The Trump administration suspended the process of forgiving hundreds of millions of dollars in student loans owed by veterans with severe disabilities, despite a pledge by President Donald Trump in August that the debts would be easily erased.
The holdup was centered at the Education Department, which in late October stopped processing automatic loan forgiveness for veterans who are "totally and permanently" disabled, according to an internal memo viewed by POLITICO. A department spokesperson confirmed that the agency has halted the loan discharges for more than 20,000 veterans who qualify. Yet as recently as last week, Vice President Mike Pence trumpeted the promise in a Veterans Day speech at Arlington National Cemetery.
Trump administration lawyers had determined that the Education Department could not legally move ahead with the automatic loan forgiveness that Trump announced until the agency first rewrote the regulations governing the program, according to the internal memo. The department took steps to do so, and new proposed regulations were pending review at the White House Office of Management and Budget.
After POLITICO published an earlier version of this article, an OMB spokesperson said late Thursday that the office had granted its approval of the new rules, clearing the way for the Education Department to publish them.
“OMB has worked around the clock since the rule came in a few days ago from the Department of Education and we were pleased to clear it today to help fulfill the President’s commitment to America’s heroes without further delay," the OMB spokesperson said.
Nathan Bailey, chief of staff to Education Secretary Betsy DeVos, told POLITICO on Thursday evening that the decision from OMB meant that the department would be able to restart the processing of automatic loan discharges for veterans within a matter of days.
"The department will be ready to execute on loan forgiveness for these deserving veterans right away," Bailey said.
The bureaucratic mess loomed over an initiative that the White House has touted as a major accomplishment on behalf of veterans, including in Pence's speech.
“Three months ago, President Trump directed the Department of Education to eliminate every last penny of student debt owed by a permanently disabled veteran,” Pence said on Nov. 11. “With the stroke of a pen, the president wiped out $750 million owed by more than 25,000 heroes.”
But only 3,300 veterans have actually received discharges of their loans under the program since Trump signed the directive in August, according to a department spokesperson. Another approximately 24,000 veterans with disabilities who qualify for automatic loan forgiveness under Trump’s policy have not yet received it, according to the internal memo.
Veterans Education Success, an advocacy group that focuses on student-veterans and had for months pushed the Trump administration to automatically forgive the loans, said it was “disappointed” that most of the loan cancellations had not yet been made.
“There are many barriers that have prevented veterans from applying for the program, so we are disheartened that this crucial program has not yet helped those who need it most,” the organization said in a statement. “Additionally, we hope that the Administration will consider refunding any illegally garnished VA disability benefits or tax refunds to those severely disabled veterans who are in default of federal student loans that should have already been discharged."
Veterans and other student loan borrowers who have a “total and permanent disability” have long been entitled under federal law to have their federal student loans canceled. But they previously had to fill out paperwork to obtain that loan forgiveness — a bureaucratic obstacle that veterans' advocates slammed as too burdensome for many veterans with severe disabilities.
Trump in August said he was taking executive action to eliminate that barrier and automatically wipe out the loans — even as his Education Department had for months resisted bipartisan calls, including from the attorneys general of 51 states and territories, to eliminate the paperwork requirement.
“The debt of these disabled veterans will be entirely erased,” Trump said as he announced the executive action at a veterans convention in Louisville, Ky., on Aug. 21. “It will be gone.”
The new process unveiled by the administration at that time called for the Education Department to automatically identify veterans eligible for loan forgiveness and give them the option to opt out for 60 days before moving ahead with canceling the debt.
That 60-day period for a first group of disabled veterans ended in late October. The Education Department began automatically canceling the loans of those veterans, but it soon stopped the process over concerns from its Office of General Counsel that existing regulations say that borrowers must individually submit an application for loan forgiveness, according to an internal memo describing the back-and-forth.
The White House Office of Management and Budget was also consulted about the decision to halt the processing, the memo said.
Angela Morabito, an Education Department spokesperson, said in an email that the “pause remains in effect” for the automatic loan forgiveness as the department works to “finalize the regulatory changes that would allow us to complete the loan forgiveness process.”
The department, in the meantime, has moved the loans owed by qualified disabled veterans into an administrative forbearance status until officials move ahead with canceling the debt, according to Morabito. Administrative forbearance allows borrowers to temporarily postpone payments on the loans.
“There is no disagreement that these borrowers deserve, and will receive, relief — the only holdup is procedural, and we’re working with OMB to get it resolved,” Morabito said. A spokesperson for OMB did not respond to a request for comment.
The Education Department on Wednesday signaled publicly for the first time that it planned to “amend and correct” its regulations governing loan forgiveness for disabled veterans. The agency wrote in a rulemaking agenda that its existing policy has created “significant and unnecessary hardship” for veterans.
The department indicated that it would use a fast-track regulatory maneuver — publishing an “interim final rule” — in order to make the necessary changes. But the department declined to provide a timeline for when the rule would be issued and when it would resume the processing of loan forgiveness.