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Updated on January 7, 2023
Veterans, including those currently serving as soldiers, marines, airmen, sailors, and coasties, may be eligible for student loan forgiveness through various student loan forgiveness programs, including the Public Service Loan Forgiveness Program, Income-Driven Repayment Plan Forgiveness, and Total and Permanent Disability Discharge.
The Department of Defense also offers student loan repayment programs to help cover federal and private student loan debt payments. These options provide much-needed relief for those who have bravely served our country and now face the burden of student loan debt.
If you’re a veteran seeking student loan forgiveness, it’s worth exploring these programs and determining you’re eligibility for relief.
Public Service Loan Forgiveness is the best option
Public Service Loan Forgiveness is an excellent option for military veterans and active duty service members, offering the potential for tax-free loan forgiveness after just 10 years of qualifying payments. Other forgiveness programs require you to be totally disabled or make at least 20 years’ worth of student loan payments. PSLF is especially beneficial for those in the military who often have a high level of student loan debt and may have a lower income due to their service.
To qualify for the PSLF program, military personnel must work full-time in the military, government, or nonprofit organization and make 120 qualifying monthly payments. After your final payment, the U.S. Department of Education forgives the remaining balance on Direct Loans, the most common type of federal student loan. Those with Federal Family Education Loans (FFEL) or Federal Perkins Loans can also take advantage of this opportunity by consolidating those loans into a Direct Consolidation Loan.
Related: Should I Consolidate My FFEL Loans to Direct Loans?
Visit the Federal Student Aid website, StudentAid.gov, to check what type of loans you have and, if necessary, apply for consolidation.
Total and Permanent Disability Discharge
Disabled vets can get the remaining balance of their federal student loan debt or Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligation discharged if they can no longer work due to a physical or mental disability. The Total and Permanent Disability (TPD) Discharge program is available to veterans with a service-connected disability that is 100% disabling or who are totally disabled based on an individual unemployability rating.
The Department of Education has partnered with the Department of Veterans Affairs and the Social Security Administration to streamline the process for obtaining a TPD Discharge, with automatic discharges for those who meet the eligibility requirements. Alternatively, veterans may apply for a TPD Discharge by applying to the student loan servicer that manages the loan discharge process for the department, Nelnet. As part of this application process, veterans must provide a benefits award letter from the VA or SSA or have their primary care physician or specialist sign the paperwork.
Learn More: What Disabilities Qualify for Student Loan Forgiveness?
Will a 100% VA disability pay off student loans?
A 100% VA disability rating makes a veteran eligible for a TPD Discharge, which would discharge the remaining balance of their federal student loan debt. This option is available to veterans with certain disabilities, including those related to post-traumatic stress disorder (PTSD).
This benefit only applies to federal student loans and not private student loans. A handful of lenders will forgive the balance if the primary borrower becomes disabled. The cosigner will remain on the hook for the payments.
Income-Driven Repayment Plan Forgiveness
Income-driven repayment (IDR) plans offer military service members and veterans a way to manage their federal student loan payments in a way that considers their income and family size. These plans, which include the Income-Based Repayment (IBR) plan and the Revised Pay As You Earn (REPAYE) plan, can be helpful for those with a lower income due to their military service and who may not be able to afford the standard monthly payments on their loans. They also carry a bonus: loan forgiveness after 20-25 years, depending on the plan and whether they borrowed loans for graduate school.
Related: Types of Income-Driven Repayment Plans
While waiting for two decades for relief may seem like a long time — especially if you have been making payments for several years — you may not need to wait that long before your debt is forgiven. The Education Department is reviewing borrowers’ payment histories to determine how many monthly payments they made under any student loan repayment plan and how much time they spent in certain forbearance and deferment periods.
Related: How the IDR Waiver Works
After completing this review, the department will give borrowers credit towards income-driven repayment plan forgiveness. It’s estimated that about 40 thousand people will have their debt automatically forgiven through this opportunity. Millions more will move several years closer to having their remaining balance erased. This is a great opportunity for vets and service members seeking student loan forgiveness who joined the military years after leaving school.
Learn More: Income-Based Repayment Plan Forgiveness
Other relief opportunities
President Biden’s student debt cancellation – Last year, the president announced a plan to get rid of billions of dollars in student loans for many borrowers, including those currently serving in the U.S. military. The plan would erase up to $20 thousand from the balances of those who earned less than $125 thousand a year during the pandemic and received a Pell Grant while in college. Over 26 million people applied for relief, and the Education Department has approved 16 million applications, but it is barred from applying the forgiveness to borrowers’ accounts until the Supreme Court determines the program’s legality later this year.
Borrower Defense to Repayment – A number of colleges and universities have been accused of exploiting military veterans, using their GI Bill benefits to enroll them in programs of poor quality or have low graduation rates. Some of these institutions were fraudulent for-profit colleges that have since been shut down by the government or through lawsuits. Others are state-backed universities and local community colleges that have profited off of veterans’ benefits without producing graduates. The Borrower Defense to Repayment rule lets borrowers have their federal student debt forgiven if their school engaged in illegal recruiting tactics, lied to them to pressure them to enroll, or did not deliver a quality education.
Interest Waiver – The Education Department has partnered with the Department of Defense to automatically waive the interest on student loans for over 47 thousand military members and vets who received imminent danger or hostile fire pay during their service. This generous interest waiver was started in the fall of 2021 and is retroactive to 2008.
SCRA – The Servicemember Civil Relief Act caps the interest rate lenders can charge during a borrower’s active duty military service at 6%. This benefit is especially helpful for those with high-interest private student loans and Parent PLUS Loans.
Student loan repayment assistance programs
Each military branch offers different student loan repayment assistance options for service members. Here’s a list of some programs:
The Active Duty Army Student Loan Repayment program forgives up to $65,000 of student loans for those who commit to serving for three years, as long as their loans are not in default and they meet certain other requirements.
The Army Reserve Student Loan Repayment Program forgives up to $20,000 in loans for those who serve in the reserve for six years, with private student loans potentially eligible for forgiveness on a case-by-case basis.
The Navy Student Loan Repayment Program forgives up to $65,000 in student loans for sailors who serve for three years.
The Air Force College Loan Repayment Program pays off either 33.33% or $1,500 of a borrower’s principal balance each year, up to a cap of $10,000.
The Coast Guard Loan Repayment Program offers up to $30,000 in student loan assistance.
The National Guard Loan Repayment Program provides up to $50,000 in assistance for those who enlist for at least six years.
Veterans and service members qualify for different student loan forgiveness programs. PSLF is the best program if you’re not disabled because it gets rid of your loans faster. But if you’ve left the military and don’t work in public service, you can still get your loan balance forgiven after making at least 20 years’ worth of payments under one of the department’s income-driven loan repayment programs.
If you’re unsure of the best plan for your loans and personal situation, book a call with me. We’ll build a strategy that puts you in a position to get rid of your debt quickly while paying as little as possible.