Student loan forgiveness for active duty military

An estimated 176,906 active-duty service members have federal student loans that are already eligible for the Public Service Loan Forgiveness (PSLF) program, or that could be consolidated into eligible loans, according to a 2021 report from the U.S. Government Accountability Office. To date, just 124 service members have actually had their loans forgiven.

The PSLF program was established in 2007 to encourage graduates to go into public service. In addition to military personnel, teachers, lawyers, nurses, and other Americans working in the public service sector qualify for the program.

Though hundreds of thousands of workers should qualify for forgiveness by this point in the program’s history—eligible forgiveness recipients need to make 10 years of on-time payments—very few have, largely due to administrative errors and the confusing rules governing the program. About 94% of PSLF applications made by military members were denied—slightly better than the 99% of all applicants who were rejected, according to the Government Accountability Office report.

To make amends, the Biden administration has introduced a bevy of changes to the program, including a limited waiver to ensure qualifying applicants can actually get their debt forgiven.

The waiver retroactively includes FFEL, or Federal Family Education Loans, as part of the PSFL program, as long as the loan is consolidated into the Direct Loan program.

Additionally, the waiver allows any prior payment made to count toward the 120 needed, regardless of if they were made on time, or if they were full or partial payments.

The only type of federal loan that is still not eligible for the waiver is Parent PLUS loans.

As of June 30,just over 146,000 public servants total have received forgiveness because of the waiver, according to the Education Department. But chances are there are a lot of military personnel who have made 10 years of payments—120 total—on their loans and don’t realize they qualify for forgiveness. Tens of thousands of military members could benefit if they submit the waiver, according to the Consumer Financial Protection Bureau (CFPB).

Members of the military who already have direct loans will have their payment count updated automatically by the Education Department. And any months where their loans were put on hold while they were serving in active duty will count toward the 120 payments needed for forgiveness.

But those who have Perkins or FFEL must consolidate those loans into direct consolidation loans to qualify. They should take that step now, says Jim Rice, assistant director of the CFPB’s Office of Servicemember Affairs.

This can be difficult, especially if military members are deployed or changing bases, Rice says. But once the loans are consolidated, the waiver itself—which can be found on the Department of Education’s website—takes “just a few minutes” to fill out, Rice says.

The clock is ticking: The waiver must be submitted by Oct. 31, 2022 (though it’s possible it might be extended).

“What’s important is 90 days from now an opportunity for these service members is going to go by the boards,” Rice says. “Even months that were in forbearance, they have an opportunity to be included.”

Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.

Are you worried about paying off student loans? With the cost of a college education on the rise, many students and recent college graduates are finding themselves overwhelmed by debt. Some branches of the military will help you lose your student loan debt with special loan repayment programs for qualified members. 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.

Eligibility for Student Loan Repayment Programs

To be eligible for the student loan repayment program you must:

• Sign up for an original (first) active-duty enlistment of at least 3 years with a qualifying specialty, or contract as an Officer candidate
• If enlisting in the National Guard, you must enlist for at least 6 years
• Have a qualifying ASVAB score.
• Have a student loan that is not in default. The loan must have been made prior to entry on active duty.

Only certain loans qualify, currently this includes:

• Stafford Student Loans (GSLs)
• Perkins Loans
• Federally Insured Student Loans (FISLs)
• Supplemental Loans for Students (SLSs)
• Parents Loans for Undergraduate Students (PLUS loans)
• Consolidated Loan Program Loans

How Much of My Student Loan Will the Military Repay?

Currently, the Army and Navy will repay up to $65,000 of your student loans, the Coast Guard will repay up to $30,000 with yearly limits and the National Guard will repay up to $50,000. Remember that these are maximum amounts and may be limited only to very specific military specialties. 

After each completed year of active duty your service branch will make a payment of 1/3 or $1,500 (whichever is greater) on the total remaining original unpaid principal balance. They make the payment directly to the loan servicer.

Payments are subject to taxes in the year it is paid. DFAS will send you a W-2 Form separate from the W-2 Form received for military pay. A percentage of the payment will be withheld; therefore, it is important that you file income taxes with this W-2. Since payments are considered income, this withholding will deter a large tax bill at the end of the year. In general you will receive a refund from the IRS.

FOR EXAMPLE: $2,500 would be withheld from a $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.

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 3 year contract to qualify for Student Loan Repayment, you will have to reenlist for at least 3 more years to be eligible for the GI Bill.

Keep Up With Your Education Benefits 

Whether you need a guide on how to use your GI Bill, want to take advantage of tuition assistance and scholarships, or get the lowdown on education benefits available for your family, Military.com can help. Subscribe to Military.com to have education tips and benefits updates delivered directly to your inbox.

Show Full Article

© Copyright 2022 Military.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Do active duty military have to pay student loans?

How do I get rid of my student loans in the military?