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? 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 month, 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 for some than for 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
Federal student loan repayment options include Income-Driven Repayment (IDR) plans. Availability depends on when you borrowed and your loan type. Your options may include:
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Income-Based Repayment (IBR) Plan: Payments are generally a percentage of discretionary income for new borrowers on or after July 1, 2014, and 15 percent for those who borrowed before that date. Payments are meant to stay within the 10-Year Standard Repayment Plan amount.
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Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) Plans: These plans are closed to new enrollees. Borrowers who were successfully enrolled in PAYE or ICR before the phase-out deadline may remain in these plans.
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Saving on a Valuable Education (SAVE) Plan: This plan calculation is based on discretionary income, but implementation is blocked or altered due to ongoing federal court rulings. Check with your loan servicer for the current operational status of the SAVE plan.”
Military Student Loan Forgiveness Programs
The Servicemembers Civil Relief Act (SCRA)
If you took out student loans before enlisting, the SCRA can help you lower your 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.
Army Student Loan Repayment Program
The Army Student Loan Repayment Program can issue loan repayments for a percentage of the current principal balance of a federal student loan per year after the first year of service is complete. The 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.
Navy Student Loan Repayment Program
The Navy Student Loan Repayment Program can issue loan repayments of a percentage of the current principal balance of a federal student loan per year after the first year of service is complete. You must enlist for a minimum of four years to qualify.
Air Force College Loan Repayment Program
The Air Force College Loan Repayment Program can issue loan repayments of up to a percentage of the current principal balance of a federal student loan per year after the first year of service is complete. The 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.
College Loan Repayment Program (Army and Navy Reserves)
This program can issue federal loan repayment for those enlisting for the first time. You must have the loans prior to enlisting and sign up for a minimum of six years.
National Defense Student Loan Discharge
If you have at least a year of hostile fire experience 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 with a total or permanent disability, you may qualify for this program, which offers full forgiveness of federal loan balances for borrowers who cannot pay their loans. 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. But this program has undergone multiple changes, and you should review the current guidelines before applying.
Related: Student Loan Guide for Military and Veterans
About the author
Michelle Nati is a contributing writer to CollegeRecon who has written about higher education and finance for Granita Media/Big Edition site Work and Money. She's also written law content for Leaf Group's Legal Beagle site and is a ghostwriter of non-fiction books. She lives in Los Angeles and spends her spare time combing flea markets for vintage photos and decor and playing with her dogs, Jellybean and Jukebox.
