Military service members, including Air Force officers, serve in dangerous situations, like in wars or national emergencies, to protect the country’s well-being. Therefore, it is unacceptable that such individuals are concerned about their debt payments once they return home safely. Unfortunately, currently, there are only a few financial aid programs and AF student loan services specifically designed for Air Force members. However, there exist some general benefits for U.S armed forces that help them to reduce debt obligations.
The AF Student Loan Services
This guide will focus on benefits presented as part of AF student loan services, including deferment, interest-cancellation, repayment, or forgiveness options. These options can be alternatives for Air Force Student Loan Repayment, which got canceled. For more information, it is advisable to contact our debt experts or check the official websites.
Military Service Deferment
Military Service Deferment helps borrowers postpone their student loan repayment when they are on an eligible active duty. A qualifying active duty can be a war or other immediate military operation, such as a national emergency.
Besides, if National Guard members perform duty during the mentioned cases, they will qualify for this benefit. The eligibility condition requires that the borrower gets a duty in another location than the regular station. However, if it is just a training or service school’s requirement, postponement is not possible.
Deferment covers many federal loan types like Stafford, PLUS, and Consolidation loans.
Application and Documentation
Borrowers in need of deferment benefit should fill and submit the deferment request form. It is also possible to get a statement from a commander in a written form. Besides the request form, the applicant should submit copies of military orders.
If the document submission is not possible, the applicant or his/her representative can request deferment verbally for the first 12 months of the federal loan.
Deferment Details
If a military member defers payment as a part of AF student loan services, he/she will not be required to repay the debt. During this period, no interest will be charged or accumulated.
However, borrowers with unsubsidized loans can face interest accumulation if they do not qualify for a 0% interest benefit. We will discuss this benefit in the following section. Accumulated interest may be capitalized at the end of the period, which means it will be added to the principal balance.
0% Interest
Another benefit provided by AF student loan services is 0% interest generated. If the military service member is on active duty in a hostile area, he/she can qualify for this benefit. In this case, the borrower will not pay any interest for up to 60 months.
The eligibility criteria require having direct loans incurred on or after October 2008. It is also possible to apply to this benefit with consolidation loans which have a portion generated on or after October 2008.
Borrowers need to provide documentation that will prove their service in hostile areas. Such documentation can include an official statement with a signature, military orders, or an earning report indicating hostile danger pay.
Servicemembers Civil Relief Act (SCRA) Interest Rate Cap
Till now, we have discussed deferment options and no-interest options as benefits of AF student loan services. Another similar benefit for service members is the interest rate cap under the Servicemembers Civil Relief Act.
This cap ensures military members do not pay more than a 6% interest rate for the loans acquired before the service period. The benefit is only accessible while the borrower is on active duty. The great side of this opportunity is that it is possible both for federal and private student loans.
Keep in mind that consolidating the loans during the active duty period can make the loan disqualified for the benefit.
Application
Usually, the loan servicers actively check the service status to detect if the borrower qualifies for the cap. If the borrower appears on the eligibility list, the loan servicer will automatically apply for the benefit. However, alternatively, the borrower can submit documentation such as a copy of orders to request the interest rate cap.
Waiving Requirements under HEROES Act
The HEROES Act is a $3 trillion worth stimulus package for the economy which faced adverse effects of the COVID-19 pandemic. The act was proposed and accepted in May 2020. This act’s benefits cover multiple areas, such as unemployment benefits, support for utility payments, or aid for veterans.
Besides, it supported the AF student loan services by eliminating some requirements temporarily. In other words, documentation demands can be waived under this act if the service member was unable to satisfy the requirements. For example, under Income-driven plans, borrowers are required to submit information about family size and income regularly.
However, it is understandable that service members on active duty might not have a favorable environment to deal with this requirement. In such a case, the HEROES act allows borrowers not to submit new documents and maintain the existing ones.
Eligibility
Different from an interest cap or deferment option, this benefit is only accessible for federal loans. Besides, the borrowers should be on active duty in another duty station, such as being in a war or dealing with a national emergency.
