Yesterday was Memorial Day, so it is only proper that I discuss protections from student loans for those who serve our country.
The Servicemembers Civil Relief Act has many provisions that apply to many other debts besides student loans. The important one here is the interest rate cap. All loans, including Federal and private student loans, are capped at 6% APR during times of active military duty, so long as the loan was originated before enlisting. Anything above the 6% is forgiven. It cannot be added back on to the loan upon deactivation. You’ll remember that a certain big fish in the student loan industry was investigated for failing to properly offer this. All that needs to happen is for the person to notify their lender and send a copy of their orders or a letter from their CO.
Another protection is that active service members cannot be forced to respond to a lawsuit. Any person (usually a creditor) bringing a lawsuit must verify that the Defendant is not on active duty. This is a valuable protection from private student loan lawsuits.
Federal Student Loans
Along with SCRA, the HEA (Higher Education Act) also has built in protections for those actively serving. Simply notify the servicer and Federal loans will be placed in deferment during the entire period of active duty with an additional 6 months after demobilization. If not qualified for deferment, a catch-all forbearance is available. The difference between the two is that during a deferment, the government pays the interest that accrues on any subsidized loans. Again, provide the servicer with a copy of the activation order or a letter from the CO. Any person can assist a service member apply for this.
Public Service Loan Forgiveness
Full-time military personal are eligible to have their loans forgiven after 10-years of service, provided they are on the proper repayment plan. And if a person decides to switch out of military service, obtaining a civilian job with either the government or a 501(c)(3) non-profit will count towards the 10-years needed for forgiveness.
This isn’t a whole lot, considering what those who serve have done for us. It is, however, a start. Memorial Day has come and gone, but our gratitude is everlasting. Thank you.