Mike Saunders is a U.S. Army veteran and director of military and consumer policy at Veterans Education Success.
Economic stress is affecting everyone right now, including military-connected students and veterans. It's more important than ever that you know your rights. And you have some important new rights about your debts.
Your Stimulus Check Can't Be Taken for Most Federal Debt, Even Unpaid Taxes
You should know that, if you received a stimulus check as part of the coronavirus stimulus package (the Coronavirus Aid, Relief and Economic Security, or CARES, Act) signed into law March 27, that's your money. The CARES Act prevents the federal government from taking your stimulus money to collect on certain federal debts you might have, even unpaid taxes.
If You Have Federal Student Loans
If you have federal student loans held by the federal government, your monthly payment and interest rate accrual have been automatically suspended. Also, if you have defaulted on any federal student loans, the government is not allowed to come after you to "collect" on defaulted federal loans through Sept. 30, 2020. (But this covers only federal student loans that are owned by the U.S. Department of Education. Federal Family Education Loans, or FFELs, which were issued prior to 2010 by financial institutions such as banks, and Perkins Loans, which are typically owned by colleges and universities, do not qualify under the CARES Act.)
Media accounts have revealed that about 54,000 wage garnishments are still happening on federal student loan debts. They shouldn't be. You can report them. Also, you can contact the debt collection company directly and ask whether the payment can be reversed or whether the collection firm has "hardship" programs that could temporarily suspend payments.
If you live in Illinois or Texas, those states have acted on their own to stop debt collection on federal student loan debt held by private entities. And California, Kentucky, Massachusetts, New York or North Carolina have also stepped in to stop some debt collection on student loans.
If You Owe a Debt to the Department of Veterans Affairs
The CARES Act required the Education Department and Treasury Department to pause debt collection, but the law did not do the same for those who owe a debt to the Department of Veterans Affairs.
Earlier this month, a veteran in financial distress came to my organization, Veterans Education Success, with a GI Bill debt and a landlord who was threatening to evict him.
"Jack" was forced to withdraw from a class last November due to his service-connected disability, which created an overpayment debt. His March and April housing allowance went to pay for that debt. In addition to appealing the debt through the VA appeals process, he made a payment arrangement with the VA where part of his disability check would go toward the overpayment each month. When he reached out to us, he had still not heard back from the VA. Despite his payment arrangements, when April hit, the VA took part of both his disability compensation and his housing allowance to pay the debt. "Jack" was going to school full time, and his wife is unable to work because she is immunocompromised. They had no money.
Fortunately, due to the decision of the governor in Jack's state to halt all evictions for 45 days, we were able to prevent the most immediate harm from taking place. We were also able to help him resolve his claim with the VA, but not everyone is so lucky.
In response to requests from the veteran community, the VA suspended all actions on all types of veteran debts beginning April 9 for 60 days. Additionally, the department said it will consider extending the timeline (if the situation with COVID-19 makes that necessary) and will update its website to reflect the change and automatically extend suspensions for affected veterans.
The VA's suspension of debt collection comes with two big caveats:
If you already entered into a repayment agreement with a third-party debt collector (like a collection agency or the Treasury Department), especially an automatic payment with the Automated Clearing House (ACH), those automatic payments will continue unless you contact the Treasury Department or the private collection agency to cancel the ACH.
If you have a VA benefit debt that preexists April 9 that has not yet been referred to Treasury, you need to contact the VA's Debt Management Center (DMC) at 1-800-827-0648 to request assistance.
In other words, VA debts that happened after April 9 will be automatically paused. But for debts that existed prior to April 9,, you must contact the VA to have them paused.
If You Have Student Loans from a Private Bank or Private Lender (Not the Government)
Private student loans are also not covered under the CARES Act. If you have private student loans, your lender or servicer may also be offering temporary payment modifications or forbearances as a result of the ongoing crisis.
The good news is that a recent Veterans Education Success report found that the number of undergraduate student veterans who take out private student loans declined significantly with the introduction of the Post-9/11 GI Bill in 2009. This is a very good sign. Private student loans come with far fewer protections and are almost always more expensive than federal student loans, as our new report explains.
In addition to lower interest rates, federal student loans offer a variety of repayment options that help borrowers cope with employment challenges that may affect their ability to repay, including income-driven repayment, public student loan forgiveness, forbearance and deferment. These options may not be available from private lenders. The variety of requirements and payment options in the private market presents a challenging landscape for individual borrowers. If you have a choice, it's best to stick to federal student loans.
Free Help Is Available
If you are a veteran experiencing any of these issues with GI Bill or student loan debt, get in touch with our free lawyers at firstname.lastname@example.org.
Times are hard everywhere. If you're a veteran in crisis or concerned about one, connect with the VA's Crisis Line responders for free, confidential help, anytime day or night:
- Call 800-273-8255, then select 1
- Start a confidential chat
- Text 838255
- If you have hearing loss, call TTY: 800-799-4889
Keep Up With Your Education Benefits
Whether you need a guide on how to use your GI Bill, want to take advantage of tuition assistance and scholarships, or get the lowdown on education benefits available for your family, Military.com can help. Subscribe to Military.com to have education tips and benefits updates delivered directly to your inbox.