Several military programs offer scholarships and grants in exchange for your prior military service, or a promise of service in the future. But, what if you already have a degree and are working to pay off your student loans? You may want to consider one of the military’s student loan repayment programs.
In 2013, CNN reported on Thomas McGregor, an attorney who enlisted in the Army to help pay off his $108,000 student loan debt. Between his income and a loan-assistance program, he was student loan free within four years.
Military service isn’t for everyone, and you should seriously consider the potential impact of signing up for a multi-year commitment. It was a good fit for McGregor, who decided to stay on after his three-year service ended. However, he was deployed to Iraq and Afghanistan, and some of his friends were injured or died in combat.
If you decide joining the military is a good choice for you and are paying down student loans, the loan assistance programs could guide your decision to choose one branch over another. While the different programs sometimes share similar names, the qualifications, requirements, and award amounts can vary from one branch’s program to another.
Make sure the loan-repayment guarantee is in your contract before enlisting and double-check your loan’s eligibility for repayment through the program. For example, a program may pay off some types of federal student loans, but not state or private loans. Restrictions also apply based on which position you enlist in, your length of service, and whether or not you have prior military experience. In some cases, the loan payments count as income for tax purposes.
The military’s loan repayment programs and offers can change based on government funding and a branch’s need for new recruits. You can find an overview of the programs below, and you should follow-up with a local recruiter to clarify specifics and find out whether or not you’ll qualify.
- JAG Corps Student Loan Repayment Program – Eligible attorneys can receive up to $65,000 in student loan repayments, payable over three years following the completion of your first year of service. The payments can go towards undergraduate, graduate, or law school loans and payments will go directly to your lender. If you stay on past four years, then you can qualify for a $60,000 in cash bonuses: $20,000 for two more years of service and another $40,000 for four more. That’s not specifically earmarked for your loans, but you can use them to pay off your debt. That would be $125,000 over 8 years, in addition to your salary and other benefits.
- Healthcare Loan Repayment Programs – The Army offers special pay and incentives to doctors, nurses, dentists, veterinarians, psychologists, and other healthcare professionals. Depending on your profession and specialty, you may be eligible for up to $120,000 in student loan repayments over three years of active-duty service in addition to salary, bonuses and special pay. Reserve-duty servicemembers may receive up to $50,000 for three years of service for loans.
- College Loan Repayment Program – The Army also offers some highly qualified Military Occupational Specialists (MOSs) student loan assistance if they enlist for at least three years of service. At the end of each of the three years, you’ll receive the greater of $1,500 or 33.33 percent of your outstanding principal loan balance, less taxes. There’s a maximum potential payout of $65,000.
Army National Guard and Reserves
- College Loan Repayment Program – The Army National Guard and Army Reserves have similar student loan payments for some highly qualified Military Occupational Specialists (MOSs). You could receive the greater of $1,500 or 15 percent of your outstanding loan principal at the end of each year of service, up to a maximum of $20,000. To qualify, you must enlist and serve for at least six years. Parent PLUS loans can be covered.
- College Student Pre-Commissioning Initiative Student Loan Repayment Program – The Coast Guard offers recent college graduates who are 19- to 27-year-olds up to $10,000 per year, for six years, in student loan aid. The program requires candidates to complete a series of trainings, including basic training and leadership training, and enlist for five years as a commissioned officer. There are some interesting catches: you can’t have more than two dependents and if you’re single, you can’t have sole or primary custody of dependents. Online degrees also don’t qualify.
- Health Professions Loan Repayment Program – The Navy pays select health care professionals up to $40,000, minus approximately 25% for federal income tax, in student loan payments each year in exchange for agreeing to continue, or begin, active duty service. The hefty tax portion will be taken out prior to sending the payment along to your lender.
- College Loan Repayment Program – Pays up to $65,000 in student loan payments if you’re serving in your first enlistment.
- Student Loan Repayment Program – You could receive the greater of $500 or 15 percent of your initially disbursed loan amount each year, with a maximum $50,000 payout and minimum six-year service agreement. You must have at least one disbursed Title IV federal loan.
Public Service Loan Forgiveness
The Public Service Loan Forgiveness (PSLF) program isn’t military specific, instead it’s a federal loan-forgiveness program contingent on your employment with a qualified government or non-profit organization. Only federal student loan that are part of the Direct Loan program qualify for PSLF. However, you may be able to consolidate non-qualifying federal loans (such as a Perkins loan) into a qualified Direct Consolidation Loan.
With PSLF, your remaining loan balance will be forgiven after you make 120 qualifying monthly payments (10 years’ worth) while employed full-time. The 120 payments don’t need to be consecutive, and some, or all, of the employment, could be within the military. You currently won’t have to pay income taxes on the forgiven amount.
Additional Military Benefits
In addition to the loan repayment programs, your federal student loans may be eligible for a capped 6-percent interest rate during active duty, and up to five years of no interest if you’re serving in qualified hostile areas. You may also be able to postpone payments during active duty, but the loans will still accrue interest.
The military’s student loan forgiveness programs may be able to help repay your loans, but don’t take the decision to enlist lightly. Other employers offer loan repayment programs, and potentially less-dangerous jobs qualify for the PSLF. If you do decide to enlist, compare the loan repayment programs and be sure to get the loan repayment included in your contract.