Education Is Valuable and Expensive: Choose Your Best Options

Active-duty service members, members of the National Guard and reserves, and their families have many options and advantages when it comes to financing education. It can feel overwhelming and confusing to wade through them, but there are resources available that can help you identify the programs you qualify for and determine which ones are the best for you. The last thing you want to do is leave money on the table because you were not aware of a program for which you were qualified. An even worse outcome would be to take on unnecessary debt that can take years to pay off.

As a service member, you have extensive resources available. Your best starting point is to talk with one of the professional education counselors at your installation or virtual education center. These education counselors do not sell anything; their only incentive is to help you see the “big picture” of what you want education to do for you, how you can minimize or eliminate out-of-pocket costs or loans, and how you can balance your investment of personal time to realize your professional goals. Education counselors can tell you about military tuition assistance, federal student aid, VA education benefits, and military spouse and family member resources that can help you avoid debt.

Federal vs private loans

It is always better to use grants and scholarships before a loan, but if you need to take out a loan, consider the following. Student loans can come from the federal government or from private sources such as a commercial financial institution, or even from other organizations. A major benefit of choosing a federal loan is the ability to switch to an income-driven plan if you can’t afford your monthly payments or to defer payments if you lose your job.

Private student loans can be a good option for some borrowers, such as students who’ve borrowed the maximum amount of federal loans and still need money. However, for many private loans, the interest rates are higher, and you will lose government features like student loan forgiveness and deferment.

To get you started, the Department of Education put together, the guide “For Members of the U.S. Armed Forces: What you need to know about your federal student loan benefits.” This publication summarizes federal programs funding education and paying off student loans. The guide also provides the eligibility and documentation requirements for each one. Programs in the handbook include:

· Servicemembers Civil Relief Act Interest Rate Cap

· Military Service Deferment

· Deferments After Active Duty

· Public Service Loan Forgiveness

· 0 percent interest student loan relief

· Income-driven repayment plans

· HEROES Act Waiver

· DOD repayment of your loans

· Veterans Total and Permanent Disability Discharge

Options for managing your student loan

Should you refinance?

Refinancing can be a good way to lower your rates and payments, but there are some things to watch out for. Make sure you are aware of any future rights you will be losing. For example, you could lose eligibility for federal student loan forgiveness if you refinance. You will also be paying a lot more in interest if you reduce your payment by extending the term of the loan.

What about consolidation?

Consolidation is similar to refinancing a loan. By using this option, you combine several loans into one. This may be a good way to lower monthly payments or to get out of default, but it may not be the best option if your goal is to save money in the long run. Like refinancing, you will pay more in interest over the life of the loan if you only make the minimum payment.

Are you using all of your resources?

Whether you are choosing a new student loan program, refinancing a loan or consolidating several loans, always take your time and use all available resources to protect yourself from long term, money-wasting situations. Fine print can be a pain, but the details are really important. Always ask for (or demand) a copy of the loan documents you will be signing at least a few days before you will be signing. Then, actually read the whole document and make notes about terms you do not understand, and visit the glossary on StudentLoans.gov to expand your knowledge. Finally, talk to a financial counselor available to you through your installation’s Family Center or through Military OneSource for help understanding your personal situation, allowing you to make your best, informed decision.

If you’re ready to learn more about your options, speak with a personal financial manager or personal financial counselor at your nearest Family Center or by calling Military OneSource at 800–342–9647.

Follow @DoDFINRED on Facebook, Twitter and Instagram for tips to keep you financially fit. Look for more on YouTube.