The Department of Education announced this week that it will work together with the Department of Veteran Affairs to identify disabled student loan borrowers who are eligible for debt forgiveness. Borrowers will be notified of their potential eligibility in the mail and will also receive a Total and Permanent Disability Discharge application.
Many veterans are unaware that they may be eligible for student loan debt forgiveness. There have also been recent changes in tax law that benefit those whose loans are discharged. A provision in the new tax code waives federal income taxes on forgiven education debt for permanently disabled people.
Previously, the IRS considered the cancelled debt as taxable income. For example, in a 2017 case a veteran who had his $223,000 in student loan debt forgiven, received a tax bill of $62,000.
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