Are you worried about paying off student loans? With the cost of a college education on the rise, many students and recent college graduates are finding themselves overwhelmed by debt. The Armed Forces can help you manage your college debt with special loan repayment programs for qualified students. Many people are not aware that the Army, Navy, Air Force, and National Guard can offer you special programs for repaying student debt. The Coast Guard has a Student Loan Repayment Program for Officers known as the College Student Pre-Commisioning Initiative (CSPI) program. This program has stringent requirements, see the Coast Guard's CSPI page for details.
If you have William D. Ford Federal Direct Loans, you may be eligible to have these loans totally forgiven by joining the military.
As always, check with your recruiter for details.
Eligibility for Student Loan Repayment Programs
To be eligible for the student loan repayment program you must:
- Sign up for an original (first) active-duty enlistment of at least 3 years with a qualifying specialty, or contract as an Officer candidate
- If enlisting in the National Guard, you must enlist for at least 6 years
- Decline enrollment in the Montgomery GI Bill in writing, using DD Form 2366
- Enlist with a high school diploma and a qualifying ASVAB score.
- Have a student loan that is not in default. The loan must have been made prior to entry on active duty.
Only certain loans qualify, currently this includes:
- Stafford Student Loans (GSLs)
- Perkins Loans
- Federally Insured Student Loans (FISLs)
- Supplemental Loans for Students (SLSs)
- Parents Loans for Undergraduate Students (PLUS loans)
- Consolidated Loan Program Loans
How Much Of My Student Loan Will the Military Repay?
Currently, the Army, Navy, and Air Force will pay up to $65,000 of your student loans, the National Guard will repay up to $50,000. Remember that these are maximum amounts and may be limited only to very specific military specialties, or medical specialties.
After each completed year of active duty your service branch will make a payment of 1/3 or $1,500 (whichever is greater) on the total remaining original unpaid principal balance. They make the payment directly to the loan servicer.
Payments are subject to federal and state income taxes as taxable income in the year repayment is disbursed. DFAS will send you a W-2 Form separate from the W-2 Form received for military pay. A percentage of the payment will be withheld; therefore, it is important that you file income taxes with this W-2. Since payments are considered income, this withholding will deter a large tax bill at the end of the year. In general you will receive a refund from the IRS.
FOR EXAMPLE: $2,500 would be withheld from a $10,000. Potentially, you could get all the money back from the IRS and use the refund to make a payment on your student loans.
Student Loan Repayment and The GI Bill
The current regulations say you cannot get the Montgomery GI Bill if you sign up for the Student Loan Repayment Program. However, the Post-9/11 GI Bill will allow servicemembers who enlisted under the student loan repayment plan to qualify for the Post-9/11 GI Bill. However, time spent satisfying the student loan repayment obligation does not count toward the active duty service necessary to qualify for the GI Bill. This means if you signed up for a 3 year contract to qualify for Student Loan Repayment, you will have to reenlist for at least 3 more years to be eligible for the Post-9/11 GI Bill.