Sunday, 24 October 2021

Military Student Loan Forgiveness and Repayment: A Complete Guide

Military Student Loan Forgiveness and Repayment: A Complete Guide
05 Mar

For some of the nearly 1.3 million Americans who serve in the military, student loan repayment and forgiveness is a top concern — as it is for the even larger number of veterans.

Fortunately, the U.S. armed forces have a variety of opportunities to help you pay for college, in gratitude for your service. Here are the top military student loan forgiveness programs and repayment assistance offerings that could move you closer to a life free of school debt, whether you’re a veteran or on active duty.

Military student loan forgiveness programs

First, let’s look at the military’s student loan forgiveness options. If you qualify for any of these programs, you could get partial or complete forgiveness of your federal student loans.

National Defense Student Loan Discharge

The National Defense Student Loan Discharge offers loan forgiveness to military members who served in an imminent danger or direct fire area for at least one year.

In particular, this program will forgive your Perkins loan, which schools used to issue to students with demonstrated financial need (although the Perkins program expired in 2017). Depending on when your service ended, you could have 50% or 100% of your Perkins loan discharged through this program.

Public Service Loan Forgiveness

Since serving in the military is a public service, you could be on your way to gaining military student loan forgiveness through the Public Service Loan Forgiveness (PSLF) program. PSLF offers complete loan forgiveness after 120 qualifying payments (typically over 10 years) while spending consecutive years in a nonprofit or governmental organization.

If you go on to teach at a public school, become a social worker, or start another job in a qualifying workplace after your service, you could be on track to earning forgiveness through PSLF even if you don’t stay in the military. Note, however, that you’ll need to put your student loans on an income-driven repayment plan to qualify for this program.

It’s also worth mentioning that the future of this program looks uncertain, with some politicians proposing its elimination altogether. So while PSLF could offer loan forgiveness after 10 years, there’s no guarantee that the program won’t change or shut down in the years to come.

Veterans Total and Permanent Disability Discharge

Veterans who have endured a service-related disability could get 100% of their student loans discharged through the Veterans Total and Permanent Disability Discharge. If your time in the military left you with such a disability, you could be released from your student loans completely.

Student loan repayment assistance programs for service members

If you don’t see a forgiveness option that fits your situation, know that the U.S. military also hands out payments you can apply to your student loan payments, helping you get out of debt sooner.

In many cases, these student loan repayment assistance programs (LRAPs) offer significant financial help toward eliminating your school debt. If you’re in the Army, Navy, Air Force, National Guard or Coast Guard, you could qualify for an award from one or more of these programs.

Army Student Loan Repayment: Active Duty

The Army Student Loan Repayment: Active Duty program offers up to $65,000 in student loan assistance to — as the name implies — active-duty service members. This program will pay up to one-third of your principal balance each year for three years.

Along with requiring that you enlist for at least three years, Army Student Loan Repayment also mandates that you score in at least the 50th percentile on your Armed Services Vocational Aptitude Battery (ASVAB).

Army Reserve College Loan Repayment Program

This program is designed for those in a qualifying military occupational speciality (MOS). If you enlist for at least six years, the Army Reserve College Loan Repayment Program could pay 15% of your student loan balance, making it similar to a forgiveness program rather than a traditional LRAP that doles out a set amount. Also note that the Army Reserve has additional incentives for reservists who previously did active duty in the regular Army, including up to $50,000 in repayment assistance.

Health Professions Student Loan Repayment Program

As a doctor, dentist or other health care provider on active duty or in the Army Reserve, you could receive up to $40,000 per year for three years through the Health Professions Loan Repayment Program. Considering many health care professionals leave medical school with six figures’ worth of debt, this potential $120,000 award could offer major financial relief.

National Guard Student Loan Repayment Program

If you enlist for six years or more in the National Guard, you could be eligible for up to $50,000 in military student loan assistance through the National Guard Student Loan Repayment Program.

Navy Student Loan Repayment Program

The Navy Student Loan Repayment Program is designed for sailors in their first three years of service. It could help you reduce your student loan balance by up to $65,000.

