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Paying Back Military Student Loans

All students must begin to repay their student loans at some point. But how much should you set aside to accomplish this?

After nine months without a payment, your federal student loan will default. You’ll not only be subject to endless collection calls, but the government can take you to court and may even garnish your wages.

Your credit will suffer, and you won’t be able to qualify for easily manageable repayment plans. Putting a small amount of money toward your monthly debt will significantly reduce student default risk.

You may be eligible for veteran and military student loan forgiveness programs if you have trouble making payments. Below are some ways to calculate your payment and stay current in repaying your loan.

How Much Income Should You Allocate to Your Student Loans?

While experts vary on how much you should save each other, there are a couple of general guidelines.

The Consumer Financial Protection Bureau (CFPB) suggests student debt payments should not be more than 10 percent of your gross monthly income, and some experts add that it should be no more than 20 percent of your “discretionary income.”

The CFPB also states that you should not borrow more than the salary you expect to make one year after graduating. These guidelines will help you keep your monthly student payments within a sensible range commensurate with your income.

While 10 percent may seem like a small amount, it may be easier to accomplish for some more than others. Veterans with families to support or a mortgage to pay may need to set aside a smaller amount.

Related: Student Loan Guide for Military and Veterans

Fixed and Graduated Payment Amounts and Plans

Anyone who is a federal student loan borrower has access to repayment options through the government’s Standard Repayment Plan (based on a fixed amount), a Graduated Repayment Plan (payments are low the first two years, then increase about every two years), and an Extended Repayment Plan (fixed or graduated payments over 25 years).

These plans base the loan payments you make each month on how much you owe, the interest rate, and a repayment time period. After leaving school, students are placed under the Standard Repayment Plan unless they specify otherwise.

There are also plans based on your family size and income regardless of the debt amount; these are known as  Income-Driven Repayment Plans (IDR plans). They are:

  • Saving on a Valuable Education (SAVE) Plan: 10 percent of discretionary income
  • Pay As You Earn (PAYE) Repayment Plan: 10 percent of discretionary income but not more than the amount under the Standard Repayment Plan
  • Income-Based Repayment (IBR) Plan: 10 or 15 percent of your discretionary income but not more than the amount under the Standard Repayment Plan
  • Income-Contingent Repayment (ICR) Plan: 20 percent of your discretionary income, or what you would pay on a fixed repayment plan with over 12 years, adjusted according to income

Calculating the Amount

Whatever plan you choose may dictate how much you pay each month, but it is wise to make sure you have budgeted enough money to cover the payment. To do this, divide your gross annual income by the number of months in a year. For example, if you make $60,000, you would make $5000 gross per month. Ten percent of that total is $500.

The best way to manage loan repayments is to borrow as little as possible, so you can afford to make payments during the time allotted. For additional help you can use the Department of Education’s Loan Simulator to estimate your monthly payments.

If you’re struggling to make your monthly payments, the military can help with student loan forgiveness through its many programs (some programs for current service members and veterans are listed below.) You can also contact your loan servicer for guidance.

Military Student Loan Forgiveness Programs

The Servicemembers Civil Relief Act (SCRA)

If you acquired student loans before enlisting, the SCRA can help you lower your loan interest rate to 6 percent while on active duty. Active service members and borrowers/cosigners qualify. The SCRA applies to private and federal loans on or after August 14, 2008.

The Military College Loan Repayment Program (CLRP)

If you’ve already gone to college and are now considering joining the military, the CLRP may be a good choice. To qualify, you must not have served before enlisting. Each branch has its own requirements for CLRP. It does not cover a loan’s interest and private loans are not eligible.

The Army Student Loan Repayment Program

The Army Student Loan Repayment Program can issue loan repayments of up to 33.33 percent of the current principal balance of a federal student loan per year, or $1,500, whichever is greater after the first year of service is complete.

Benefits cap at $65,000 in total loan forgiveness. To qualify, you must enlist for at least three years and score at least 50 on the Armed Services Vocational Aptitude Battery.

The Navy Student Loan Repayment Program

The Navy Student Loan Repayment Program can issue loan repayments of up to 33.33 percent of the current principal balance of a federal student loan per year after the first year of service is complete.. Benefits cap at $10,000 in total loan forgiveness. You must enlist for a minimum of four years to qualify.

The Air Force College Loan Repayment Program

The Air Force College Loan Repayment Program can issue loan repayments of up to 33.33 percent of the current principal balance of a federal student loan per year, or $1,500, whichever is greater after the first year of service is complete. Benefits cap at $10,000 in total loan forgiveness.

The National Guard Student Loan Repayment Program

The National Guard Student Loan Repayment Program requires applicants to score at least 50 on the Armed Services Vocational Aptitude Battery, enlist for at least six years, and enroll with eligible jobs through the Guard. This program can issue loan repayments of up $50,000, and applicants can earn $7,500 annually.

College Loan Repayment Program (Army and Navy Reserves)

This program can issue federal loan repayments of up to 15 percent or $1,500, whichever is greater, for those enlisting for the first time. You must have the loans prior to enlisting and sign up for a minimum of six years.  Benefits cap at $20,000.

National Defense Student Loan Discharge

If you have at least a year in hostile fire and have already completed your service, you may qualify for this program. The discharge will vary, so contact your loan or branch officer for further information.

Total and Permanent Disability (TPD) Discharge for Federal Student Loans

If you are a veteran suffering from total or permanent disability, you may qualify for this program, which allows total forgiveness for federal loan holders who cannot pay their loan balance.Your injury must have occurred during your service, preventing you from employment and the income you’ll need to pay the loan.

Public Service Loan Forgiveness (PSLF) for Federal Student Loans

This program forgives the balance remaining on direct loans for those employed by the government or a not-for-profit entity after they’ve made the equivalent of 120 qualifying monthly payments through an accepted repayment plan while working full-time for an eligible employer.

Related: Student Loan Guide for Military and Veterans