Application
Application for the waiver under HEROES Act is similar to the interest cap application. The borrowers can wait for the loan servicer to automatically apply for the waiver because they check the eligibility regularly.
Once the loan servicer detects a borrower who is on active duty and qualifies for the release, they take care of it. Alternatively, military orders can be submitted to enjoy this benefit for AF student loan services.
Defense Department’s Repayment Plan
The AF student loan services provide multiple repayment options. We already discussed the deferment, 0% interest, or 6% interest cap. Besides, in some instances, the Defense Department can repay the borrower’s debt partially or fully. The repayment depends on the branch of service. This guide will discuss two options:
- JAG Student Loan Repayment
- Air Force Duty Health Professions Loan Repayment
1. JAG Student Loan Repayment
Under the AF student loan services, it is possible to get some of the debt repaid through JAG Student Loan Repayment. Before, there existed an Air Force Student Loan Repayment program for such borrowers. The program granted a total of $10,000 student loan forgiveness. In more detail, the service members could get only one-third of this amount ( or $1,500, whichever is greater) in return for one year’s service. However, this program was discontinued, and current military members cannot access it.
Instead, the JAG Student Loan Repayment program is accessible. Different from Air Force Student Loan Repayment, this repayment option brings up to $65,000 total benefit. Borrowers can apply to this program for three years, and during this time, they should continue the service. Only after the service requirement is satisfied, the funds will be directed to the lender’s account.
Eligibility Conditions
A broad category of Air Force members can apply to this program:
- Regular Air Force on Active duty or retired
- Air National Guard- on Active duty, drilling, retired
- Air Force Reserve- on Active duty, drilling, retired
Each position has its requirements and standard procedures. For providing you some ideas, we will consider the process for Regular Air Force on active duty. Keep in mind that one of the closest options to the Air Force Reserve Student Loan Repayment program is the JAG repayment program.
This program is designed to increase the attractiveness of the JAG position. Hence, it benefits highly professional and skilled officers. The officers on active duty can only apply to the benefit if they are on the first-four-year service period.
Several loans, including federal Direct and Perkins loans, qualify for this program. If you have a consolidation loan, you can still apply for this benefit of AF student loan services. However, in the case of having a joint loan with a spouse, only the service member’s portion of the debt will be considered for repayment.
Additionally, defaulted loans will not qualify for this program. The loans should be in good standing, which means even unnecessary deferment or loan forbearance can be a barrier to a successful application.
Benefit Amount
As mentioned, officers only in the first four-year service qualify for this program. If you are in the first, second, or third year of service, you can apply for the benefit. Regardless of application time, successful applicants are required to serve four more years. For each service year, at the end of the period, the award will be delivered. It is possible to apply for the benefit only three times.
Each year, the borrower will receive one-third of the total benefit amount, which is $65,000. It means, once the one-year service is provided, around $21,000 will be paid to the lender as a part of AF student loan services. In this way, borrowers can qualify for $65,000 student loan forgiveness in return for a three-time application.
Taxability
Usually, borrowers are worried about the taxability of the programs. When they finally eliminate some portion of the debt, they can get huge taxes due to the forgiveness. Some options are non-taxable, like Public Service Loan Forgiveness, which we will discuss in subsequent sections. However, programs like JAG Loan Repayment are still taxable.
Yet, the taxation process is in the form of tax-deductible from the benefit amount. It means the lenders will receive a net amount of award, free from taxes. Keep in mind that the $65,000 limitation also includes taxation, which means $65,000 is a gross benefit amount. You will get less than $65,000 forgiveness in the net.
Important Considerations
Before applying to JAG Student Loan Repayment Plan, you need to consider two essential factors. First, even in the case of a successful application, the borrowers are required to pay the interests. The forgiveness only covers the principal portion of the debt. Second, if you have a mandatory service requirement for Post-9/11 GI Bills, your service for JAG will not count for Post-9/11 GI Bill benefit (or vice versa).
Additionally, note that this guide concentrated on the Air Force Regular members on active duty. If you belong to one of the other eligible categories, you need to check the specific requirements for those members.
