Student Loan Forgiveness Programs for Veterans

November 13, 2014

The Post 9/11 GI Bill and the Military Tuition Assistance Programs provide some exceptional education benefits to military personnel. Despite this, many student veterans continue to struggle with student loan debt. Fortunately, several programs help members of the Armed Forces to get rid of their existing student loan debt. Here’s a list of the main loan forgiveness programs aimed at the veterans.

1. The Military College Loan Repayment Program (CLRP): If you join the military and take part in the CLRP, you could receive up to $65,000 of repayments. This benefit applies to any student loans you took out prior to joining. This benefit is available if you re-enlist as well. The Federal Government pays the CLRP loan forgiveness payments to your lender, instead of giving the payment to you. Typically, the first forgiveness payment reaches your lender when you complete your first year of service in the military.

Eligibility: This program is only open to enlistees with no prior military service. It is also open for those who re-enlist. However, you will need to express your willingness to participate in the program on your enlistment contract. Officers are not eligible for the CLRP.

The CLRP does not forgive all student loan debt. For example, it does not provide benefits for private loans, state-funded loans, equity loans etc. However, it does provide benefits for Stafford Student Loans, Auxiliary Loan Assistance for Students (ALAS), Parents Loans for Undergraduate Students (PLUS), Federally Insured Student Loans (FISLs) etc.

2. The National Defense Student Loan Discharge: This program provides a partial discharge of the costs of your college education, if you used a National Defense Student Loan.

Eligibility: Recipients of National Direct Student Loans and Perkins Loans can receive a partial cancellation of their loans for serving in the Armed Forces. However, they will only receive this benefit if their military service included at least one full year in a hostile fire or imminent danger pay area.

To avail this benefit, you will need to send a copy of your DD214 discharge form to the company servicing your loan. In addition, you will need to send a letter that explains why you qualify for this program. The letter would need to detail aspects such as your service in the military and the basic details of your role during your deployment.

3. The Servicemembers Civil Relief Act (SCRA): This law provides eligible individuals with a maximum cap of six percent on interest rates. These rates apply on any debt obligations of the individual that existed before the individual enlisted in the military. Therefore, if you took out a student loan that had an interest rate of say 10 percent prior to enlisting in the military, the provisions of the SCRA enable you to reduce the interest rate by four percent.

Moreover, this tenet does not just apply to student loans. It applies to any kind of debt obligation you have. This includes credit cards, mortgages, car loans etc. Therefore, unlike interest deferments, the SCRA does not delay your payments until a later date. Rather, it actually forgives your debt.

To avail of this benefit, you will need to contact your loan servicer in writing. Provide them with a copy of your orders. Also, submit an official request to have your interest rate reduced in accordance with the SCRA law. Thereafter, you will be able to enjoy a reduced interest rate. That too, for as long as you serve in the military.

4. Student Loan Deferment Programs: Deferments do not reduce your debt obligations as much as they postpone them. Not everyone in the military can qualify for a deference on their student loans. However, many service members qualify for this deference based on their status, lender requirements and other conditions.

Some lenders extend this benefit to service personnel when they join the military. Others only offer it during deployments. Military students having tuition assistance programs can defer their student loan payments. That too, while they remain actively enrolled in class. Some service personnel, who have specific military education, are also eligible for student loan deferments. Contact your loan servicer to avail of this benefit.

5. The Veteran’s Total and Permanent Disability (TPD) Discharge: If you have a TPD discharge, you do not need to repay a Direct Loan, an FFEL and / or a Perkins Loan. To avail this you will need to inform the US Department of Education that you suffer from a total and permanent disability. Therefore, you will need to complete a TPD discharge application. You will also need to submit the application along with certain supporting documents. These documents must corroborate the fact that you have a total and permanent disability.

Veterans will need to submit documentation from the US Department of Veterans Affairs (VA). The documentation must show that the VA has determined that you are unemployable because you suffer from a service related disability. The Department would evaluate your information. Thereafter, they would determine whether you qualify for a TPD discharge.

6. The Public Service Loan Forgiveness (PSLF) Program: This program enables members of the military to discharge their student loan debt. However, it does not follow as direct a process as the CLRP.

Eligibility: The program forgives the remaining balance of the Direct Loans taken by an individual, after the individual has made 120 qualifying payments on those loans. In addition, the individual must be working on a fulltime basis for certain public service employers. In addition, only payments made after October 01, 2007 qualify for PSLF.

Only loans received under the William D Ford Federal Direct Loan (Direct Loan) Program are eligible for PSLF. Loans such as the Federal Perkins Loan (Perkins Loan) Program and the Federal Family Education Loan (FFEL) Program etc. are ineligible for PSLF. However, you could consider consolidating the Perkins Loan and the FFEL into a Direct Consolidation Loan for availing of the PSLF benefits.

Student veterans already have a lot on their plate, without having to worry about how to manage their debts as well. The above-mentioned programs will enable them to focus more on their academics, than on the financial aspect of their educational pursuits.