[Editors Note: A correction has been made to the following article. The so-called "last payer" clause does not incude Federal Pell Grants, SOG, or Direct Student Loans (known as Title IV funds). Funds from these sources can be applied to the student's tuition and fee balance after the GI Bill portion is determined. ]
One small and seemingly insignificant change to the Post 9/11 GI Bill could actually cost unsuspecting veterans thousands in out-of-pocket tuition and fees. Known as the “last payer” clause, the change states that the VA will only pay the remaining tuition and fee balance after all other scholarships, waivers, federal and state aid -- except Federal Title IV (Pell Grants, SOG, and Federal Direct Loans).
Here is the clause in the new law:
The VA will pay the actual net cost for in-State tuition and fees assessed by the institution for the program of education after the application of—For a student veteran who has 36 months of qualifying post 9/11 active service -- making him or her eligible for 100 percent of the P911 GI Bill benefit -- this is no big deal. But, this could result in thousands of dollars in unexpected tuition costs for a veteran with less than 36 months .
-- any waiver of, or reduction in, tuition and fees; and
-- any scholarship, or other Federal, State, institutional, or employer-based aid or assistance (other than loans and any funds provided under section 401(b) of the Higher Education Act of 1965 (20 U.S.C. 1070a) [Federal Title IV]) that is provided directly to the institution and specifically designated for the sole purpose of defraying tuition and fees;
The following is a synopsis of a case in which a veteran has earned only 70 percent of the Post-9/11 GI Bill:
Let’s say a particular school’s tuition is $12,500.00 per semester ($25,000.00 per year), once the student’s state and institutional aid is applied, the “actual” semester tuition rate reported to the VA is $4,025.00 (plus an additional $134.00 in mandatory fees).
In this case the VA made a payment of only $2,911.30 for the fall semester since that is 70 percent of $4,159.00. The student is experiencing a shortfall each semester.
The VA told the student that he should take out federal loans to help cover the out-of-pocket expenses.
Note: Title IV funds like Pell Grants and Federal Direct Loans can be used to pay the remainder after the VA has paid the prorated amount based on time in service.
So a word to the wise for all Post-9/11 vets, be sure you check with your school certifying official and financial aid department before you commit to enroll. Don’t let the last payer clause catch you by surprise.