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In the United States, there are numerous programs in place aimed at relieving or forgiving student loan debt for military personnel. These programs recognize the sacrifices made by service members and aim to provide financial relief as a form of gratitude. The following sections detail two of the most significant programs: the Public Service Loan Forgiveness (PSLF) program and the National Defense Student Loan Discharge program.
Public Service Loan Forgiveness Program
The Public Service Loan Forgiveness (PSLF) Program is a federal program that forgives the remaining balance of student loans for individuals who have made 120 qualifying payments while working full time (considered to be at least 30 hours a week or what the employer considers full time) for a qualifying employer, such as the military or another public service job.
Qualifying Loans and Payments
Not all student loans qualify for this program. Private student loans, for instance, are excluded. Qualifying payments for the PSLF program include those made under the Income Based Repayment (IBR) Plan, the Income Contingent Repayment (ICR) Plan, the Standard Repayment Plan with a 10-year repayment period, and other Direct Loan repayment plans if the payments are at least equal to the monthly payment amount that would have been paid under the Standard Repayment Plan with a 10-year repayment period.
Unique Features
One unique aspect of this program is that zero-dollar loan payments can count toward the required 120 payments if the borrower qualifies for a zero monthly payment under the IBR or ICR programs.
For more information about the PSLF program, the U.S. Department of Education has published further reading.
National Defense Student Loan Discharge
The National Defense Student Loan Discharge program is specifically available to some military members. This program operates under federal law (34 CFR 674.59), which stipulates that service in a location qualifying a military member for hostile-fire or imminent-danger pay can qualify for up to 50 percent of their loan being canceled if their military service ended before August 14, 2008. For those whose service began on or after that date, they may have up to 100 percent of their loan forgiven.
However, this discharge program is limited to Federal Perkins Loans. While the authority for schools to make new Perkins Loans ended on September 30, 2017, those with existing Perkins Loans can still benefit from this program.
Eligibility
To qualify, the military member must have served a full year of active duty, which is defined as 12 consecutive months. Active-duty service for less than a complete year or a fraction of a year beyond a complete year does not qualify.
For more information, military members are advised to contact their lender.
Servicemembers Civil Relief Act (SCRA)
The SCRA provides certain protections to individuals in military service, which include student loan protections. The Act caps the interest rate at 6% for financial obligations, including student loans, that service members incurred prior to their military service. This cap is applicable while the service members are on active duty. The service member must apply for the benefits provided by the SCRA, and the interest rate cap does not apply to consolidated loans or loans taken while on active duty.
Military Service Deferment
This provision allows service members to defer their student loan payments while they are on active duty and up to 13 months after their active duty ends, or until they return to enrolled student status on at least a half-time basis, whichever comes first. This deferment is applicable for Direct Loans, FFEL program loans, and Perkins Loans.
Veterans Total and Permanent Disability Discharge
Veterans who are totally and permanently disabled, or who are determined by the VA to be unemployable due to a service-connected disability, are eligible to have their student loans discharged. This applies to Direct Loans, FFEL program loans, and Perkins Loans. To receive this benefit, veterans need to submit a TPD discharge application to the U.S. Department of Education, providing documentation of their VA disability determination.
Conclusion
The U.S. government provides several routes for military personnel to receive forgiveness for their student loans. Whether through the PSLF program or the National Defense Student Loan Discharge, service members have access to meaningful financial relief. As with any financial decision, it's crucial to research thoroughly and consult with a financial advisor or lender to understand how these programs can impact individual financial situations.
