Bullets and Dollars

Student Loan Forgiveness for Military Personnel

The wars may be winding down, but in 2016, military personnel still have more than enough on their minds, without the additional burden of student loan debt. Service personnel shouldn’t have to worry about paying back excessive student loans, but many of them are facing crushing monthly loan repayments, which should be considered a national tragedy.

While the Post 9/11 GI Bill provides some exceptional military education benefits, and the Tuition Assistance Programs help military personnel prevent generating additional student loan debt, neither of these programs help discharge existing loans.

Fortunately, the Military Student Loan Forgiveness Program and the Military College Loan Repayment Programs were created to help members of our Armed Forces get out of existing student loan debt.

The best thing about these loan forgiveness programs is that they remain extremely well-funded, even at a time when budgets are being slashed virtually across the board.

At the time of this post’s publication in January, 2016, Military SLRP and CLRP benefits still remain among the best student loan benefits programs available to service personnel, offering a lifetime student loan debt forgiveness maximum value of up to $65,000.

Loan Forgiveness Programs for Military Personnel

Here are the major programs created to provide loan forgiveness for military personnel:

  1. The Military College Loan Repayment Program (CLRP)
  2. The Public Service Loan Forgiveness Program (PSLF)
  3. The National Defense Student Loan Discharge (NDSLD)
  4. The Servicemembers Civil Relief Act (SCRA)
  5. Student Loan Deferment Programs

Read on for details about how to utilize these programs to help reduce your existing student loan debt.

1. The Military College Loan Repayment Program

Military College Loan Repayment Program benefits are only available if you’ve already accumulated student loan debt and are considering joining the military in an active duty role, or if you’ve previously served in an active duty role and are now considering joining the reserves.

CLRP benefits are available from each branch of the military, including the Army, Navy, Air Force, National Guard, Coast Guard and some branches of the Reserves.

In order to qualify for the military loan repayment program benefits, you’ll have to meet the following eligibility criteria.

You must:

  • Be enlisting in the military for the first time (or joining the reserves after completing an active duty enlistment)
  • Be enlisting in an MOS that is eligible for participation in CLRP (only those positions with shortages are eligible for CLRP benefits)
  • Hold a high school diploma (GEDs and equivalency tests do not qualify you for participation in this program)
  • Score at least a 50 on the Armed Forces Qualification Test
  • Request CLRP participation in writing on your enlistment contract
  • Decline participation in the Post 9/11 GI Bill (if you’re only enlisting for 4 years, if you’re enlisting for 6, this does not apply)
  • Have a student loan that meets CLRP program eligibility guidelines

Only loans that are not in default and meet the following criteria qualify for participation in the CLRP program:

  • Loans that are made, insured or guaranteed under the Federal Family Education Loan Program
  • Loans that are made under the William D. Ford Federal Direct Loan Program
  • Loans that are made under the Federal Perkins Loans program
  • Loans that are incurred for educational purposes and:
  1. Made by a lender that is an agency or instrumentality of a State
  2. Made by a financial or credit institution, or an insurance company subject to examination and supervision by an agency of the U.S. or a State
  3. Made by a pension fund or non-profit private entity

How Much Money Does CLRP Provide?

In 2016, the amount of money you are entitled to varies depending on which branch of the military you join, but the maximum amount of military college loan debt forgiveness you can receive in your life is $65,000.

The amount of money you’ll receive is also determined by your duty-status, with active duty members eligible to receive up to twice as much as those who join the reserves.

Here’s the breakdown by status:

  • Active duty enlistees are entitled to receive up to 33.33% (or $1,500, whichever is greater) of their loans outstanding principle balance paid for each year of service that they complete.
  • Enlistees in the reserves are entitled to receive up to 15% (or $1,500, whichever is greater) of their loans outstanding principle balance paid for each year of service that they complete.

How Does CLRP From Each Branch Work?

CLRP benefits are available from all branches of the military, but each of them has different requirements, different lifetime maximums, and different ways of disbursing the benefit.

Find out how it works with each service branch below:

The Army College Loan Repayment Program

Out of all the service branches, the Army’s CLRP benefits package is typically regarded as the best, since it provides up to $65,000 in lifetime student loan forgiveness.

The benefit is doled out on an annual basis, beginning as soon as a Soldier completes his first year of qualifying service, and provided at a rate of either 33.33% of his or her loan’s outstanding principle balance, or $1,500, whichever amount is greater.

For details, please visit our page on Army SLRP benefits.

The Army Reserves College Loan Repayment Program

Members of the Army Reserves are eligible to receive some loan forgiveness benefits as well, though it’s not quite as valuable as what the regular Army Soldiers get (which makes sense).

After their first year of service, Army Reserves personnel will receive annual forgiveness of up to 15% of their outstanding principal balance, or $1,500 (again whichever amount is greater).

The Navy College Loan Repayment Program

Sailors have access to about the same benefits as Soldiers, with up to $65,000 in lifetime loan forgiveness available to those who qualify for the benefit.

