Student Loan Relief, Higher Ed Benefits for the Military
This year, July is Military Consumer Protection month, an awareness campaign to promote good financial education resources for service members and veterans alike, as well as to help guard them against fraud and abuse.
First initiated in 2013 by the Federal Trade Commission as Military Consumer Protection Day, this has since developed into a year-round crusade that not only the FTC supports but also the Department of Defense, the Consumer Financial Protection Bureau and Military Saves.
More than 50 federal and state agencies, attorneys general and consumer advocacy groups observe Military Consumer Protection Month, joining together to support military service members and veterans.
The Student Loan Ranger has discussed some student loan-related military benefits in the past -- and now is a great time to provide an overview of all the student loan and other higher education-related benefits available to the military and veterans.
Interest Rate Cap
The Servicemembers Civil Relief Act was enacted during World War II as the Soldiers' and Sailors' Civil Relief Act of 1940, which was an extension of a similar act originally passed in 1918. The act was intended to protect military members from the possible negative consequences of being stationed far from home with no real way to manage financial and legal affairs.
The law has been amended many times since its origination and now covers procedures such as civil judgments, including child support cases, garnishments and tolling related to various statues of limitations.
For student loans and other consumer debts incurred prior to service, while the service member is in active duty status, the SCRA limits the amount of interest that can be charged to 6 percent, regardless of whether the previously agreed to interest rate was higher. The interest rate cap will apply if the borrower -- or borrowers, in the case of a co-signed loan -- or endorser is eligible for the benefit.
[Discover three ways to get academic credit for military training.]
This interest provision applies to both federal and private student loans. As of July 1, student loan holders are required to proactively check the Department of Defense government database to determine whether a borrower may be eligible for the SCRA and then apply the benefit appropriately.
With that said, it's always a good idea to contact your loan holder to ensure that they received the accurate dates of their eligible service. You can also submit your own eligibility evidence to the loan holder, especially if you don't feel the dates they are using accurately reflect your service dates.
Deferments
Active-duty service members can also defer their federal student loan payments during their tours. While most can defer those payments for up to 180 days after their active duty has ended, service members who were enrolled in school when called up can defer for a total of 13 months after their active duty end date. This gives them time to re-enroll in school if they so choose.
Unlike SCRA, the loan holder will not automatically place this deferment on your account, so it's important that you or your borrower's representative submit a completed application to all your federal loan holders.
The original three-year time limit that applied to this benefit was eliminated in 2007; service members are eligible as long as they are considered active duty status.
Most private loans do not offer deferments specific for military service, but service members should reach out to their loan holders and ask about potential options if they can't afford their payments while on active duty.
[Know when it's OK to postpone your student loan payment.]
Public Service Loan Forgiveness
The option to defer student loan payments is nice, but in some cases it may not be the best long-term strategy. Because the federal government pays active duty service members, their service counts as eligible employment under the Public Service Loan Forgiveness Program.
If federal student loan borrowers plan to remain in the military for many years or work for the government, a nonprofit or other eligible employer after they leave military service, using one of the income-driven repayment options may be a much better strategy than deferment.
Service members just need to make sure their loans are federal direct loans before they start the repayment plan or none of their payments will count toward the forgiveness program. As an added bonus, some student loan payments that the DOD made may count toward the 120 needed for the forgiveness program.
[Discover more methods of student loan forgiveness.]
Tuition Reductions and Waivers
In addition to these primarily postcollege benefits, many states offer generous tuition reductions and waivers for service members or veterans who attend their respective state colleges. Some of these discounts also apply to the service members' or veterans' family members. Dozens of scholarships are also available for the military.
Although they can be hard to track down, many good benefits are available for the military and veterans. During Military Consumer Protection Month and throughout the year, we encourage all service members, veterans and their families to some time making sure they fully understand their potential eligibility for these student loan options.
Betsy Mayotte, director of regulatory compliance for American Student Assistance, regularly advises consumers on planning and paying for college. Mayotte, who received a B.S. in business communications from Bentley College, responds to public inquiries via the advice resource "Just Ask" and is frequently quoted in traditional and social media on the topics of student loans and financial aid.
