Tackling Student Loan Debt
By Legal Office, 17th Training Wing Legal Office
/ Published September 08, 2016
GOODFELLOW AIR FORCE BASE, Texas -- If you have a student loan, federal or private, that you took out before you came on active duty and are now on active duty, you are eligible to have your interest rate lowered to six percent. You must submit your request to your loan provider asking to lower your interest rate under the Service Members Civil Relief Act while on active duty or within 180 days after leaving active duty. Your request must be in writing and include a copy of your orders. The lower interest rates will be applied retroactively for the entire period of your active duty service.
All active duty service members may qualify for Public Service Loan Forgiveness after making 120 qualifying monthly payments. To get started, you need to have qualifying loans, sign up for a qualifying payment plan, and certify you are employed in public service. State and federal government or military service count.
Only federal Direct Loans are qualifying loans for PSLF. To learn more about your loans, check out www.nslds.ed.gov. The best qualifying payment plan for many borrowers is the Income-Based Repayment. IBR sets a low monthly payment based on your income, allowing you to pay the smallest amount and receive the maximum loan forgiveness. To get started, enroll online at www.studentloans.gov or contact your student loan provider.
The next step after ensuring that you have a qualifying loan and payment plan, is to certify that you work for a qualified public service employer. Your student loan provider can get you the Employment Certification for Public Service Loan Forgiveness form to qualify for loan forgiveness. Your employer will need to complete and sign section three.
If you have newer loans, made after October 1, 2011, you may be able to lower your monthly payment even further. Pay As You Earn is a different payment plan that offers lower monthly payments than IBR. Eligible borrowers must have no federal loans from before October 1, 2007. Learn more at www.studentloans.gov.
Ask your loan provider about other options for your federal loans. If you are serving in an “area of hostility” that qualifies you for special combat pay, you may not have to pay interest on Direct Loans made on or after October 1, 2008, for up to 60 months. Perkins Loan borrowers serving in an “area of hostility” for more than 365 days may be eligible to have their loan balance reduced for each qualifying year of service. Military deferment may be available for some service members if you’re on active duty or in the National Guard during certain qualifying times. But be aware, the unpaid interest may cause your total debt to grow.
Want loan forgiveness but have federal loans that don’t qualify? Consider consolidating your loans. Borrowers with older federal loans may be able to take out a new Direct Consolidation Loan in order to be eligible for Public Service Loan Forgiveness. But, be careful. While this option may make sense for borrowers with very high levels of student debt, you may lose eligibility for your interest rate reduction under the SCRA if you’re on active duty and your student loan interest rate is higher than six percent.
Manage your private student loans. If you’re having trouble making ends meet and you’re serving on active duty, you may be eligible to postpone private student loan payments through deferment or forbearance options. Be aware that while the terms of alternative payment plans will vary, the interest on your loans will continue to grow even after you stop making payments. For most service members, it’s better to pay your private student loans if you can. If you can’t afford to repay your loans while you’re on active duty, ask your loan provider about interest-only payments instead of deferment or forbearance. This will stop your loan balance from growing and may still provide you with some short-term relief.
Have an issue with your loan provider or debt collector? Visit www.cfpb.gov/complaint or call 855-411-2372. They will forward your complaint to the company and work to get a response from them. If you have questions, visit www.consumerfinance.gov/askcfpb. Or, you may contact your local Legal Office.