2. Air Force Active Duty Health Professions Loan Repayment
Another program available for AF student loan services under the Defense Department’s benefits is health professions serving on Air Force active duty. This program aims to give incentive to health specialists to become active-duty officers. Specialists in the Medical Corps, Nurse Corps, or Biomedical Sciences Corps will qualify for the benefit.
The benefit amount for this program covers the loans generated for educational purposes. A qualified education is the one for getting a health professional degree. Different from JAG repayment, this program covers both principal and interest. Even in some cases, it can also include expenses for living.
The benefit is up to $40,000, including tax payments, which means the borrower gets less use in the net form. Again, the repayment is directly sent to the lender by excluding the borrower. Similarly, in return for the award, the officer should agree to a particular service period.
Note: for the benefits provided by the Defense Department, it is advisable to contact the Military Personnel Officer or representative of your branch to get more information and apply for the desired program.
Disability Discharge
Disability discharge is available as a part of AF student loan services to qualifying borrowers. If you have Direct, FFEL, or Perkins loans, this program can eliminate your debt. However, in return, you need to prove your total and permanent disability condition. As a result, the Education Department will check the eligibility and provide information about the decision.
How to Prove Disability?
There exist several ways to detect disability, including getting disability insurance from Social Security Administration, documentation from Veteran Affairs, or a certificate from a Physician.
Usually, the department is in close contact with the Social Security Administration and Veteran Affairs to detect eligible borrowers. Hence, sometimes, disabled borrowers will get notification about the disability discharge even without application. In other cases, the borrowers should apply for discharging the debt.
Other Considerations
If the borrower receives disability discharge, he/ she cannot request a new loan or TEACH grant in the future. However, it can be possible if the borrower takes the responsibility and acknowledges that he/she will not request a discharge for the current disability issue.
Post-Application
If applied through Veteran Affairs, the department will check the eligibility and eliminate the debt if the borrower qualifies. In case of denials, the borrower can request a re-evaluation. However, when applied with SSA documentation or a Physician’s certificate, the approval requires a three-year monitoring period. During this period, the borrower will be closely monitored. If at any point, the borrower’s disability is eliminated, he/she will be required to pay the discharged amount.
Income-Driven Repayment
Another option for service members is applying for Income-Driven Repayment plans. This plan allows borrowers to get monthly payments based on the income level. Hence, it can be more affordable and suitable for the budget. In extreme cases, the borrowers can even qualify for a $0 payment. Income-Driven Repayment plans have four major types, and each type has its own conditions. However, regardless of the type, the borrower can get forgiveness at the end of the payback period for any remaining debt balance.
Unfortunately, only federal loans qualify for such repayment plans. If you have private loans, you can contact the lender to learn about different repayment options. They may even grant a forbearance status to the active-duty service members.
Payments and Payback Periods
As mentioned, depending on which Income-Driven plan you choose, you will face different payback periods and payment amounts. The loan payment amount is usually determined as some percentage of the discretionary income.
Discretionary income is the amount left after deducting necessities from the budget. Hence, Income-Driven Repayment plans allow borrowers to repay the debt easily without disturbing their normal course of life. Below, you can see the four types of Income-Driven Repayment plans and their payment amounts:
- Revised Pay as You Earn - Borrowers are required to pay 10% of the discretionary income.
- Pay as You Earn - Borrowers are required to pay 10% of the discretionary income, which cannot be more than the payments under the Standard plan.
- Income-based Repayment - Debtors should pay either 10% or 15% of the discretionary income as debt repayment, depending on the time the loan was received.
- Income-Contingent Repayment - Debtors should pay either 20% of discretionary income or a fixed amount for 12 years.
The payback periods also change depending on the plan. Usually, it takes a minimum of 20 years to pay out the debt fully. With PAYE, you can repay the debt in such a period. However, with REPAYE and IBR, the repayment can be either 20 or 25 years, determined on loan type or based on when the loan was received. Besides, it takes 25 years to repay the debt under the Income-Contingent repayment plan.
