Today we welcome a reader and guest poster, Drew Cloud. His article on Military Student Loan Forgiveness is especially timely with all the rumblings about the PSLF going away (even going away retroactively). What would you do if your loans you thought would be forgiven suddenly weren’t, through no fault of your own?!
While none of these options applied to my civilian wife’s debt and we (wisely now that we have a child) did not plan on the PSLF option, this is a treasure trove of resources which I’m excited to share with you- Enjoy, and thanks, Drew!
**links in the article may generate advertising revenue for this blog, at no cost to you! Keep us online!**
Military Student Loan Forgiveness
Americans are grateful for the sacrifices that our servicemen and servicewomen have made for us, whether they have served in the Army, Navy, Air Force, Marines or National Guard. (John’s Note: or the Coast Guard*!) There are many ways that we show our appreciation for their service, including through specialized loan forgiveness programs that may completely erase student loans for qualifying borrowers.
Military student loan forgiveness programs are available for certain members of the military who meet qualifications for a particular program. These different programs are meant to assist members of the military who have student loan debt when they enter the military, as opposed to the various bills, like the GI bill, that provide tuition assistance to service members who enter college after discharge.
While there are many benefits to these loan forgiveness programs, borrowers who take advantage of them should be aware of one important fact. If your loan balance is forgiven, you will be required to pay income tax on that amount in the year that it occurs. This could end up costing quite a bit of money. For borrowers with substantial debt, it may still be worth it to have their student loans forgiven for their service. Read on to learn more about the different military student loan forgiveness programs available for our servicemen and women.
Military College Loan Repayment Program (CLRP)
For members of the military who enter with student loan debt, the Military College Loan Repayment Program (CLRP) is a method of paying off their student loans during their terms of service. These programs may pay as much as $65,000 (Army and Navy) off in loans for each soldier, with the Marines not currently offering a CLRP. Importantly, the CLRP does not cover the interest on a loan. Some branches of the Reserves offer CLRP.
To qualify, a member must have a college degree, an Armed Forces Qualification Test score of at least 50, and a student loan that is accepted into the program. He or she must also give up the right to apply for additional funds through the Post 9/11 GI bill, so it isn’t ideal for service members who plan to continue their studies.
National Defense Student Loan Discharge (NDSLD)
For those military members who served in an area with imminent danger and/or direct dire for at least one year and accessed a loan through the Perkins Loan or Direct Student Loan programs, the National Defense Student Loan Discharge (NDSLD) program may provide at least partial loan forgiveness. To qualify, a borrower must submit his or her DD 214 discharge paperwork as well as a letter explaining why they think that they qualify for the program.
Veteran’s Total and Permanent Disability (TPD) Discharge
If a veteran or service member has suffered a total and permanent disability as a result of injuries received during service, then he or she may be eligible for a discharge of his or her student loans under the Veteran’s Total and Permanent Disability (TPD) Discharge program. Under the TPD program, if a veteran is incapable of working to pay back a Direct, Perkins of FFEL loan, then he or she may qualify for a discharge.
To qualify, the borrower must notify the United States Department of Education of his or her disability due to service, and submit an application along with proof of disability. This should include documentation from the Department of Veterans’ Affairs that will show an inability to work due to the service-related total and permanent disability. The Department of Education will then use this information to determine eligibility for a loan discharge.
Public Service Loan Forgiveness Program
In addition to military-specific forgiveness programs, military members may also benefit from public service loan forgiveness programs. These programs are targeted at anyone working in the public sector. If a person is working in the public sector — for example as a teacher or a fireperson — for at least thirty hours per week, he or she may qualify for the program. After 120 monthly on-time payments, the remaining student loans may be forgiven. This program is generally not as advantageous as other programs that are offered only for military members, but may be helpful for anyone who does not qualify for those programs. (John’s Note: PSFL has stringent guidelines, including submission of proof of employment, recommended at least annually).
For our servicewomen and men who sacrifice so much to serve our country, student loan forgiveness programs are just one benefit that can be offered that can ease some of the burden of their service. If you have served in the military, you may want to explore these options to determine if the burden of your student loans can be forgiven**.
Drew Cloud started The Student Loan Report in the hopes of covering the ins and outs of student loans across the country. On top of keeping borrowers informed, another one of his goals is to help others understand the basics of student loans. You can find all sorts of resources and guides in addition to news releases on his site.
*Coast Guard: Def- The hard nucleus about which the Navy forms in times of war.
** The SCRA provides for limits and protections to how your loans accrue interest. You may be entitled to a lower interest rate. Your loan provider might credit you with the lower rate as part of a military incentive, too.