Military Student Loan Forgiveness: A Complete Guide
Military student loan forgiveness has been a hot topic in the media recently and rightly so. Military service personnel grant freedom for the country and maintain peace in areas where there is a high probability of the occurrence of a conflict. These people put their life at risk in order to keep their nation safe. Therefore, once their military duties are over, they need to feel welcomed home with great respect and gratitude. A veteran struggling with student debt will not feel any type of gratitude from the state, nor will he/she feel welcomed home.
On the contrary, federal and private student loans are bound to add up to the military’s frustrations and disillusions. Military service members who are still on duty, veterans and National Guardsmen who serve for at least 90 days can take advantage of the Post 9/11 GI Bill, which provides funding for education, including tuition, fees, books and even housing for the period of studies. However, the GI Bill does not cover existing student loans, so veterans with pre-existing student loans cannot benefit from education gratuities, which seems quite unfair if we come to think of their sacrifices.
In order to provide the necessary support for military students who have contracted a loan prior to joining the army, the federal and state authorities have come up with a number of programs meant to offer military student loan forgiveness and/or financial facilities for their educational debts.
1. Military College Loan Repayment Program (CLRP)
The program is designed to help people who join the military to pay for their already contracted student loans. Unlike other similar programs, the CLRP does not send the money to the military’s account, but to an account belonging to the company which services the student loan. This is a safety way to ensure that the money reaches its intended destination. Usually, the first payment reaches the lender’s account at the end of the first year of service.
Military personnel who join the army as well as persons who choose to re-enlist can apply for a loan forgiveness through the College Repayment Program, provided that they meet the following criteria:
- Have a College Degree, as GED or other equivalents do not qualify for the CLRP;
- The Armed Forces Qualification Test score should be above 50;
- Give up the rights available for militaries through the Post 9/11 GI Bill if they apply for the 4 years program (not applicable for the 6 years program). It is advisable that military personnel who plan to continue their studies after their service period is over opt for the 6 years program to benefit both from the CLRP and the Post 9/11 GI Bill.
- Have a student loan which is accepted in the program. Thus, loans made under the Federal Family Education Loan Program, Federal Perkins Program and William D. Ford Federal Direct Loan Program are not eligible for a repayment through CLRP.
The program is open for all branches of the military, including some branches of the Reserves too. In fact, the amount of money that can be repaid, depends on the branch in which the candidate is enrolled.
Thus, the Army’s CLRP pays $65,000 in military student loan forgiveness for each soldier. The Navy’s CLRP also pays $65,000, but the Navy Reserves only benefits $10,000 from loan forgiveness. The National Guard’s CLRP offers $50,000, the program for Coast Guards offers $30,000 and the Air Forces program has $10,000 for each military. The Marines currently do not offer any type of CLRP. One of the CLRP’s drawbacks is that it does not cover loan's interest.
2. Public Service Loan Forgiveness Program
The program is targeted at individuals working in the public services, so the military personnel are eligible for a loan forgiveness under this program. The program cancels any remaining student loan after 120 monthly payments made on time and consecutively. During this time, the candidate must have a full-time job (at least 30 hours/week). The program is not as direct as the CLRP, nor does offer high forgiveness, since there are few chances that the military has a high amount of money to pay on their loan after 10 years of full payments. Also, the program was established in 2007, which means that individuals will start benefiting from it in 2017, so it is not a solution for military in immediate need of help.
A good way of making the loan easier on the budget is to recalculate monthly payments. This will offer a partial relief on the financial burden and leaves more for the loan forgiveness coverage.
3. The National Defense Student Loan Discharge
The National Defense Student Loan Discharge (NDSLD) program is aimed towards military personnel who accessed a loan through the Perkin Loan or a National Direct Student Loans programs and who served at least one year in an area with imminent danger and/or direct fire. The program has not yet reported the forgiveness rate or the number of people who have taken advantage of it so far, but it is certainly worth a try. Candidates must fill in a special DD 214 discharge form and explain why they think they qualify for the program. The form and the explanatory letter must be sent to the company which services the loan.
4. The Servicemembers Civil Relief Act
The Servicemembers Civil Relief Act establishes a series of benefits for military personnel, including a maximum interest rate of 6% for any loan contracted before enrolling in the military service. This means that individuals who have a student loan and enroll in the army can reduce their interest to 6%. In most cases, this translates into a considerable reduction of the total sum which must be paid. This measure is valid only for the period in which the military is in service, so it is recommended that the papers are done immediately after enrollment for dramatic reductions. In order to benefit for the SCRA, the qualified candidate must contact the loan provider attaching copies of the order and an official request to reduce the interest rate according to the SCRA law. The good news is that the SCRA interest rate reduction is available for any type of loan, including car loans, mortgages and credit cards.
5. The Veteran’s Total and Permanent Disability (TPD) Discharge
Military and veterans who have suffered injuries during their service or have a total and permanent disability, can apply for a loan discharge. This means that the individual’s debt will be erased because he/she is incapable of working in order to pay it back. The program is available for candidates who have a Direct loan, a Perkins loan or a FFEL loan.
In order to receive a loan discharge, the candidate must notify the US Department of Education that they have a TPD and submit a special application along with the documents which prove your disability. Veterans need to send information form to the US Department of Veteran Affairs stating that your TPD prevents them from being employed and thus you cannot repay the student loan contracted previously. The Department will evaluate the papers and decide if the veteran is eligible for a loan discharge.
6. Military Student Loan Forgiveness & Deferment Programs
The Student Loan Deferment program does not offer students loan forgiveness, but helps individuals delaying its payment only till a later date. This decreases the financial pressure for a period of time, until the applicant can make ends meet. Yet, the program is not available to all military with students loans. In order to find out if a candidate is eligible, the individual must contact the lender and discuss their situation. Candidates who are actively involved in classes and also take specific training are very likely to benefit from a loan deferment, but once again, it is necessary to discuss each case with the company servicing the loan. Personalized approach is available and candidates may get a good deal after the discussion.
Joining the army is a life-changing decision which may affect the individual on the long as well as a short term. People on the military service have enough to think about, both during their service and after their retirement, so the student loan (or any other type of loan, for the matter), should be the last thing on their mind. The above listed programs provide help and financial relief and even though they do not have a 100% forgiveness rate, they are certainly worth a chance.