MYCAA is an amazing program, but for a lot of military spouses it might not be enough. And the program isn’t open to everyone. This means that some military spouses will have to use student loans to help fund their education. While hearing about student loans can seem a bit overwhelming, they can be the right answer to help you with your educational plans.
Related: Information on colleges with military discounts
Related: Transfer GI Bill to Spouse and Dependents
Types of Loans
There are both private and federal student loans. Federal loans are from the government, private can be from individual lenders, banks, credit unions, schools, and even state agencies. Usually, you should start the process by applying for federal student loans and go from there.
There are some major differences between federal loans and private ones.
With a federal loan:
- You don’t have to start paying them back until you graduate, you leave school, or change your enrollment status to less than half-time.
- The interest rate is fixed and often times lower than you would find with a private loan. They are also much lower than typical credit card interest rates.
- Students who have a financial need will likely qualify for a subsidized loan where the government will pay the interest while they are in school at least half-time.
- You don’t need a credit check for most federal loans, they can also help you establish your credit.
- You will not need a cosigner for these loans, and your interest may be tax deductible.
- You can consolidate your loans into a direct consolidation loan and if you have trouble paying them back, you might be able to temporality postpone them or lower your payments.
- There are several different payment options, no-prepayment penalty, and you might even have the option of having your loans forgiven if you work in public service.
With private student loans:
- You might have to start paying your loans back while you are still in school and they will probably have higher interest rates.
- They will not be subsidized, and you might be required to have established credit.
- You might need a co-signer, and your interest might not be tax deductible.
- You can’t consolidate them into a direct consolidation loan, and there won’t be as many deferment options.
- There could be prepayment penalties and probably no loan forgiveness programs.
How to Apply For Student Loans
For federal loans, you would apply through FAFSA (Free Application for Federal Student Aid.) The form is easy to use, and you can fill it out online. By filling out this form, you are starting the process for federal aid in the form of grants, which you don’t have to pay back, loans, which you do, and work-study options.
The form for the 2018-2019 year was opened in October of 2017 and will be due June 30, 2019. After your FAFSA is processed, each college that accepts you will send you a financial award letter.
For private loans, you will need to do your research. Each loan could be a little different with its own terms, fees, and what you need to do to apply. You can also check with your college or university to see if they have a list of preferred private loan providers to apply to.
After you compare loans, you should apply for the ones you are comfortable with that you qualify for. Since you might need a cosigner for a private loan, make sure to find someone you trust, usually someone from your family.
Paying Student Loans Back
Since student loans are loans and not grants, you will have to pay them back. The good news is, for federal loans, you will probably get a six month grace period. This is designed for you to be able to have time to find a job before you start to have to pay them back. If you do drop out of school or go down below half-time status, you will have to start paying them off then.
The grace period applies to direct subsidized/unsubsidized loans, subsidized/unsubsidized Federal Stafford loans, and some private loans. The grace period does not apply to PLUS (Parent Loan for Undergraduate Students.)
You can also choose to consolidate your loans during your grace period.
As far as payment plans go, that depends on the repayment plan you have set up. The default plan is the Standard Repayment Plan which is a 10-year program of fixed monthly payments.
There are also other options if you are having trouble keeping up on your payments. These are:
- Revised Pay As You Earn plan (REPAYE) which is 10% of your discretionary income.
- Pay As You Earn plan (PAYE) which is also 10% of your discretionary income, but never more than the 10-year Standard Repayment Plan amount.
- Income-Based Repayment plan (IBR) which is 10% of your discretionary income if you’re a new borrower on or after July 1st, 2014 but never more than the 10-year Standard Repayment Plan amount. It would be 15% if you are not a new borrower on or after July 1st, 2014.
- Income-Contingent Repayment plan (ICR) which is lesser of either 20% of your discretionary income or what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income.
Help for paying student loans back
As a military spouse you might be wondering if there is help for you and your student loans. Unfortunately, there isn’t a specific program for military spouses. Those who serve in the military can use SCRA (Servicemembers Civil Relief Act) to cap the interest rates on student loan payments to 6%, however since the military spouse isn’t on their spouse’s student loan, it will not apply to them.
The good news is that there are programs that can help even if they are not directly for military spouses:
The PSLF program will forgive the remaining balance on direct loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.
You qualify based on your employer, not on your specific job. You will need to have employment from these types of organizations to qualify:
- Government organizations at any level, meaning federal, state, local, or tribal.
- Not-for-profit organizations that are not tax-exempt under section 501 ( c ) (3) of the Internal Revenue Code.
- Other types of not-for-profit organizations that are not tax-exempt under section 501 ( c ) (3) of the Internal Revenue Code if their primary purpose is to provide certain types of qualifying public services.
- Serving as a full-time Americorps or Peace Corps volunteer also counts.
To apply you must complete and submit the Employment Certification as soon as possible as you have to make sure you are making qualifying payments along the way.
Teacher Loan Forgiveness is a way for teachers to be able to be forgiven for some or all of their student loan debt. You will need to teach full-time for five consecutive academic years and do so in a low-income school or educational service agency and meet other qualifications. If you qualify you can be forgiven for up to $17,500 on your direct subsidized and unsubsidized loans as well as your subsidized and unsubsidized Federal Stafford loans.
The problem military spouses might have is that they do not get to live somewhere where they could have taught for five consecutive years. However, there was a bill that was introduced, the Preserving Teacher Loan Forgiveness for Military Spouses Act, which would allow military spouses to qualify as long as they had taught five full years as a teacher, not needing them to be consecutive. It has however not yet been passed.
This program will allow you to have some or all of your student loan canceled or discharged. You will need to qualify and to do that you must:
- Work full-time in a public or nonprofit elementary or secondary school as a teacher.
- The school you work at must serve low-income families, or be a special education teacher, teach in mathematics, science, foreign languages, or bilingual education, or in any other field of expertise determined by a state education agency to have a shortage in that subject.
- You must have taught full-time for a full academic year or its equivalent
The cancellation works like this: 15% per year for the 1st and 2nd years, 20% for the 3rd and 4th years, and 30% for the 5th year.
You must request appropriate forms from the office that administers the Federal Perkins Loan program at the school that holds your loan.
As a military spouse, there are options for you as far as finding funding for your education. Student loans is a big one that can help you achieve your educational dreams. Take the time to do your research and figure out what would be best for you.
Related: 10 Unexpected Careers to Pursue Through MYCAA