August 30, 2019

Engaging the Tangled Nature of Veterans’ Benefits

Hands in military uniform taking notes. Photo by Nell King, U.S. Army.All 51 attorneys general had to petition before the president granted student loan relief for veterans with disabilities – and even then, the Department of Education, which administers the program, may not be totally on board with it.

Benefits for those who served have never taken a straightforward path. They have had to be fought for – and then, they had to be navigated. For returning service members with disabilities, the navigation becomes even more complicated.

The current “Montgomery” GI Bill, introduced in 1984 and aimed at Vietnam veterans, provides up to 36 months of education benefits, but unlike its WWII predecessor, it does not offer a living or annual book stipend. To be eligible you have to have an honorable discharge, a high school diploma or GED, and meet certain service active duty requirements.

A Post-9/11 GI Bill, enacted in 2008, gives veterans on active duty the day of the attack or after greater educational benefits, which can be transferred to their spouse or kids. Unlike the Montgomery bill, which makes payments directly to the veterans, who can use them as they wish, this bill pays tuition directly to the school and provides living and books/supplies stipends.

Post-9/11 Bill benefits are payable for up to 15 years following active duty; Montgomery benefits for 10. But you can’t request education benefits specifically to repay a student loan.

The Total and Permanent Disability Discharge – the provision that the president’s action took aim at – was established under the Higher Education Act of 1965 as part of the federal student loan program. (“Discharge” here means loan forgiveness.) The TPD is available to all severely disabled student borrowers, not just veterans, but the VA typically certifies disability for former service members.

Meant to be a boon to those with disabilities, the TPD can be more of a boondoggle. You have to take the initiative to apply for it. A determination can take three to five months. If approved, you are subject to a three-year monitoring period, during which the Department of Education can reinstate your loans if your income exceeds the poverty level or you are found to no longer be totally and permanently disabled.

Because the application process is onerous, and many veterans and other potential applicants are not aware of the option, the TPD has been relatively little used. Moreover, forgiveness has in some cases been treated as income by the IRS and state taxing bodies; in one case, an Army lieutenant wounded in Afghanistan had $223,000 in student loans canceled, only to receive tax bills for $70,000.

Since 2016, at least 20 Senators, of both parties, and two Senate committees have called upon the Eduation Department and the VA to automate student loan forgiveness. The department notified 387,000 borrowers listed by the Social Security Administration as disabled of their eligibility in 2016, and in April 2018 contacted some 42,000 disabled veterans (not listed in the SSA database). But it continued to oppose making forgiveness automatic, until the recent executive order.

According to the latest estimates, some 50,000 veterans with disabilities could benefit from the move. Overall, hundreds of thousands of current and former service members and their families have student loans, including more than a third of all service members, and half of the junior enlisted personnel. Among those using the Post-9/11 GI Bill, one in four has federal student loan debt when they graduate. The student loan debt of today’s 200,000 active duty members has been estimated at $2.9 billion.

As with TPD, veterans’ benefits are not the only ones that veterans can be eligible for. And the complexity of different – but sometimes overlapping, and elsewhere conflicting – eligibility rules based on income, disability, service status, can be confounding to all but public policy ninjas.

The rules vary from program to program. The Montgomery GI Bill has two main programs, for active duty personnel and reservists. They provide similar education benefits but the service requirements and payment rates differ. Some veterans are eligible for both bills, and can receive up to 48 months of education benefits, but only if they use up their Montgomery benefits first. They will end up leaving benefits on the table if they are misinformed or chose the Post 9/11 first because of the housing/living allowance. The Post-9/11 GI Bill benefit tiers range from 40% to 90% depending on months of active duty. The maximum VA payment for private schools is (currently $24,476.79 a year) doesn’t cover tuition at most private schools. A Yellow Ribbon Program can help defray costs, but only at schools that participate – but it only works in conjunction with the Post-9/11 GI Bill.

The loan programs evolve or go away. The TPD provides a mechanism for loan forgiveness for three specific types of federal loans: the William D. Ford Direct Loan, Family Education Loan (FFEL), and Perkins Loan. The FFEL loan program has been discontinued, with all loans now being made under the Direct Loan program; but that program’s website has been taken down, and it requires some tooling around to get to its replacement. The Perkins loans program also ended, on June 30, 2018. So two of these loans are no longer being given out but – without loan forgiveness – they must still be paid back. Service members in a hostile fire or imminent danger pay area for longer than a year qualify for up to 50% forgiveness of their federal Perkins loans if their active-duty service ended before August 14, 2008, or up to 100% if it includes or began on or after August 14, 2008.

And the rules change, sometimes with little notice. For example, this year the ability to transfer unused Post-9/11 GI Bill benefits was limited to service members 6-16 years of service. Many had to scramble to make the transition before year 16 ended.

State programs also play into the details of eligibility and the implications of using the various programs. In fact, it was the possibility that states would tax TPD loan forgiveness even if the IRS did not that DeVos offered as a reason for hesitating to automate forgiveness.

These numerous and convoluted complications have created roadblocks to education and civilian life for many service members who have returned to confront reintegration issues with possibly one or more forms of physical or mental injury or disability. And it is particularly frustrating for advocates to see these barriers because if there’s one thing the public associates with the benefits of military service, it’s education. The original GI Bill brought higher education within reach of working-class Americans in a way that had never been possible before. By 1947, close to half of those entering college were veterans. But the GI Bill can only be used to pay for college while you are in the service or afterward. And this is one reason loan forgiveness is so important.

In fact, veterans’ benefits have been far from smooth sailing as long as our nation has had wars. Returning WWI veterans ultimately marched on Washington seeking to obtain their promised service bonuses, and it took another 20 years before the payments were made. Not wanting to repeat that disastrous experience led to the GI Bill, formally enacted as the Servicemen’s Readjustment Act of 1944; it remained in force until 1956. Like the later Montgomery version, it granted stipends for tuition and expenses to veterans attending college or trade schools, as well as providing low-cost home loans. Nonetheless, it was administered in ways fraught with racial prejudice, and many veterans of color were excluded from both the housing and educational benefits, essentially denied what the government had promised them.

In writing to Education Secretary DeVos in May of this year, the 51 attorneys general (Guam’s was a signer) were forcefully seeking to end a similar denial. The department’s requirements, they noted, “may prove insurmountable obstacles to relief for many eligible veterans due to the severe nature of their disabilities.”

“Under the Higher Education Opportunity Act of 2008, which passed Congress with strong bipartisan support before being signed by President Bush, the Department has an obligation to discharge the loans of veterans who are permanently and totally disabled as result of their service” they wrote, quoting the statute, but adding the emphasis: “the Secretary shall discharge the borrower’s liability.”

(Photo by Nell King, U.S. Army)

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