Like Soldiers, they’re only eligible to begin receiving CLRP benefits after they’ve completed at least a year of service, and they can’t qualify for the program unless they agree to sign up for at least four years of service.

For details, please visit our page on Navy CLRP benefits.

The Navy Reserves College Loan Repayment Program

Reserves Sailors don’t have access to quite as much benefit as their Active-Duty counterparts, with a lifetime max of only $10,000 of total loan forgiveness.

They’re only able to begin receiving repayment benefits after completing their first year of service, but unlike the Active-Duty Sailors, they’ve got to sign up for a longer service contract as well, agreeing to serve for at least 6 years.

The Air Force College Loan Repayment Program

Airmen get short-changed in terms of what’s available to them, with only $10,000 in lifetime loan forgiveness benefits on offer, and about the same eligibility rules applied to Soldiers and Sailors.

If you’re main reason for joining the military is to secure some financial assistance for your student loan debt, then you’d do best to look to one of the other branches, because you’re not going to get much help here.

For details, please visit our page on Air Force CLRP benefits.

The National Guard College Loan Repayment Program

Let’s not forget the Guardsmen, who’ve been especially busy in recent years with the wars in Iraq and Afghanistan, and who were finally made eligible to receive some serious financial assistance in 2014.

Both Officers and enlisted personnel are eligible to receive up to $50,000 in student loan forgiveness benefits, but the eligibility criteria for qualifying to receive these benefits is pretty complicated.

For details, please visit our page on National Guard CLRP benefits.

The Marines College Loan Repayment Program

Speaking of being short-changed, things are even worse for the Marines, where no student loan debt forgiveness has been made available since 2011.

In a certain way, it does make sense that they wouldn’t offer the benefit, since the Marines have the lowest rate of enlistment by college graduates, but still… it doesn’t seem very fair.

The Coast Guard College Loan Repayment Program

On the other side of coin would be the Coast Guard, who do receive a substantial percentage of enlistees from amongst the population of college graduates, and who offer up to $30,000 in loan forgiveness to new personnel.

Like the Army, Navy and Air Force loan forgiveness programs, benefits are first made available after completion of a year of service, but unlike them, the limitations include a stipulation that only $10,000 can be received each year.

CLRP & Interest

You’ll note that in the above section we mentioned you will receive payment based on the “outstanding principle balance” of your loan, which unfortunately means that interest is not covered by the CLRP program.

As such, any interest that has accumulated on your student loan debt will remain entirely your responsibility.

While this is a major drawback to the benefit, it doesn’t mean that the program is without value, as you could still save yourself tens of thousands of dollars by participating in CLRP.

CLRP & Taxable Income

A second drawback to CLRP benefits is that as of 2014, they do count toward your annual taxable income, which must be reported to the IRS each year.

When filing your taxes, the military will provide you with a CLRP-specific W-2 which you can use to count this benefit toward your taxable income.

Fortunately (or unfortunately, depending on how you look at it), your benefits will never actually be delivered to you in person, as the loan repayments are made directly from the Federal Government to your lender, and the Government will hold back 28% of its payments to be provided to the IRS, covering your tax liability.

That means that you won’t receive credit for quite as much as you had hoped, but you also won’t have to pay taxes out of pocket for the CLRP benefits that you’ve received.

CLRP & The Post 9/11 GI Bill

In the eligibility guidelines above, we mentioned that CLRP benefits are only available if you’ve waived your right to Post 9/11 GI Bill benefits, but we want to remind you that this only applies if you sign up for a 4 year service contract.

Apparently, agreeing to a 6 year contract will allow you to be eligible for both CLRP benefits (due to your first three years of service) and Post 9/11 GI Bill benefits (due to your second three years of service).

If you ever plan on attending college courses again – EVER – then make sure to enlist for at least 6 years, as you’ll be saving yourself up to tens of thousands of dollars in the long run.

Do not neglect to pay close attention to this essential rule regarding CLRP benefits. Failing to respond appropriately to this single rule could cost you thousands upon thousands of dollars.

2. Public Service Loan Forgiveness Programs

The Public Service Loan Forgiveness Program is one of several debt forgiveness programs recently overhauled by updates to President Obama’s Student Loan Forgiveness Program.

PSLF provides a useful method for members of the military to discharge their student loan debt, though it’s not as direct a process as the Military College Loan Repayment Program, and its also far less likely to provide as much in total benefits.

PSLF allows members of the military who have been employed for at least ten years to have their federal student loans fully discharged, though it’s a bit of a catch-22 since by the time that the 10 year period of required service is up, typical federally funded student loans are likely to have very little debt left, if any at all.

To qualify for the PSLF program, you’ll have to have worked for at least 10 years in what was considered to be a full-time position, meaning at least 30 hours per week, as well as conforming to your employer’s own definition of what a full-time position entails, and you’ll have to have made 120 monthly payments on your student loan debt.

