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U.S. states want federal government to forgive disabled veterans' student loans

(Reuters) - Attorneys general from 47 U.S. states on Friday called on Education Secretary Betsy DeVos to forgive more than $1 billion of student loans burdening more than 42,000 veterans who became permanently disabled through their military service.

FILE PHOTO: U.S. Education Secretary Betsy DeVos speaks at the United States Conference of Mayors winter meeting in Washington, U.S., January 24, 2019. REUTERS/Yuri Gripas/File Photo

Led by New Jersey Democrat Gurbir Grewal and Utah Republican Sean Reyes, the attorneys general said in a letter here they welcomed federal efforts to make loan discharges easier to obtain, but said the Department of Education should develop an automatic process to forgive loans rather than require veterans to apply for loan discharges.

They said fewer than 9,000 eligible veterans had applied for loan discharges as of April 2018, and more than 25,000 veterans were in default.

“The current approach is inadequate,” the letter said. “The cost of education for our disabled veterans today is soaring, and it would be of great benefit to those who are burdened by these crushing debts to obtain relief without arduous compliance requirements.”

Attorneys general for the District of Columbia and three U.S. territories also signed the letter.

In a statement, the Department of Education said it recognized the sacrifices that veterans make for their country and did not want to cause “unintended consequences” for them.

But the department said it was important for veterans to be fully informed before making decisions about their loans, including whether discharges might boost their tax bills or make it harder to borrow for education later.

“While ‘automatic discharge’ may seem like a simple solution, there are long-term impacts we want all veterans to have the chance to consider before their loans are discharged,” the department said.

The attorneys general, in their letter to DeVos, addressed the tax issue, saying federal and most state tax laws exclude loan discharges for disabled borrowers from taxable income.In 2008, President George W. Bush signed a law deeming veterans who are “permanently and totally disabled” eligible for loan discharges when the Department of Veterans Affairs decides they have become “unemployable” because of service-related conditions.

Friday’s letter said loan forgiveness for disabled veterans has bipartisan support in Congress and among veterans’ groups. The letter was sent three days before the Memorial Day holiday honoring members of the military.

“We now urge the department to take action to better protect those who once protected the nation,” the letter said. “Our veterans deserve nothing less.”

Reporting by Jonathan Stempel in Chicago; editing by Leslie Adler