Service members may be missing valuable student loan benefits resulting in higher loan costs
Like many Americans, active-duty military men and women are carrying significant student loan debt. The New York State Higher Education Services Corporation (HESC), the State’s student financial aid agency that helps people pay for college, reminds men and women serving in the military to review their student loans options to find opportunities for reducing their overall loan costs.
A recent report issued by the federal Consumer Financial Protection Bureau found that many service members are choosing less favorable repayment plans, which may lead to thousands of dollars in excess debt. The average student loan debt was $25,566 for those graduating from college in 2008.
Postponing loan payments through military deferment or forbearance may seem like an ideal option, but it could be costing tens of thousands of dollars over the life of the loan. When the student loan is an unsubsidized federal loan, the interest rate continues to accrue, even though repayment is suspended during deferment or forbearance.
Alternatives to Military Deferment:
Income-Based Repayment (IBR) may be a better option and help save thousands over the life of the loan. IBR sets a borrower’s monthly payment at a fixed amount after accounting for income and family size. The plan allows payments to be reduced, while limiting an increase in principal due to interest capitalization.
Active-duty career service members may qualify for the federal Public Service Loan Forgiveness program (PSLF). Beginning on or after Oct. 1, 2007, anyone making 120 monthly on-time payments while on active duty, or while employed in another eligible public service position, will qualify to have any remaining student loan debt forgiven on their Direct Student Loans.
Taken together, these options could save tens of thousands of dollars, particularly on large student loans. Information on other benefits is available on HESC’s Military Corner website.
Military men and women have unique challenges when considering their student loan repayment options. Taking time to evaluate their repayment options now may save thousands of dollars later.
HESC is New York State’s student financial aid agency that helps people pay for college and a national leader in providing need-based grant and scholarship award money to college-going students. At HESC’s core are programs like the Tuition Assistance Program (TAP), numerous state scholarships, federal college access grants and a highly successful College Savings program. HESC puts college within the reach of hundreds of thousands of New Yorkers each year through programs like these and through the guidance it provides to students, families and counselors. In 2011-12, HESC helped more than 424,000 students achieve their college dreams by providing more than $971.5 million in grants, scholarships and loan forgiveness benefits, including $920.1 million awarded through the Tuition Assistance Program (TAP).