Student loan debt is a growing crisis in America, with over 43 million borrowers owing more than $1.7 trillion in student loan debt. With the cost of college rising every year many students and graduates are struggling under the weight of their loans. This leads to an important question – can military members and veterans use GI Bill benefits to pay off student loans?
Overview of the GI Bill
The GI Bill is one of the most popular and generous military benefits, helping servicemembers and veterans pay for college, graduate school, and training programs. The current GI Bill program is the Post-9/11 GI Bill, which provides money directly to the student for tuition and fees, a monthly housing allowance, and an annual book stipend.
GI Bill benefits are intended to help veterans and servicemembers pay for education and training, not past student loans. The VA and Department of Defense have clear rules prohibiting the direct use of GI Bill funds to repay student loans
However, veterans may still be able to utilize the GI Bill in combination with other programs to help tackle student loan debt.
Using GI Bill for Current Education
While GI Bill funds can’t pay loans directly, they can be used for current or future education costs. This frees up extra money in a veteran’s personal budget to put towards paying down loans.
For example, if a veteran is attending college full-time using the Post-9/11 GI Bill, they don’t have to pay tuition, fees, or book costs out of pocket. The monthly housing allowance also provides substantial help with living expenses. Overall, this could easily free up several hundred dollars or more per month that could be put towards old student loans.
Utilizing GI Bill benefits for education is one of the best and most common ways for veterans to tackle student loan burdens.
VA Work-Study Program
The VA Work-Study program allows students using GI Bill benefits to work part-time for the VA. They earn an hourly wage, receive awards for their work, and gain valuable work experience.
Importantly, VA Work-Study income can be tax-free if it’s used to repay qualified student loans. This provides veterans a way to chip away at old student debt through part-time work, without owing taxes.
Student Loan Repayment Programs
While rare, some military services offer recruitment and retention incentives in the form of student loan repayment assistance. These are targeted programs designed to attract personnel to hard-to-fill jobs or skills. Most programs require a multi-year service commitment in exchange for up to $65,000 in loan repayments.
For example, the Army Student Loan Repayment Program provides qualifying soldiers up to $65,000 for prior federal student loans. To be eligible, you must sign up for at least 3 years of active duty service after completing initial training. The Army then repays 1/3 of your total loan amount or $1,500, whichever is greater, for each year of completed service.
Student loan repayment programs can provide a huge benefit, but are highly selective and require an extended commitment. Talk to your recruiter to see if you qualify.
Public Service Loan Forgiveness (PSLF)
The PSLF program forgives federal student loan balances after 10 years of payments while working full-time for a nonprofit or government agency. Time spent on active duty counts towards PSLF, allowing servicemembers to tackle a portion of their loans through military service alone.
After separating from the military, veterans can continue with PSLF-qualifying public service jobs to complete the 10 year requirement and receive full forgiveness. Teachers, government workers, and many nonprofit employees qualify for PSLF.
Using Severance or Disability Pay
Financial assistance received when separating from the military is not considered taxable income. This includes severance pay, disability severance, and disability compensation benefits.
As a result, these funds can be used to pay down student loans without owing any taxes. For veterans receiving lump-sum severance or disability payouts, this provides a tax-advantaged way to knock out a chunk of student loan debt.
Education and Training Stipends
Many military education and training programs include stipends to offset the cost of school attendance or lost wages. These include ROTC stipends, Platoon Leader Class stipends for officer candidates, and some special forces training stipends.
As with other military salary and benefits, these stipends can be used to pay down student loan principal once tuition and fees are covered. Every dollar helps when working to pay off debt.
Utilizing the 0% Interest Benefit
The Servicemembers Civil Relief Act caps interest for student loans and other debt at 6% while activated. Additionally, student loans with rates above 6% are lowered to 6% during active duty service.
Importantly, any interest above 6% is also waived when the service period ends for federal loans. This 0% interest benefit allows military members to greatly reduce student loan costs. Focus payments on principal during active duty, then save on interest when transitioning out.
