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.
The GI Bill is one of the most valuable benefits available to military service members and veterans pursuing higher education. However, a common question that arises is whether the GI Bill can be used to pay off existing student loans.
The short answer is no, the GI Bill cannot directly pay off student loans. But military members do have options to tackle student debt. Keep reading to understand how the GI Bill works, alternate ways to pay off loans, and steps to minimize college costs.
How the GI Bill Works
First let’s review how the GI Bill functions. The GI Bill refers to education benefits administered by the Department of Veterans Affairs (VA). There are a few types of GI Bill programs
- Montgomery GI Bill – For those who enrolled and contributed $100 per month while on active duty prior to 2011
- Post-9/11 GI Bill – For those who served on active duty for at least 90 days after Sept. 10, 2001
- Transfer of Entitlement – Allowing Post-9/11 GI Bill benefits to be transferred to dependents
The Post-9/11 GI Bill is most common today, It provides up to 36 months of benefits to cover expenses like
- Tuition and fees
- Monthly housing allowance
- Books and supplies stipend
- Tutorial assistance
The key is that GI Bill benefits are paid directly to the college or training program, not the student. The VA also issues housing and book stipends directly to the military member. So the GI Bill does not provide any lump-sum payment that could go toward paying off existing student loans.
Can the GI Bill Ever Pay Loans?
There is no way to request GI Bill benefits specifically for repaying loans. But military members can use their benefit payments toward loans if they want.
If you get a GI Bill housing allowance every month, for example, you could choose to use that money for student loans instead of living costs. However, the GI Bill does not have a way to directly pay off loans.
The one exception is Veterans Educational Assistance Program (VEAP) benefits. If someone donates to VEAP and doesn’t use the program, they can ask for their money back. This refund could then go toward loans.
Alternate Options to Pay Student Loans
Since the GI Bill itself does not pay loans. What choices do people in the military have? Here are some ways to deal with student loans.
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Military Student Loan Repayment Programs—Each branch has programs to help enlisted members in certain jobs pay back their loans. The Army, Navy, and Coast Guard can pay back loans of up to $65,000
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Public Service Loan Forgiveness – Those employed full-time in public service, including the military, may receive federal loan forgiveness after 10 years of payments.
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Income-Driven Repayment – Federal repayment plans that base payments on income could lead to loan forgiveness after 20-25 years.
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Military College Credits – Earn credits for military training that apply toward a degree, reducing total tuition costs.
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CLEP Exams – Pass College-Level Examination Program (CLEP) tests to earn college credits and bypass certain classes.
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Military Scholarships – Apply for military scholarships to help cover tuition and expenses.
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Yellow Ribbon Program – Receive additional assistance from colleges participating in this GI Bill program.
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Spouse Transfer – If married, a service member could transfer GI Bill benefits to their spouse pursuing higher education.
How to Minimize Education Costs
In addition to the above options, here are some tips to cut down on education costs and avoid debt:
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Attend an in-state public school which tends to be significantly cheaper than private or out-of-state options.
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Complete general education credits and an associate degree at a community college before transferring to a university.
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Maintain a high GPA and test scores to qualify for academic scholarships.
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Work a part-time job and save as much as possible to help cover expenses.
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Limit borrowing and rely more on grants, scholarships, work-study, and personal savings.
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Pursue certifications, vocational training, or associate degrees that take less time to complete than bachelor’s degrees.
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Research best value schools that provide a quality education for an affordable price.
Key Takeaways
While the GI Bill does not directly pay off student loans, military members have options:
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Repayment programs and federal loan forgiveness could eliminate loans over time
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GI Bill benefits received could be applied toward loans if desired
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Take steps to minimize college costs and avoid debt as much as possible
Eligibility for Student Loan Repayment Programs
To be eligible for the student loan repayment program, you must:
- Sign up for your first active-duty service of at least three years in a specialty that qualifies, or sign a contract as an officer candidate.
- You have to join the National Guard for at least six years if you want to.
- Have a qualifying ASVAB score.
- Have a student loan that is not in default. The loan had to be taken out before the person went on active duty.
Only certain loans qualify. Currently, this includes:
- Stafford Student Loans (GSLs)
- Perkins Loans
- Federally Insured Student Loans (FISL)
- Supplemental Loans for Students (SLS)
- Parents Loans for Undergraduate Students (PLUS)
- 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, and the Coast Guard will repay up to $30,000 with yearly limits.
The National Guard’s general repayment amount is up to $50,000, but as with any program, benefits can fluctuate based on funding issues. For example, in July 2023, the Army National Guard ceased payments to soldiers for student loan debt within the Student Loan Repayment Program, or SLRP.
Remember that the amounts given are maximum amounts and may be limited to 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 portion of the payment will be held back, so it’s important that you file your taxes with this W-2. This withholding will keep you from getting a big tax bill at the end of the year since payments are considered income. In general you will receive a refund from the IRS.
Example: $2,500 would be withheld from $10,000. You might be able to get all of your money back from the IRS and use it to pay off your student loans.
How Do I Take Advantage Of The Military Student Loan Repayment Plan?
FAQ
Will the military pay off my student loan debt?
The Loan Repayment Program (LRP) is an extra incentive that the Army gives to people who are very qualified to join. Under the LRP, the Army will repay part of a Soldier’s qualifying student loans. Only specified Military Occupational Specialties (MOSs) qualify for the LRP.
How to get 100% student loan forgiveness?
If you work full time for a government or nonprofit organization, you may qualify for forgiveness of the entire remaining balance of your Direct Loans after you’ve made 120 qualifying payments—i. e. , at least 10 years of payments. To benefit from PSLF, you need to repay your federal student loans under an IDR plan.
Can I use GI Bill to pay off student loans on Reddit?
Will 100% VA disability pay off student loans?
If you get a total and permanent disability (TPD) discharge, you don’t have to repay your federal student loan(s) or complete your TEACH Grant service obligation. As of May 2023, around 492,000 borrowers have gotten loan forgiveness through TPD discharge. And there are multiple ways to qualify!.
