
Last call for anyone who would like to be added to a list I plan to forward/discuss to the GAO containing names and phone numbers of affected people that the GAO may (if they desire) contact to discuss the ongoing SL issues our veterans are currently facing. Once they see this is not an "isolated incident" and random, I think this can be resolved to everyone's benefit.

I spoke with them yesterday again, and will be speaking with them tomorrow.
 

devade

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#18
if he is permanent and totally disabled, unable to go to school or work, he can apply to have his student loans discharged and forgiven.

Do you happen to know if this includes soldiers who are put on TDRL? How about those that want to go back to school and will most likely try to through Voc Rehab or on their own with the new Post 9/11 GI BIll? I have major memory problems and dont know yet if I will be able to handle school at all, but I do have current school loans... I feel like I will be in a bad predicament if I take the Loan Discharge and work my way to heal myself enough to go to school to only have the loans come back and drag my credit down in the future. Thank you for your help.
 

DragonFly757

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#19
Devade,

Sorry for the delay in responding. I have been out of town and am borrowing a computer since the TSA forgot to put my laptop power cord back in my suitcase after a suitcase inspection. Ha!

To answer your questions, with my understanding of how this all works:

Can I apply while on TDRL?
Yes. In our case the VA determined his disability rating, and that is what we sent in as confirmation of his disability. The new application does NOT require any signatures from a physician if you are a disabled veteran. If you send the VA paperwork (rating determination letter) then you get to bypass the 3 year conditional discharge requirement as well. In other words, you are "fast tracked" ahead of the rest of the applicants who had no military service.

Can I return to school in the future?
Yes, but with some conditions. The VA offers "quality of life" courses to learn things like photography, car repair, etc. and they are fully paid by the VA. However, if you plan to seek a degree program and return to school you will need to have your doctors certify your ability to return to school. If you do this, you will NOT be able to have future federal student loans discharged.

Good luck to you! The sooner you apply, the sooner it can be discharged. ;)
 

DragonFly757

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Incidentally, the GAO offices indicated they are swamped right now, but promised they will be following up with me on this. I am giving them the time they need to go through all the evidence I gave them. No word from them yet, but I expected it may take some time. I will be sending them an inquiry on their progress in a few weeks to see the status.