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How Service Members and Veterans Can Pay for College

Sep 11, 2020 5 min read John Schmoll

Key Takeaways

  • Limit your borrowing to 10% of your monthly income.
  • Know what scholarships and benefits are available to service members.
  • Discuss your options with an academic financial aid counselor.

 

As the cost of college tuition continues to rise, American families are scrambling to find ways to pay for it. The financial challenge can feel especially overwhelming for military service members who are planning to pay tuition for themselves, a child, or other family members. Thankfully, there are plenty of options available to service members to help them pay for college while still serving our country, as well as for veterans who have returned from duty.

 

 

How much should I borrow?

Before we explore the college funding options specifically available to service members, it's worth considering how much anyone should borrow for college.

A good rule of thumb Opens in new window is to limit your debt to no more than your expected earnings the first year after graduation. While that might be hard to pin down, these salary statistics Opens in new window from the U.S. Department of Labor can help. If your desired career earns an average entry salary of $45,000, for example, it's best to limit your total amount borrowed to no more than $45,000.

Another way to estimate the amount you should borrow is to work backward from the amount you can afford to pay back each month. Your borrowing limit should require no more payment toward principal than 10% of your monthly gross income. So if you make $60,000 per year and bring home $5,000 each month, your total student loan debt payment should not exceed $500.


Student loans

A number of benefits are available to service members seeking to earn a college degree, including those outlined below:

  • Servicemembers Civil Relief Act (SCRA) Interest Rate Cap – The Federal Student Loan Office Opens in new window of the Department of Education caps interest on student loans obtained prior to a borrower's military service at 6% during periods of active duty, as a provision of the Servicemembers Civil Relief Act. The amount of interest you pay on your student loans matters because the higher your interest rate, the more you will pay overall for your degree. For example, if you borrow $30,000 in student loans at an interest rate of 6%, you will pay a total of $39,967.45, according to FinAid Opens in new window. Paid back over 10 years, that works out to a monthly loan payment of about $333.
  • Military Service Deferment – Another valuable benefit available to active duty service members is the ability to postpone loan repayment. While certain specifications must be met, this can provide significant relief when active duty complicates your ability to repay student loans.

Additional benefits available to service members, which are outlined by the Federal Student Aid Office of the U.S. Department of Education include:

  • Deferments after active duty
  • Public service loan forgiveness
  • 0% interest
  • HEROES Act waiver

Borrowing money is only one piece of the college financing puzzle; scholarships are another essential component.

 

Scholarships for service members and veterans

An array of scholarships are available for service members and their family members to help pay for college.
 

  • Military Tuition Assistance program – If you are looking for a way to pay for college for yourself and you are an active duty, National Guard, or Reserve Component service member, this program provides a significant benefit. According to Military OneSource Opens in new window, the Tuition Assistance program pays up to 100% of tuition expenses for semester hours costing $250 or less, up to $4,500 per fiscal year. Courses and degree programs can be academic or technical and can be taken at two- and four-year educational institutions. Even better, your service branch pays your tuition directly to the school. Vocational, undergraduate, graduate, independent study, and distance learning programs all qualify. This is a valuable benefit that you should absolutely take advantage of if you are looking for a way to pay for college for yourself as a service member.
  • Forever GI Bill Opens in new window – In August 2017, the Harry W. Colmery Veterans Educational Assistance Act expanded education benefits for veterans, service members and their families. Benefits include the ability to use educational assistance for independent study at technical schools and non-IHLs; priority enrollment transparency; credit of REAP benefits toward Post-9/11 GI Bill benefits; a monthly housing allowance, and more. It's worth exploring the benefits of this bill to see which ones apply to and benefit you.
  • Post 9/11 GI Bill Opens in new window – If you have served at least 90 days of active duty after 9/11/01, you may qualify to receive 40% to 100% funding of your tuition and fees at an in-state public college or university, or up to $17,500 at a private or foreign educational institution.
  • Montgomery GI Bill Opens in new window – A bit different from the post 9/11 GI Bill, the Montgomery GI Bill pays you after you have already invested in your education. If you have already enrolled in a college degree program and have paid $100 per month for 12 months (or $1,200), you may receive about $1,500 per month toward your college expenses.
  • Scholarships for service members, spouses, and dependents – There are a variety of private organizations that want to honor your service with scholarships. Spend time researching what is available Opens in new window, and you are sure to find opportunities to help defray the cost of college education.

     

A common question service members have about these various benefits is the transferability of them to family members, spouses, or children. Transferability varies by program and benefit. For example, the Post 9/11 GI Bill requires a specific length of service to qualify for transferability.
It's best to read through the requirements and stipulations carefully to see what can be transferred and what cannot.


Vocational rehabilitation

If you are looking to transition out of the military and into civilian life, vocational rehabilitation and employment services are available through the US Department of Veterans Affairs Opens in new window. Services include:

  • Job training
  • New employment
  • Resume assistance
  • Job seeking
  • Personal counseling and support

The great news for service members looking to earn a college degree or continue their education after military service is that there are a variety of programs available to provide assistance.


Employer Benefits

Don't overlook benefits that may be available through your employer. Many employers offer tuition reimbursement to employees and may offer special benefits to veterans. If you qualify for assistance through your employer, you may be able to pass GI Bill benefits to your spouse or children.
The key is understanding your military benefits and researching outside programs available to you.

 

What you can do next

Talk with an academic financial aid counselor in your unit or at the college or university you or a family member is considering attending. They can help you determine which programs are best suited to your individual needs.

Footnotes

John Schmoll is the founder of Frugal Rules, a finance blog covering investing, budgeting and frugal living. He is a father, husband and veteran of the financial services industry who's passionate about helping people find freedom through frugality.

 

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