Those 120 monthly payments have to have been made in full and on time, so any that you made which were for a partial amount, or which arrived late, will not count toward your payment minimum.

Any payments made before October 1st, 2007 won’t count toward your 120 payment minimum either, so the soonest that you can qualify for this program will be October 1st, 2017, and that’s only if you have already made, and can continue to make, every single payment on time and for the full amount outlined in your loan service contract.

The program is relatively useless since most eligible federal student loans have been entirely paid off by the time 120 full payments are made (the typical loan term for federally funded student loans is 10 years), but some individuals may be able to take advantage of this program if they’re facing very specific situations.

You’ll have to do some research to find out if this program will actually benefit you, but if you’re interested, check out our page covering public service student loan forgiveness here.

3. The National Defense Student Loan Discharge

If you used a National Defense Student Loan to help pay for the costs of your college education, then you may be able to have those costs partially discharged by taking advantage of this unique program.

Recipients of National Direct Student Loans and Perkins Loans are eligible to receive partial cancellation of their loans (debt forgiveness), for serving in the Armed Forces if (and only if) their military service included at least one full year in a hostile fire or imminent danger pay area.

If you think you might qualify for a National Defense Student Loan Discharge, all you have to do is send a copy of your DD214 discharge form and a letter explaining why you believe you qualify for this program to the company who services your loan.

While success rates for this program haven’t been widely reported, there are definitely some indications that it’s worked for certain individuals, and it is certainly worth pursuing if you meet the stated eligibility requirements.

4. The Servicemembers Civil Relief Act

The Servicemembers Civil Relief Act (SCRA) was passed by President Bush in 2003, and is essentially an addendum to the Soldiers and Sailors Civil Relief Act (SSCRA) originally created in 1940.

These two laws help clarify and define benefits provided to active duty members of the military.

The law provides a variety of benefits, but the most relevant benefit to loan forgiveness is the following tenet:

  • A 6% maximum cap on interest rates for any debt obligations that existed before enlisting in the military

How could you use the SCRA benefit to your advantage? If you have student loan debt (or any other debt for that matter) which is being charged an interest rate higher than 6%, and this debt was created before you joined the service, then you may be entitled to have that interest rate reduced (sometimes dramatically).

While this certainly works for student loan debt, it also applies to credit card debt, mortgages, car loans, or other debt that you may have accumulated prior to enlisting in the military.

Unlike interest deferments, the SCRA interest rate reduction actually forgives debt, it doesn’t just delay your payments til a later date.

While you can’t apply this benefit to any debt you accumulated after joining the military, it is a major bonus to those of you who have pre-service debt which is being charged anything over 6% interest.

To receive this benefit, you’ll need to contact whoever is servicing your loan, in writing, provide them with a copy of your orders, and an official request to have your interest rate reduced according to SCRA law.

You’ll only receive a reduced interest rate for as long as you continue to serve in the military, so don’t delay this request another day. You could stand to save tens of thousands of dollars by acting quickly.

5. Student Loan Deferment Programs

While deferments don’t actually reduce your debt obligations, they can be helpful in delaying them to a later date.

Not everyone in the military is eligible for having their student loan debt deferred, but many service members are. Eligibility rules are determined by status, lender requirements and other conditions.

If a deferment would help you, then consider contacting your lender to find out if they offer student loan deferments for military personnel.

Some lenders provide this benefit to service personnel at the time they join the military, while others offer it only during deployments, but you won’t know what you’re eligible for (if anything) until you speak to the company who services your loan.

Many military students utilizing tuition assistance programs are eligible to defer their student loan payments while they’re actively enrolled in classes, and some service personnel with specific military education are also eligible for student loan deferments.

As an example, Airmen who take classes in the Community College of the Air Force (CCAF) while completing job specific technical training are almost virtually guaranteed to be eligible for loan deferments.

But Is It Enough?

Do these debt forgiveness programs for military personnel offer enough to help prevent our country’s service personnel from being crushed by student loan debt, or are they just the first small step in the right direction?

Have you used any of these programs, and do you have input that you can share with others?

Get More Information

To find out more about how military benefits can save you tens of thousands of dollars in education-related expenses, please visit our Guide to Military Education Benefits.

In it, you’ll find out how to use programs like the Post 9/11 GI Bill, the Yellow Ribbon Program and Military Tuition Assistance to fund your educational expenses.

Please Help!

The only way that the Military Student Loan Forgiveness Programs will continue to be offered is if more people find out that they exist, and sign up for them!

Do your part to ensure that we don’t lose access to this important benefit by spreading the word and posting a link to this page on your Facebook, Twitter, or Google+ account.

Thank you for your support, and please come back soon!


Tim's experience battling crushing student loan debt led him to create the website Forget Student Loan Debt, where he offers advice on dealing with excessive student loans and advocates a cautious approach to funding education costs via borrowed money.