Serve Your Country While Tackling Student Loan Debt — Here’s How
If you’re looking for an easy way out of your student loan debt… this isn’t it.
But if you’re ready to make a commitment to protecting and defending your country, you may find relief through a debt forgiveness program.
And you’d have plenty of company in your… company, since approximately 200,000 active duty members owe a collective $2.9 billion in student loan debt.
But as a service member, you have a few more options for wiping out your student loan debt than your civilian counterparts. So pay attention.
Military Student Loan Forgiveness
If you’re ready to serve your country after graduating college, you have options for attacking your student loan debt.
Although you can also qualify for other programs unrelated to your service, such as teacher student loan forgiveness or nursing school loan forgiveness, we’ll focus on the options that depend on your work in the military.
National Defense Student Loan Discharge (aka Perkins Loan Forgiveness)
If you served in a hostile fire or imminent danger pay area, you qualify for the National Defense Student Loan Discharge, which is part of the Perkins loan cancelation program (the Perkins loan program ended on Sept. 30, 2017).
Loans are discharged according to the following classifications:
- Up to 50% for four years for borrowers whose active duty service ended before Aug. 14, 2008.
- Up to 100% for five years for borrowers whose active duty service includes or began on or after Aug. 14, 2008.
Public Service Loan Forgiveness (PSLF)
This is probably the most well-known forgiveness option — although “notorious” might be a better adjective for it.
Out of the approximately 76,000 PSLF applications that were processed by March 2019, only 518 applications were approved. For those who didn’t major in math, that’s less than 1%.
If you make too much to qualify for an income-driven repayment plan, don’t bother with PSLF since the standard payment plan will leave you with nothing to forgive after 10 years.
And the program that was supposed to fix the problem — Temporary Expanded Public Service Loan Forgiveness (TEPSLF)? Yeah, it turns out the acceptance rate for that one nearly matches the original.
Be prepared for a long wait — it takes a minimum of 10 years to qualify — and to follow a lot of rules in regards to the type of loan, repayment program and employment eligibility. To help you navigate the process, check out these seven essential questions to ask about Public Service Loan Forgiveness.
Total and Permanent Disability Discharge
If you become totally and permanently disabled during your service, you’ll automatically have your student loan debt discharged. (Your student loans also get canceled if you die, but let’s not consider that as an option, OK?)
Prior to August 2019, you still had to fill out the TPD Discharge application, but now the discharge is automatic for veterans.
Veteran Affairs will alert the Federal Student Aid office as to your eligibility. The office will then notify you, at which point you will have 60 days to decide if you want to decline the loan relief.
If you think you may go back to school again some day, understand that accepting the disability discharge could make it more difficult to take out future student loans.
Why would you decline? Although the discharge isn’t subject to federal taxes, the discharged amount may still be considered income for state tax purposes.
If you don’t decline, your remaining student loan balance will be discharged and you’ll be reimbursed for any payments made following the date of the discharge. Get more details about the total and permanent disability discharge (TPD) program here.
Repayment Programs for Service Members
As a service member, you’ll find multiple programs that will repay some of your debts, but none of these programs forgives the loan and interest in its entirety — and all of the forgiven amounts are taxable.
Armed Forces Education Loan Repayment Program
Following a complete year of active-duty service, you’ll become eligible for benefits available through most branches of the service (sorry, Marines).
Depending on which branch you choose, you’ll see the loan repayment programs referred to as College Loan Repayment Programs (CLRP) or Student Loan Repayment Programs (SLRP).
If you’re rehabilitating a student loan in default, you’re allowed an interruption in the consecutive pay period until after your qualified military service is completed.
All of the programs repay direct federal loans (subsidized and unsubsidized); other federal loans may be eligible, depending on the specific program. And each come with enlistment and/or testing qualifications, so ask your recruiter about specific requirements for your program:
- Air Force: Soaring with the Air Force Reserve for up to six years could really pay off. Annual payments will be $500 per each qualifying loan or 15% of the outstanding balance, whichever is greater, for up to $3,500 for each year of satisfactory service. Maximum amount: $20,000.
If you’re taking the legal eagle route, the Air Force has a three-year student loan repayment program for you. You can qualify after completing your first year as a Judge Advocate General (JAG) officer. Maximum amount: $60,000
- Army: The Army has multiple loan repayment programs to choose from, depending on your status. For active duty members, the maximum annual benefit is a third of the current principal balance or $1,500, whichever is greater, for each year of service up to three years. Maximum amount: $65,000.
- Navy: For active duty members, the maximum annual benefit is one-third of the current principal balance or $1,500, whichever is greater, for each year of service up to three years. Applicants must be approved before shipping to RTC, according to a Navy Recruiting Command spokesperson. Note: To be eligible for the loan repayment program and 100% of your Montgomery GI Bill benefits, you must reenlist for additional three years or have a 6 year Active contract. Maximum amount: $65,000.
- Coast Guard: For six years of service, you’ll receive up to $10,000 per year to repay loans at qualified minority-serving institutions. Maximum amount: $60,000.
- National Guard: You’ll need to enlist for at least six years for annual disbursements through the National Guard repayment program. Maximum amount: $50,000.
Health Professions Loan Repayment Program (HPLRP)
If you’re a health professional with student loans to repay, providing your services to the military could help you out of debt.
Both Active and Reserve members of the Army can receive assistance through separate programs. For example, nurses in the Army Reserve are eligible for up to $50,000 toward student loan repayment over three years of service.
For the Navy, you must be a commissioned officer enrolled in the final year of an approved residency program leading to specialty qualification in medicine, dentistry or osteopathic medicine. The maximum award is $40,000.
And if you’re Air Force, you’ll receive up to $40,000 to cover your health profession education in exchange for at least two years of service.
Additional Student Loan Benefits for Service Members
Even if you don’t receive forgiveness of your loans, you can deploy these reduced interest and deferment programs as a member of the military.
- Servicemembers Civil Relief Act (SCRA) Interest Rate Cap: Interest on student loans you took out prior to your military service is capped at 6% during periods of active duty.
- Military Service Deferment: You can postpone loan repayment during certain periods of active duty and while you prepare to go back to school following your active duty.
- 0% Interest: If you serve in a qualifying hostile area, you don’t have to pay interest for up to 60 months.
- HEROES Act Waiver: The Education Department waives many documentation requirements — think: updating your family size and income for income-driven repayment plans — while you are on active duty.
Committing to years in the military is a big decision, so helping wipe out your student loans is the least your country can do to thank you for your service.
Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.
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