Disabled veteran asks: “Should I be afraid to file for student loan disability discharge?”

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I have written about the Department of Education’s Disability Discharge program in the past and have answered gobs of questions (in comments sections) on these previous posts:

I received an email from a disabled veteran who had multiple concerns and questions. I am going to repost it here (anonymously) with my response to his questions and concerns so that you may benefit from the information as well.

He writes:

Torrey,

I am a Disabled Veteran and was rated since my Honorable Medical Discharge from the Army, which was 10%. After my initial rating and discharge, I filed for an increase and was awarded an increase, which was 50%. Years later, I again filed for an increase and received a temporary decision of 90%, and then the final decision of 100% was determined on December 24, 2013. That decision is for 100% Service Connected, Total and Permanent Disability. This is my question.

Prior to the military, I had attended college and accumulated a large amount of student loans. I had hoped the military would help me pay them or I would gain experience to find better employment, which would allow me to pay them. That did not happen. I read in one of your articles that disabled veterans can have them discharged or forgiven. I have been afraid to contact the holder of the student loans due to there was no way I could afford payments and if they had seized anything or garnished my wages or disability my family and I would be homeless. I am asking if I qualify for the loan discharge or forgiveness. I would just apply but like I said if I am not qualified then I fear they will have all my information and will take my disability or try to somehow force me to pay when I cannot afford them.

If I can provide you with the information you may need can you tell me if I qualify and should file to get this monkey off my back. If I can get this off me and my family, I can then apply for the guaranteed home loan and finally have a home of my own. The last thing I need in my life is to file for it, get denied and then have the holder of the loans somehow take my disability which is all I have to live on. Can you please help me with this? What information would you need?

My disability is rated by the DOD and the VA as 100% Total and Permanent Disability, and the loans as much as I can remember are just general student loans, they use to be called Stafford Loans, not sure what they are called now. I appreciate any help and advice you can give me. If I can get these discharged, I can apply for the Guaranteed Home Loan from the VA and hopefully have a better life. I cannot even purchase a car due to these on my credit history. Please help.

Here is my response:

Dear Veteran,

Thank you for your service and sacrifice. I understand your concerns. Questions for you:

1. Are all your loan(s) federal loans (ie, any private loans?)

2. Are your loans in default?

3. Do you have your award letter in hand to prove the 100% P&T status?

Facts as I know them:

1. My husband’s loans were from the early 1990’s, well before he became disabled. They were forgiven after his PT rating came in.

2. My husband was in default at the time of his application. We were never taken to court for a garnishment of student loan payments.

3. Your disability income cannot be garnished. They can TRY, but it would require filing a judgement against you, at which time you can respond to prove your income is exempt from garnishment.

4. Getting a judgement takes time and is a legal process. You have legal rights in this process.

5. They cannot file a judgement if your application has been submitted for processing.

6. Not filing for disability discharge would guarantee that they would come after you eventually. Filing is your best option.

If you have any private loans, they will be handled differently and DO NOT qualify for this program. I am going to assume all your loans are federal.

You will need your award letter to proceed further.

If your loans are in default, you need to hurry. (You are accumulating negative information on your credit report each month this remains in default.)

Now, my blog has a lot of information about the process. Pay special attention to my suggestion to send the application by certified mail to prove they received it. Make sure to send a COPY (not the original) of your award letter. If you get your loans forgiven and they file a 1099C for the balance as ‘unearned income’ be sure to file for insolvency when doing your taxes the next year.

Lastly, in regard to your desire to get a home loan…. the defaulted, late, etc. payments do not automatically fall off your credit reports. Read this post to understand how to get the negative information corrected on your credit report:

How to Dispute Negative Student Loan Information After a Disability Discharge

BE SURE after all is said and done… verify that you have been removed from the CAIVRS system as having a federal debt BEFORE you apply for a VA loan. I found out by accident that after the loans were discharged that we were still in CAIVRS. It will reject your application until you have been cleared from the system. More about CAIVRS here: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/sys/caivrs

Disclaimer: I am not an attorney, tax professional and am not liable for my advice. I am only trying to help you with sharing of information.

Good luck to you and let me know how it works out!

I hope that sharing my response will help others with their similar questions. If you have questions, be sure to add them to the comments section below and I will do my best to help answer them.
About The Author

Torrey Shannon

My name is Torrey Shannon and I am a writer, author, blogger, movie consultant, speaker, veteran's advocate and Blue Star Mom. I am also a full-time caregiver and spouse of a wounded warrior. My husband survived a gunshot wound to the head in a gunfight in Iraq in 2004 after serving in the Army for more than 23 years. We spent three years of his recovery at Walter Reed Army Medical Center. He has severe PTSD and suffered a traumatic brain injury. Dealing with the invisible wounds of war first-hand allows me to bring a human element to the problems our military communities face. Blogging gives me the chance to do what I love the most: write about life after combat and help create awareness and solutions for military members and their families. When I am not writing here, I freelance for a variety of publications and media outlets and am currently writing a book.