Student Loans: Servicemembers May be Eligible for Education Benefits

August 4th, 2021 by

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Below are several examples of benefits our men and women in uniform can have when it comes to student debt and student loans, according to the Consumer Financial Protection Bureau. 

Reduction of loan interest rate

As a servicemember, you can reduce your student loan under what is known as the Servicemembers Civil Relief Act (SCRA). Servicemembers can reduce their interest rate to 6 percent on all pre-service loans including student loans, while you are on active duty.  

You can also request this benefit up to 180 days after leaving the military and the lower rate will be applied retroactively for the entire period of your active-duty military service. 

If you have a federal student loan the interest rate reduction is automatic as of June 2012. Your federal loan server should check to see if you are eligible for the SCRA benefit and make the reduction automatically. 

If you have a private student loan the interest reduction is not automatic.  You will need to contact your student loan servicer and request the reduction.  

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You will need to provide a copy of your military orders calling you to active duty.

Federal Student Loan Protections

If you were deployed to an area of hostilities and received special pay, your federal student loan may qualify for a zero percent interest rate during that deployment.  

You can receive this 0 interest rate for up to 60 months. To find out about what documentation you will need to provide contact your server after your deployment.

If you have a Federal Perkins loan and you served in an area of hostilities for more than 12 months straight, you may be eligible to have your loan balance reduced for each qualifying year of service.

Another benefit is that of a military deferment. 

For federal student loans, you can have your payment deferred during certain periods of military service. You may have to pay back unpaid interest at the end of the deferment, or it could be added to the outstanding balance of your loan.  

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If your federal student loan is subsidized, the Department of Education will pay the interest for you when you use a military deferment.

Income-Driven Repayment (IDR) plans

You may be able to reduce your monthly payments based on your income and family size if you have a federal Direct Loan and older federal loans made by private lenders. Which repayment plan you may be eligible for usually depends on when you took out your student loan. Under the Public Service Loan Forgiveness Program (PSLF) you may qualify for loan forgiveness using repayment plans such as this since they are considered “qualifying plans”. Some of these plans are:

  • Income-Based Repayment (IBR) This type of repayment plan sets a low monthly payment based on your income and family size.  If you have older loans it will be capped at 15% of your discretionary income.
  • Pay As you Earn (PAYE) This plan is available for federal student loans and it caps your monthly payment at 10 % of your discretionary income.
  • Revised Pay As You Earn (REPAYE) This program is designed for those people who have graduated a while ago or don’t think their loans are new enough to qualify for the PAYE plan. This plan caps your payments at 10% of your discretionary income.  You can get a lower payment if your federal student loan debt is high compared to your income.

Public Service Loan Forgiveness (PSLF)

As a member of the military or a veteran and you meet certain qualifications, you may have the balance of your federal student loan forgiven after working in public service for ten years.

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To be eligible for this benefit you need three things:

  • You need to have a federal Direct Loan, if you don’t have this type of loan you may be able to take out a new Direct Consolidation Loan which will also meet this requirement.
  • You will need to make 120 qualifying monthly payments. These payments can only be made under certain plans such as the IBR, PAYE, and REPAYE.  These payments have to be made on time but do not have to be made consecutively.
  • You must be employed by a qualified public service employer.  The 120 payments that you make must be made while working for a qualified employer such as being in the military, including the Coast Guard or Homeland Security.  Civilian jobs that will qualify you are teaching positions as well as public law enforcement,

With all of these programs available to you as a member of the military, there is one program and plan that will benefit you to continue your education.

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