Citation Nr: 21023707 Decision Date: 04/21/21 Archive Date: 04/21/21 DOCKET NO. 16-48 134 DATE: April 21, 2021 ORDER The overpayment of payment of educational assistance benefits under the Transfer of Entitlement provisions of Chapter 33, Title 38, United States Code (known as the Post-9/11 GI Bill), in the amount of $84,043.96, was validly created. Entitlement to waiver of recovery of an overpayment of payment of educational assistance benefits under the Transfer of Entitlement provisions of Chapter 33, Title 38, United States Code (known as the Post-9/11 GI Bill), in the amount of $84,043.96, is granted. FINDINGS OF FACT 1. The overpayment of payment of educational assistance benefits under the Transfer of Entitlement provisions of Chapter 33, Title 38, United States Code (known as the Post-9/11 GI Bill), in the amount of $39,145.71, housing allowance benefits in the amount of $41,023.25, and books and supplies allowance benefits in the amount of $3,875.00 were each properly created; therefore, the debts are valid. 2. The appellant is not shown to have committed fraud, misrepresentation, or bad faith in the creation of the overpayments, recovery of those debts would create an undue hardship, and waiver is appropriate after applying the standards of equity and good conscience. CONCLUSIONS OF LAW 1. The debt created by the overpayment of Chapter 33 educational assistance benefits in the amounts of $39,145.71, housing allowance benefits in the amount of $41,023.25, and books and supplies allowance benefits in the amount of $3,875.00, are valid. 38 U.S.C. § 5302; 38 C.F.R. §§ 21.7136, 21.7144. 2. Recovery of the overpayment of Chapter 33 educational assistance benefits in the amounts of $39,145.71, housing allowance benefits in the amount of $41,023.25, and books and supplies allowance benefits in the amount of $3,875.00 would be against equity and good conscience. 38 U.S.C. § 5107, 5302; 38 C.F.R. §§ 1.962, 1.963, 1.965. REASONS AND BASES FOR FINDING AND CONCLUSION Information of record indicates that the Veteran served on active duty from September 1994 to September 2014. The appellant in this case is the Veteran’s daughter. A Board hearing was held in February 2021. A transcript is of record. This appeal to the Board of Veterans’ Appeals (Board) arose from a September 2015 decision by a Department of Veterans Affairs (VA) Regional Office (RO) wherein the RO’s Committee on Waivers and Compromises (COWC) denied the Veteran’s request for waiver of recovery of an overpayment of Chapter 33 educational assistance benefits in the total amount of $77,952.92. The appellant disagreed with that decision and perfected an appeal to the Board. A September 2019 correspondence from the Debt Management Center (DCM) informed the appellant that the debt total for the overpayment of tuition cost had increased to $39,145.71; thus, the overall overpayment debt increased to $84,043.96. As a waiver of the recovery of the overpayment is granted herein, the Board does not find a further audit is needed in the matter. 1. Entitlement to waiver of recovery of an overpayment of payment of educational assistance benefits under the Transfer of Entitlement provisions of Chapter 33, Title 38, United States Code (known as the Post-9/11 GI Bill), in the amount of $84,043.96. The appellant asserts that she is entitled to a waiver of recovery of an overpayment of benefits paid for her tuition, books, and housing while she was a student from August 2011 to December 2014 at Slippery Rock University of Pennsylvania. Here, the appellant was awarded education benefits in February 2013 under a transfer of benefits from her father, the Veteran. The February eligibility notice awarded the appellant 100 percent of benefits available based on the Veteran’s length of creditable active duty service, which was calculated at 4,172 days. The record then reflects that the Veteran retired on September 30, 2014 although his service obligation for the education transfer of benefits required active service through January 31, 2015. A subsequent overpayment of all prior education benefits paid to the appellant was created because the Veteran’s service obligation was not completed. At her February 2021 hearing, the appellant asserted that the debt created was invalid and that she had no fault in the debt creation, and it would be an undue hardship to repay the debt. Validity of Debt The issue of the validity of a debt is a threshold determination that must be made prior to a decision on a request for waiver of the indebtedness, see Schaper v. Derwinski, 1 Vet. App. 430 (1991)), and as the appellant has questioned the debt’s validity, the Board must consider whether the debt was validly created. In the instant case, the record shows that in January 2011, the Veteran transferred his Post-9/11 GI Bill educational assistance benefits to the appellant. This transfer was approved, and notice of eligibility was sent to the appellant in July 2011. At that time the Veteran's obligated service end date was indicated to be January 31, 2015. From August 2011 to December 2014, Slippery Rock University of Pennsylvania certified that the