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EDUCATIONAL SERVICES

COLLEGE STUFF

FINANCIAL AID

LOANS

 

Education Loan Sampler

There are many many different education loan programs available to all students.  Some of them are:

A number of publications with information on loans are available in the Education Center.

 

MAXIMUM INTEREST RATE

 

The Servicemembers' Civil Relief Act reduces to 6% the interest rate on any student loan you incurred before you entered the military (but after 01 July 2008) for as long as you remain in uniform.  That is, if you have a student loan with an interest rate higher than 6%, you can get it reduced to 6% retroactive to the date you entered the military.

To get a higher interest rate reduced to 6%, you must "provide to the creditor written notice and a copy of the military orders calling [you] to military service and any orders further extending military service, not later than 180 days after the date of [your] termination or release from military service."  (50 U.S. Code App. §527(b)(1))

Once your creditor has received your written notice and a copy of the orders calling you to military service, it has to treat the debt as if the interest rate was 6% effective as of the date you were called to military service.

This provision applies to all other types of loans as well and it applies to loans incurred by you or by you and your spouse jointly.  For other-than-education loans, there is no requirement that it was incurred after 01 July 2008; it just has to have been incurred before you entered the military.  And if the loan in question is "a mortgage, trust deed, or other security in the nature of a mortgage", interest is to be reduced for as long as you're in the military plus one year.  (50 U.S. Code App. §527(a)(1)(A))

 

LOAN REPAYMENT

 

The new Consumer Financial Protection Bureau (CFPB) is taking the lead in ensuring those who have student loans (particularly servicemembers) aren't taken advantage of.  To that end, it's just published a report about repayment of student loans by military personnel.  Among other things, it reported that "Many servicemembers are adopting less favorable repayment plans, which may lead to thousands of dollars in excess debt."  The report also contains a link to a new Student Debt Repayment Assistant.

The CFPB has also developed a "Action Guide for Servicemembers with Student Loans", which you should definitely read carefully.

The Department of Education's web site also has many pages describing ways to repay student loans.  Below is a sample.

 

Student Loan Consolidation

 

If you entered the Coast Guard with more than one student loan and are now paying them off, you might want to consider consolidating them so you only have one payment to make each month. Don’t just jump at the first loan consolidation company you see an ad for, however. First, check out the Department of Education’s web site on student loan consolidation.

 

Income-Based Student Loan Repayment Program

If you’re having problems repaying federal student loans, you owe it to yourself to check out the Income-Based Repayment (IBR) program.  In a nutshell, the program “caps your required monthly payment at an amount intended to be affordable based on your income and family size.”  The program applies to all Stafford, PLUS, and Consolidation Loans made under either the Direct Loan or FFEL Program with a few exceptions.  Those are:

Student Loan Forgiveness

 

Starting within the next few years, you may qualify for forgiveness of the remaining balance due on your eligible federal student loans after you have made 120 payments on loans under certain repayment plans while employed full time by certain public service employers.  Only non-defaulted loans made under the William D. Ford Direct Loan ProgramSM are eligible for loan forgiveness.

The Direct Loan Program includes (but is not limited to) the following types of loans:

“Public service”, for purposes of this program, includes employment by any federal, state, local, or tribal government entity (including the military, public schools and colleges, public child and family services agencies, and special governmental districts).

“Since borrowers must make 120 monthly payments on their eligible federal student loans beginning after October 1, 2007 before they qualify for the loan forgiveness, the first cancellations of loan balances will not be granted until October 2017.”

For more information about this program, go to the Department of Education’s web site.

 

Civilian Employee Student Loan Repayment Program

 

The Coast Guard has a program which will “repay certain types of federally insured student loans as recruitment or retention incentive for certain Coast Guard civilian employees paid from appropriated funds.”

For more information, see ALCOAST 419/11 and the directive which authorizes it,  COMDTINST 12500.3.

 

Military Student Loan Repayment Program

 

In 2004 Congress authorized the Coast Guard to repay the loans “of any person for service performed on active duty as an enlisted member of the Coast Guard in a specialty specified by the Secretary.”  The amount that can be repaid is 33⅓ percent of the loan (interest and principal) or $1,500 (whichever is greater) for each year of service. (Title 14, U.S. Code §472)  The purpose of this statute and the parallel DoD statute is to give the armed forces another way to improve recruiting and retention.

As far as I’ve been able to determine, however, the Coast Guard has not used this authority.  The rationale for not doing so may be that since the Coast Guard isn't having problems with either recruiting or retention, it doesn’t need to implement this provision.

 

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Last Modified 01/17/2013