For more information on Income-Driven Repayment plans, you can check the official Student Aid website or read our blogs.
Public Service Loan Forgiveness
There is a reason why we kept Public Service Loan Forgiveness to the end- it is one of the best options AF student loan services can grant. Public Service Loan Forgiveness can bring full cancellation of the debt once the borrower makes 120 qualifying payments.
It means, in a minimum of 10 years, you can get rid of the debt, as opposed to Income-Driven Repayment Plans, which require a minimum of 20 years. Military members can apply to this program if they meet the eligibility conditions.
Eligibility Requirements
Military members usually have a high chance of getting forgiveness as they mostly satisfy employment requirements. However, only Direct loan borrowers will qualify for this program. Unfortunately, if you have FFEL or Perkins loan forgiveness, you cannot take advantage of Public Service Loan Forgiveness.
If you have consolidation loans, they will still qualify for this program. However, consolidating the loans has a significant disadvantage. If consolidation occurs, the previous debt repayments will not count for 120 payment requirements. For example, imagine you make 15 qualifying payments which took 15 months. Then, you decided to consolidate the loans. In this case, you will lose 15 payments and start all over again to progress toward 120 payment requirements.
The qualifying payments are those made on time (up to 15 days after the due date), in total amount, and under the Income-driven plans. Once you make 120 payments, you become eligible for the program.
Application
Keep in mind that throughout the repayment period, you should submit the PSLF form. This form allows the officials to check your payment progress and inform you how many qualifying payments you made. In this way, if there is anything wrong with your payments, you can be informed about them on time. Otherwise, detecting that your payments did not qualify after 120 payments would be a huge disappointment.
Besides, employment certification should be submitted to validate that you work in a qualifying position. If you do not submit this certification regularly, you will be required to provide it at the time of application. It is advisable to be in contact with the loan servicer for this program for your AF student loan services to get more information.
Taxes
We discussed the importance of taxes in the debt forgiveness programs. Taxes make people worried about upcoming huge payments when they finally think they are out of debt. Luckily, the Public Service Loan Forgiveness is one of the few federal assistance programs that are non-taxable. It means the Internal Revenue Service does not require paying additional taxes for the benefit amount received.
Expected Changes
Public sector employees are those who protect the country, teach its children or ensure the cleanliness of the streets. Hence, they always deserve a better opportunity to eliminate their student loans.
President Joe Biden recognized this challenge and involved Public Service Loan Forgiveness into his “Plan for Education beyond High-School.” Under this student loan plan, Biden suggests simplifying the forgiveness opportunity. Instead of waiting at least ten years for the forgiveness, Biden wants to bring $10,000 forgiveness per service year. The applicants will qualify up to 5 times, which means the highest benefit amount accessible can be $50,000.
Currently, there is no guarantee that this change will happen. However, borrowers should consider the possibility. The current PSLF program grants unlimited forgiveness after making 120 payments. However, if Biden modifies the program, the award will be limited to $50,000. On the other hand, the new PSLF program will grant the benefit almost immediately- every service year, while the current program requires a long waiting and progress period.
Final Words
Air Force service members deserve better assistance for their student loans. We understand that many programs mentioned in this guide are not specifically designed for Air Force members; rather, they are available to all U.S armed force members, federal loan borrowers, or public sector employees. However, we still believe these programs can simplify and even reduce the debt challenges.
If you are unsure how to deal with your debt repayment or which program to select, it is advisable to contact our debt specialists about the available AF student loan services. Keep in mind that the information presented in this guide can be incomplete due to the space limitation or because each program has many technical terms/requirements that are hard to understand for the borrowers lacking prior knowledge. Hence, before making a crucial decision, it is necessary to get help from debt experts, like those we work with in Student Loans Resolved. Our specialists have years of experience, and we were contacted by a multitude of borrowers sharing the same concerns as you do. Therefore, we are better able to analyze your challenges and suggest a working solution to reduce/eliminate the debt. Take action today to get rid of your debt concerns, and contact us now.
