In this episode of MoneyTalk with MFLN Personal Finance Dr. Barbara O’Neill revisits a few concepts from the recent webinar, Paying for College: The Forever GI Bill and Student Loan Repayment Plans.
We’re going to be talking about the student loans webinar we held in September on the Forever GI Bill. There are some significant changes to education benefits. Which of these benefits will make the biggest financial impact on military families?
I want to start out first by saying that the webinar was very detailed. We had two parts. We were talking about student loans and college on the front end (i.e. preparing to go to school and different benefits), and we were talking about the back end (i.e. paying off student loans). Today, we’re only going to be scratching the surface, and I would just encourage anybody who’s listening to go to the Learn page for the webinar and pull up those slides because there’ll be a lot more detail. Having said that, here’s the answer to your question about significant changes in the Forever GI Bill. First of all, people should know that it’s pretty recent. These changes were signed on August 16, 2017. Probably the most important thing is the fact that if people need certain qualifications there’s no time limit on the use of their benefits. That’s pretty huge for people, myself included. I went back for an advanced degree when I was in my early 40s, so you can have a service member who maybe isn’t interested in education when they’re in their 20s and 30s. Maybe life intervenes (i.e. they have a family), and then they decide to do their education later. So it did remove what was previously a 15 year time limit, but the key date is that certain events had to apply to someone on or after January 1, 2013. 1) They would’ve had to leave active duty and have a discharge that was from a period of at least 90 days. 2) They were a child or a spouse who became eligible for a scholarship, and then 3) a spouse who received a transfer of entitlement. Again, if one of those three things happen on or after January 1, 2013, people would not have that time limit to get their benefits used. Two other things that happened that they talked about on the webinar was that people can get their benefits restored if they were affected by a school closure or a programmatic disapproval. You have some education programs that just don’t pass muster. Finally, they talked about the fact that new tools are coming online to help people find out if the schools that they might be interested in have priority enrollment for veterans, which of course would be very attractive for people. I know here at Rutgers we have a very good reputation of being a very veteran friendly university, so people might be looking for that in their educational institution. Those are some of the big changes.
Great, so can you talk a little bit about how military spouses can benefit from the Forever GI Bill?
Well that’s important to note that it’s not just for the service member him/herself, but there are also benefits that could apply to their spouse. That’s kind of important too for people to remember. When I was looking at the webinar, I came across this acronym: DEA (Survivors and Dependents Educational Assistance). What they talked about on the webinar was that there would be an increase in the amount of educational assistance that would be payable under DEA, but they also talked about the fact that the time period for eligibility was actually decreasing from 45 months to 36 months. I guess this speaks to the need for much more proactive planning by the military spouses than maybe the service members themselves in the sense that the spouses have a time frame that they need to complete their education by. It’s a lot more open ended for the service members, assuming that they pass those qualifications that I talked about and that magic date. Other things that could affect the family members is that there were some changes in the monthly housing allowance. Obviously, if you’re living the military life with your service member spouse, those allowances are going to affect the non-military spouse as well. The other thing that they presented in the webinar is the definition of the word campus as just the campus where you’re receiving your education. It’s actually a pretty broad definition because it could be the physical location where the student is learning, if they’re in a study abroad program. It could be internships, externships, practicums that could be any place off campus. It’s a pretty broad definition as well, so those are some things for the spouses.
So it sounds like the benefits have been expanded quite a bit. Are National Guard and Reserve members eligible for these benefits as well?
Yeah, there’s an expansion there. You’re absolutely correct. What they presented in the webinar is that the VA will consider the time that a National Guard or Reserve member spent called to service on or after June 30, 2008 as active duty. It’s interesting with all of these provisions that are added to the regulations surrounding the GI Bill and educational benefits. They all have these really key dates. For the National Guard and Reserve, it’s June 30, 2008. So if you are called to service as active duty, this service can count towards the establishment of your benefits in the post-9/11 GI Bill. They also clarified that this also includes authorized service for major disasters, so it’s not just a war zone. We’ve had all these natural disasters in the country, and I’m sure that there’s lots of National Guard and Reserve people that are helping the folks down in Florida right now in the aftermath of the hurricane. It includes that as well as pre-planned missions in support of combatants. Basically, you would be active duty in a war zone, so quite a bit of service might be able to count towards those benefits.
So the other half of the webinar focused on student loans and loan repayment options. Who qualifies for the alternative payment plans such as income based repayment?
Like I said, this is a very interesting webinar because we had a lot of acronyms going in both parts. We had a lot of military acronyms going in the first part, and then of course all of these student loan repayment acronyms in the second part. What I would recommend to people, if you’re really interested in that, is to get the slides. They have some really good bullet points on them that talk about all the different repayment plans. Basically, what Carey Johnson (the presenter) talked about is that people are automatically put into the standard 10 year repayment plan, unless they come along later and select otherwise with one of any number of plans. She presented six plans that had to do with income driven structure. Then there were three traditional payment plans and some others as well. So who qualifies? It depends. Some people will qualify by income. She listed six income driven repayment plans. For example, Pay As You Earn repayment plan and Revised Pay As You Earn repayment plan, so income can be key. Another would be the type of job that a student loan borrower has once they leave college. We talked in the webinar about the Public Service Loan Forgiveness program. Even a person’s health and earning ability could come into play. There are some plans that are kind of income sensitive. Again, if people have a limited ability to earn an income, they might qualify as well. Basically, it’s by your income, by your earning ability, and by the type of job that you have.
There was a bit about loan consolidation. When might that be a good idea?
Just like any type of loan consolidation (people can do this for credit cards as well), it could be a good idea when you have lots of loans. It certainly will simplify your payments and your record keeping. Think about someone who goes to college, and let’s just say they’re on the four year plan, although I know a lot of students who sometimes go the five or six year plan. You’re talking about four years- fall and spring semester, sometimes the summer as well. If every time you take out a loan, you’re going to have quite a constellation of loans. You might want to do that for the simplification. Instead of having to make eight or ten payments, you basically have one. You’ve got simplified record keeping because you’re only dealing with one loan versus multiple loans. Another way that you might want to consider this in addition to the simplification aspect is if the new loan rate is less than the previous loan rates. The whole benefit there would be to lower your payments and get some economic benefit. Basically, the two reasons are lower payments and simplification of the process. As far as some additional information that Carrie presented about loan consolidation, she told the audience that they should go to www.studentloans.gov to start the application process if they want to consolidate. She mentioned that even private types of loans (not the ones that come from the federal government) can be consolidated in some cases. She did caution people to not consolidate both private and federal direct loans into a new consolidation loan because once you co-mingle, you have lost all the benefits that a Federal Direct loan might provide. There are more benefits as far as repayment flexibility, death discharge, and that sort of thing that you might not get in a private loan consolidation.
Resources from the Podcast:
Barbara O’Neill, Ph.D– Financial Resource Management Specialist for Rutgers Cooperative Extension, has been a professor, financial educator, and author for 35 years. She has written over 1,500 consumer newspaper articles and over 125 articles for academic journals, conference proceedings, and other professional publications.