appellant was enrolled in an undergraduate degree program at that institution. Specifically, it was indicated that she was enrolled in 16 resident credit hours for the term running from August 29, 2011 to December 17, 2011; for 16 resident credit hours for the term running from January 23, 2012 to May 12, 2012; for 15 resident credit hours for the term running from August 27, 2012 to December 15, 2012; for 15 resident credit hours for the term running from January 28, 2013 to May 18, 2013; for 17 resident credit hours for the term running from August 26, 2013 to December 14, 2013; for 15 resident credit hours for the term running from January 21, 2014 to May 10, 2014; for 15 resident credit hours for the term running from August 25, 2014 to December 13, 2014; and for 6 resident credit hours for the term running from December 17, 2014 to January 13, 2015. Payment of Chapter 33 educational assistance benefits was continually made to, or on behalf of, the appellant. In February 2015, the RO sent to the appellant a letter in which the RO stated that information received from the Department of Defense (DoD) revealed that the Veteran was discharged from service prior to service obligation end date. The RO informed the appellant that because the Veteran did not complete his service obligation, she was not eligible for VA educational assistance benefits under the Transfer of Entitlement provisions of Chapter 33. The appellant was informed that because of this change, VA had paid her more than she was due, which resulted in an overpayment of $77,952.92 for books and supplies, tuition and fees, and monthly housing allowance for the terms outlined above. Relevant to the issue on appeal, the law provides that that the Secretary of Defense or, in this case, the Secretary of the Army, may approve a member of the Armed Forces who is entitled to basic educational assistance under Chapter 33, under certain circumstances, to elect to transfer to one or more dependents the unused portion of entitlement to such assistance. 38 U.S.C. § 3319(a). To be eligible to transfer educational assistance benefits, a transferor must have served six years on active duty or in the Selected Reserve at the time of his approval by the Secretary of the Army and must have entered into an agreement to serve at least four more years as a member of the Armed Forces. 38 U.S.C. § 3319(b). The law further provides that if an individual transferring entitlement under 38 U.S.C. § 3319 fails to complete the service agreed to in accordance with the terms of the agreement of the individual under 38 U.S.C. § 3319(b)(1), the amount of any transferred entitlement under this section that is used by a dependent of the individual as of the date of such failure shall be treated as an overpayment of educational assistance. 38 U.S.C. § 3319(i)(2)(A). Exceptions however exist and subparagraph (A) will not apply in the case of an individual who fails to complete service agreed to by the individual (1) by reason of the death of the individual or (2) for a reason referred to in 38 U.S.C. § 3311(c)(4). 38 U.S.C. § 3319(i)(2)(B). In accordance with 38 U.S.C. § 3311(c)(4), if the individual transferring entitlement fails to complete the service agreed to due to early discharge or release from active duty for (1) a medical condition which preexisted the applicable period of service of the individual and which the Secretary determines is not service-connected; (2) hardship; or a physical or mental condition that was not characterized as a disability and did not result from the individual's own willful misconduct but did interfere with the individual's performance of duty, as determined by the Secretary concerned in accordance with regulations prescribed by the Secretary of Defense, an overpayment of education assistance benefits will not be assessed. 38 U.S.C. § 3311(c)(4); 38 C.F.R. § 21.9750(l). Here, the Veteran and the appellant assert that the Veteran was retired from active service on September 30, 2014 because he failed to be promoted in rank. There are no records of evidence which reflect any of the exceptions listed under 38 U.S.C. § 3319(i)(2)(B). There is also no debate that the appellant received benefits at the rate of a full time student from the August 2011 semester through the January 2015 semester; therefore, a qualifying mitigating circumstance under 38 C.F.R. § 21.7020 does not apply. See 38 C.F.R. § 21.7020. As there is no dispute as to the actual amount in question, an overpayment in education benefits in the amount of $84,043.96 was properly created. Waiver of Overpayment The law provides that there shall be no recovery of overpayments of any benefits under any of the laws administered by the Secretary of VA, whenever it is determined that recovery would be against equity and good conscience, if application for relief is made within 180 days of notification. 