Getting Support for Defaulted Loans
For veterans struggling with defaulted federal student loans, the VA can provide assistance in getting the loans rehabilitated and removing the default status. This involves setting up affordable monthly payments based on income for 9 months.
After successful rehabilitation, defaulted loans convert back to normal repayment status, the default is removed from your credit history, and you regain eligibility for deferments, forbearances, and loan forgiveness programs.
Considering GI Bill Transfer for Dependents
For veterans who don’t need GI Bill benefits for themselves, transferring the benefit to a dependent spouse or child may free up money to pay loans.
Transferring GI Bill benefits requires a 4 year service commitment from the date of transfer approval. If you aren’t using the GI Bill yourself, transferring benefits can allow a loved one to earn a college degree debt-free while you tackle your own loans.
Finding Other Options for Loan Relief
If GI Bill benefits and military programs don’t provide enough loan repayment assistance, consider civilian options:
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Income-driven repayment plans through the Department of Education tie payments to disposable income and provide forgiveness after 20-25 years
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Extended repayment stretches loan terms from 10 to 25 years, reducing monthly costs
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Private student loan refinancing can significantly lower interest rates and payments
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Bankruptcy and debt consolidation are last resort options if payments become unmanageable
While GI Bill benefits can’t directly pay down past student loans, they remain an invaluable tool for completing education and freeing up money to tackle debt through other means. With proper planning, military service can be the first step towards becoming student loan debt-free.
Will the Military Pay off Student Loans?
The military offers several programs to help service members pay off their student loans. Two of the most well-known available options include the Student Loan Repayment Program (SLRP), for active duty members who agree to serve in specific roles or occupations; and the Public Service Loan Forgiveness (PSLF) program, for service members who work in qualifying public service positions.
Additionally, some branches of the military offer their own loan repayment programs or incentives to help recruit and retain personnel. These programs may vary depending on the needs of the branch and the specific job roles.
Many people are not aware that the military can offer you special programs for repaying student debt.
As always, check with your recruiter for details and carefully review the eligibility requirements and terms of each program.
Student Loan Repayment and The GI Bill
The current regulations say you cannot get the GI Bill if you sign up for the Student Loan Repayment Program. If you signed up for a three-year contract to qualify for Student Loan Repayment, you will have to reenlist for at least three more years to be eligible for the GI Bill.
Using The GI Bill and the Student Loan Repayment | ARMY
FAQ
Can the GI Bill pay off student loans?
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Can GI Bill be used to pay off student loans?
Can the GI Bill be used to pay off student loans? You cannot request education benefits specifically to repay a student loan. If you’re enrolled and receiving benefits, you can use your benefit payments however you choose, including student loan repayment.
Does the GI Bill cover student loan payments?
The GI Bill is a military benefit program that can be used to pay for college while you are in the service or after you separate from the service. However, it does not cover student loan payments. What if you already had student loans when you joined the military?
Can I get the GI Bill if I get a refund?
In general you will receive a refund from the IRS. Example: $2,500 would be withheld from $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. The current regulations say you cannot get the GI Bill if you sign up for the Student Loan Repayment Program.
Can GI Bill benefits be used for training?
“Individuals eligible for GI Bill benefits may use such benefits for training. Generally, VA can only pay retroactive benefits for training pursued no more than one year prior to the receipt of an application for benefits.”
Can GI Bill benefits be transferred to a spouse?
The GI Bill is a great help to members of the Armed Forces, but it can also benefit military spouses. That’s because qualified service members can transfer all or a portion of their Post-9/11 GI Bill benefits to a spouse or child. Join over 114,000 others and see how much you could save.
What is the GI Bill & how does it work?
The GI Bill dates back to 1944 and was created to help military service members and their families cover educational costs for college and other types of training. The Post-9/11 GI Bill brought changes to eligibility and benefits covered by the GI Bill for active duty service members after September 10, 2001.