Air Force Judge Advocate General’s (JAG) Corps Loan Repayment Program

As a JAG officer, you could receive up to $65,000 in military student loan forgiveness over three years. This assistance could be a big help in covering the costs of a law degree.

Coast Guard’s CSPI-Student Loan Repayment Program (CSPI-SLRP)

Whether you’re a current student or have already graduated, you could apply for the Coast Guard’s SLRP, which is designed for “motivated individuals who demonstrate a high caliber of academic and leadership excellence.” After getting accepted into this program and meeting other requirements, you could get up to $10,000 a year for six years to put toward your student loans.

Alternative options for military student loan repayment

Outside of regular student loan forgiveness and repayment-aid options, check out these other ways to manage your student debt as a veteran or active member of the military.

Cap interest through the Servicemembers Civil Relief Act (SCRA)

Although most military student loan forgiveness programs are reserved for federal student debt, the SCRA could help you manage private student loans as well. Specifically, this act caps the amount of interest on your student loans, federal or private, at 6.00% while you’re on active duty. If you have high-interest loans, this perk could save you a significant amount of money. To qualify, you must have borrowed loans after Aug. 14, 2008.

HEROES Act waiver

If you opt for an income-driven plan or other alternative to the standard 10-year student loan repayment plan, you’ll typically have to recertify your plan on an annual basis. But with the HEROES Act waiver, you can keep your current plan without needing any new documentation for as long as you’re on active duty. That way, you can maintain your monthly student loan payment and not need to worry about filing paperwork every year.

Defer your student loans while you’re on active duty

If keeping up with your student loans feels impossible while you’re serving in the military, you could postpone payments on your federal student loans through deferment.

The Department of Education lets you defer your federal loans while you’re on active duty and for 13 months afterward. Some private lenders also offer deferment for military members, so check about your options for postponing payments on your private loans as well.

Unfortunately, interest could keep accruing on your loans during a period of deferment, unless you have subsidized loans. So while deferring your student loans could be a huge help, remember that your balance could keep growing until you resume repayment.

Adjust your bills with an income-driven repayment plan

If you’re worried about interest piling up during deferment but don’t have the income to make regular payments on the standard 10-year repayment schedule, consider using an income-driven plan. Programs such as Income-Based Repayment (IBR) and Pay As You Earn make your monthly payments affordable by adjusting them based on your discretionary income.

On these plans, you won’t have to pay more than 10%, 15% or 20% of your discretionary income, depending on which one you choose. And if you still have a balance after 20 or 25 years of on-time repayment, it could be forgiven completely.

Keep in mind though that income-driven plans are only available for federal student loans; private loans don’t qualify.

Consolidate your federal student loans to simplify repayment

If you’re tracking multiple federal student loans and payments, you could combine them into one with a direct consolidation loan.

By applying for federal consolidation, you could simplify repayment. Your new interest rate would be the weighted average of your old rates rounded up to the nearest 1/8 of a percent.

Although consolidation won’t necessarily save you any money, it could make your student loan payments easier to track. Just be sure consolidating won’t mess with your eligibility for any student loan forgiveness programs you’re pursuing.

Refinance your student loans for a lower interest rate

Many student loan forgiveness programs for military members, as well as income-driven repayment plans, only offer relief for federal student loans. But if you have high-interest private student loans, you might look into student loan refinancing.

By refinancing your debt, you could qualify for a lower interest rate, potentially saving a significant sum of money on your repayment. (Use our student loan refinance calculator to see how much you can trim your bill.) You can also choose new repayment terms, usually between five and 20 years, as well as adjust your monthly payment.

Both federal and private student loans are eligible for refinancing, but refinancing federal student loans means you turn them private. As a result, your federal student loans would become ineligible for forgiveness programs like PSLF or income-driven plans like IBR. So make sure to consider carefully whether you can afford to lose those benefits if you refinance federal loans.

Military student loan repayment assistance is out there for you

As a military member or veteran, you’ve volunteered years of your life to serve your country. In exchange, the government offers a number of student loan forgiveness and repayment assistance programs.

If you don’t qualify for these military student loan forgiveness programs, look into alternative options for managing your student loan debt. Whether you choose deferment, income-driven repayment, refinancing or another strategy, you have the power to conquer your student loans.

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Rebecca Safier

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