38 U.S.C. § 5302 (a). The standard “equity and good conscience” will be applied when the facts and circumstances in a case indicate a need for reasonableness and moderation in the exercise of the Government’s rights. The decision reached should not be unduly favorable or adverse to either side. The phrase “equity and good conscience” means arriving at a fair decision between the obligor and the Government. In making this determination, consideration will be given to the following elements: fault of the debtor, balancing of faults, undue hardship, defeat the purpose, unjust enrichment, and changing position to one’s detriment. If there is any indication of fraud, misrepresentation, or bad faith, waiver of a debt is precluded. 38 C.F.R. § 1.965. 38 U.S.C. § 5302 (c) and 38 C.F.R. § 1.965 (b) indicate that a finding of fraud, misrepresentation, or bad faith precludes a grant of a waiver of recovery of an overpayment. The COWC concluded in its decision on appeal that the facts in this case do not show that the mandatory bars to waiver apply in the present case, and the Board agrees. There is no indication that the Appellant attempted to defraud VA by misrepresenting any relevant facts with respect to her benefits. After reviewing the record, the Board finds that it would offend the principles of equity and good conscience to require the appellant to repay the debt of $84,043.96. To that extent, for the reasons below, her request for a waiver for this amount is granted. In assessing whether collection of the debt would be against equity and good conscience, the Board finds that the appellant is not at fault in the creation of the debt. Regulations require consideration of whether the actions of the debtor contributed to causing the debt. 38 C.F.R. § 1.965 (a)(1). Here, the appellant relied on a July 2011 certificate of eligibility which detailed that she was eligible for education benefits at the 100 percent rate based on the Veteran’s eligible service. As the appellant was not the servicemember, and had no authority concerning the servicemembers retirement date or obligatory service commitment, the Board finds that she was not at fault for the subsequent creation of the debt. Similarly, the Board finds that while VA was not responsible for the creation of debt, the appellant was equally not at fault for the debt creation for the reasons outline previously. 38 C.F.R. § 1.965 (a)(2). As to the element of undue hardship, the pertinent regulation provides that consideration should be given to whether collection of the indebtedness would deprive the debtor or her family of basic necessities. 38 C.F.R. § 1.965 (a)(3). The appellant submitted a February 2021 Financial Status Report which details that she has no income and relies solely on her spouse for household income. The report also details that after expenses, the household has a net discretionary income of $375. The Board finds that recovery of the debt would have a significant financial impact on the appellant and inhibit her ability to make payments and obtain other basic necessities. After review of the appellant’s Financial Report, and her testimony detailing her household members and obligations, the Board finds repayment would constitute an undue hardship for VA purposes. The Board must also consider whether the recovery of the overpayment would defeat the purpose for which the benefits were intended. It has not been shown that recovery of the overpayment would defeat the purpose of VA education benefits, which is to help eligible students complete a program of education by providing financial assistance. Here, the record reflects that the appellant completed her education program and the benefits were used to effectuate this achievement. Although erroneously granted in retrospect, these education benefits were used for their intended purpose. Regarding the fifth element, the facts show that the appellant was arguably enriched by the improper payment of VA benefits which allowed for completion of her education program; thus, increasing her earning potential in the future, but the this alleged enrichment is tempered by the other factors described above. The final factor that the Board is explicitly required to consider is whether reliance on the benefits resulted in relinquishment of a valuable right or the incurrence of a legal obligation. The appellant has not contended with any specificity, nor does the evidence show, that she had relinquished a valuable right or incurred a legal obligation in reliance on her VA educational assistance benefits. With due consideration of these findings, the Board concludes that considerations of equity and good conscience as they pertain to the specific facts of this case dictate a need for reasonableness and moderation in the exercise of the Government’s rights. In view of the Board’s findings, and affording reasonable doubt in favor of the appellant, recovery of the $84,043.96 overpayment would cause undue hardship on the appellant and would be against equity and good conscience. Accordingly, the appellant’s request for waiver is granted. DONNIE R. HACHEY Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board N. Peden The Board’s decision in this case is binding only with respect to the instant matter decided. This decision is not precedential and does not establish VA policies or interpretations of general applicability. 38 C.F.R. § 20.1303.