Members of the U.S. military may qualify for student loan forgiveness or repayment programs. Federal loan borrowers who have served could be eligible for programs like Public Service Loan Forgiveness (PSLF) program. Additionally, there are other resources and assistance programs designed specifically to help military personnel manage their student loan debt.
Loan Forgiveness and Discharge Programs
As a member of the military, you have a few options if you are considering military discharge or loan forgiveness. The U.S. Department of Education and the U.S. Department of Defense (DOD) have created special student loan benefits and repayment options available to you such as military service deferments, the Public Service Loan Forgiveness program (PSLF), and the Military College Loan Repayment Program (CLRP) among other options and programs. In addition, the Servicemembers Civil Relief Act (SCRA) also provides for repayment benefits of debt, like limiting your interest rates on eligible debt while you are on active duty. Read on to find out more!
Public Service Loan Forgiveness Program (PSLF)
Your service to the public has not gone unnoticed. As a public servant, you may be qualified for the PSLF and receive forgiveness for the remaining balance on your Federal Direct Loans if you have been employed full-time with a qualified government or non-profit public service organization. If you a full-time employee with a military organization, or your time on active duty will count as eligible employment. While you are employed full-time employer, you will need make 120 qualified payments on your Direct Loans, while enrolled in an income-drive repayment plan. Only payments made on or after Oct. 1, 2007 will be counted.
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Veterans Total and Permanently Disabled Discharge
Under the law, if you sustained a service-connected disability, you may be eligible and qualify for your federal Direct, FFEL and Perkins student loans to be discharged. If you hold private student loans, check with your lender as all private lenders may not offer this benefit. To be eligible for discharge, the Department of Veterans Affairs sends borrower data to the Secretary of Education showing that the borrower is “totally and permanently disabled.” Eligible borrowers will have 60 days to opts-out of the process. Those who do not decline will receive a discharge of their federal student loans. Federal student loans discharged based on Total and Permanent disability between Jan. 1, 2018, to Dec. 31, 2025, are not required to pay federal income taxes on the amount discharged, but your specific state may classify it as taxable income. Private student loans may be considered and treated as taxable income, so talk to a tax professional to better understand your taxable obligations. Contact your loan servicer with any questions regarding your situation.
Repayment Programs
Servicemembers can have access to repayment programs that are available to them based on their branch of service and other points of eligibility. When it comes to student loans, the federal government has provided repayment options, incentives, and benefits for active-duty members and veterans alike.
Military College Loan Repayment Program (CLRP)
The Military College Loan Repayment Program is for active-duty enlisted service members, with no prior military service who may be able to get some or all of their federal student loans (and some private student loans) entered into before military service forgiven after having served for 3-6 years. Different branches of the military offer different maximum amounts, so talk to your recruiter or ranking authority and loan servicer. If you accept the CLRP, you will have to reject the benefits received in the GI Bill before CLRP enrollment. Active-duty members can participate in the GI Bill during a subsequent enlistment period even if CLRP was used during enlistment, provided they use the GI Bill 30 months into the second enlistment.
These provisions do not apply to members of the Reserves and National Guard who can use the Montgomery GI Bill, and the CLRP during the same enlistment period. Read your enlistment contract carefully as repayment must be written into it.
Health Professions Loan Repayment Program
If you have professional qualifications or are enrolled to receive those professional qualifications in a health profession that has been deemed as critically needed by the Secretary of Defense to meet identified wartime combat medical skill shortages, and meet the program qualifications (for example, an individual must also be serving as a commissioned officer on active duty and not in the reserve unit) then you may be eligible to have the military pay for your loans under the Health Professionals Loan Repayment Program (HPLRP).
Eligible Loans for the HPLRP:
- FFEP Loans and Direct Loans
- A health professions education loan made or loan insured under the Public Health Service Act,
or - A loan made, insured, or guaranteed through a recognized financial or educational institution to finance your health profession education
Talk to your recruiter or chain of command for more information to find out your eligibility for HPLRP.
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More Options for Managing Student Loan Debt
Military Deferments
If you are a student in the military, there are two distinct deferment options that are dependent on your enrollment.
Military Service Deferment
You request your loan holder defer repayment of your eligible loan(s) beginning the date of your qualifying military service and ending 180 days following the completion of the qualifying service.
Post-Active Duty Student Deferment
This requests that your loan servicer defers repayment of your eligible loan(s) upon completion of your qualifying active-duty service and any applicable grace period. Your deferment will end whichever date comes first: the date you resume enrollment at an eligible school for at least half-time basis, or 13 months following the completion date of your active-duty service and any applicable grace period.
You may be granted a Military Service Deferment and a Post-Active Duty Student Deferment Period. These will run at the same time and you will receive no more than 13 months of deferment following the completion of your military service.
During this time of deferment, the interest on your Direct Subsidized Loans will be paid by the government.
This doesn’t reduce your outstanding balance on your student loans any faster, but you won’t have to worry about interest accruing during this time. Unsubsidized student loans will continue to accrue interest while on active duty causing your principal balance to grow until you enter repayment and start making payments. However, your loan may qualify for benefits under the Servicemembers Civil Relief Act, which may limit your interest rate while you’re on active duty on debt, you incurred before start of active duty. This applies to both Federal and private student loans. In addition, if you are serving in a hostile area that qualifies for hostile pay, you may not need to pay interest for up to 60-months on your eligible Federal Direct Loans.
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If you are requested a deferment, you need to complete the appropriate request with your student loan servicer: Military Service and Post-Active-Duty Student Deferment Request. Make sure you provide your servicer with all required documentation. And before you leave for active duty, it may be worth it to discuss a power of attorney option with a qualified legal professional. That way you will have someone at home able to help with your federal student loan management while you are away.
Income-Driven Repayment Plan
An income-driven repayment plan bases your ability to pay on your discretionary income, family size, and state of residence. Under this kind of repayment plan, you may qualify for a low or zero payment amount. It may be possible for you to receive student loan forgiveness for the remaining balance in 20-25 years. You may be eligible based on your income, type of loan, and the date when the loan was made. Private loans may not be eligible for income-driven repayment plans, so contact your loan servicer to understand what your available options are.
More >>> Income-Driven Repayment Plan Options
Servicemembers Civil Relief Act (SCR)
One of the other benefits available to you as a servicemember is the Servicemembers Civil Relief Act (SCRA) interest rate cap. As a holder of federal or private loans, during your active-duty periods, you are legally protected in regards to your financial obligation to obtain a 6% interest cap on the student loans you received prior to your military service. One thing to note-if you consolidated your federal loans after your active-duty start date, your new loan may not be eligible for SCRA. Talk to your lender for more information. And make sure you review the information your lender has regarding your active duty start dates. If there is any discrepancy, make sure to provide a copy of your order to your lender to ensure your benefit is activated and covers your entire period of active duty.
Refinance Your Student Loans
Refinancing allows you to move your current student loans into a new, single loan. You are able to refinance both federal and private student loans together if you choose, and though you can take your federal student loans and refinance them into private student loans, know that in doing so, you may lose valuable federal borrower benefits. If you are looking to make your federal student loans more manageable, you may want to look into a Direct Consolidation Loan, available only for federal student loans.
Private student loans and federal loans can be refinanced together in a private refinance loan. Whatever you choose, make sure to read over the different options that are available to you such as a lower APR and repayment terms to ensure you find the right choice for you. Private lenders don’t have as many options should your circumstances take a negative turn, so weigh all your options before moving a federal loan into a private refinanced loan.
