In the wake of President Joe Biden’s announced plan to forgive $10,000 in federal student loan debt for Americans making less than $125,000 per year, some soldiers are wondering what will happen to the student loan repayment incentives in their contracts.

Army Times asked Army officials what the move’s implications could be.

All of the service’s loan repayment options could be impacted by forgiveness, according to Army spokesperson Hank Minitrez:

  • Regular Army Loan Repayment Program, an enlisted recruiting incentive also available for non-prior service applicants who direct commission as cyber officers. This incentive maxes out at $65,000 paid over a three-year period.
  • Student Loan Repayment Program-Reserve Component, available to both Army Reserve and National Guard enlisted soldiers and officers as a recruiting or retention incentive.
  • Chaplain Loan Repayment Program-Reserve Component
  • Health Professionals Loan Repayment Program, for Reserve and Guard medical providers.
  • Judge Advocate Student Loan Repayment Program, for uniformed attorneys.

Minitrez explained that the incentives are for “highly qualified applicants” and typically are limited to high-need career fields.

Army-funded loan payments are treated as taxable income, and those who opt for loan repayment aren’t accruing eligibility for the Post-9/11 GI Bill.

Will troops receive their loan repayments as cash refunds?

The Army’s loan repayment system works by calculating annual payments against a soldier’s outstanding student loans, up to a program maximum, according to Minitrez.

Those payment amounts are included in the contract the soldier signs when selecting the loan repayment incentive and they are sent to the loan servicer on the annual anniversary of the soldier signing the contract.

Most troops qualify for at least $10,000 in student loan forgiveness, as the income cutoff of $125,000 is based on taxable wages — which excludes untaxed housing and subsistence allowances.

The income limit is $250,000 for those who file joint taxes with a spouse. Others may qualify for $20,000 if they received a Pell Grant as an undergraduate student.

But if you were hoping that a decrease of $10,000 or even $20,000 on your balance would send the Army’s excess payments into your pocket, Minitrez has disappointing news.

Because “payments are made to each soldier’s loan servicing agency, any overpayment is returned to the Defense Finance and Accounting Service,” Minitrez said, and “there’s no reimbursement available for loan payments already paid.”

What about those whose balances will be zero?

Those whose balances are wiped out before their incentive’s first annual installment paid out to their loan servicer “may submit a request to the Army Review Board Agency’s Army Board for Correction of Military Records and request the program’s service commitment be waived,” Minitrez said.

For troops using the regular Army loan repayment program, this could eliminate their three-year additional service commitment and allow them to “become qualified for the 50 percent Post 9/11 GI Bill education incentive payable rate at 90 calendar days after completion of their Advanced Individual Training, as opposed to the 3 year and 90 calendar day mark” had they kept their loan repayment incentive, Minitrez said.

“There may be other criteria required by a soldier’s individual enlistment contract, so Soldiers with questions should contact their personnel office,” he said.

It’s not clear whether those who have in-progress loan repayment contracts against loans that have been forgiven will be able to shed their service commitment or start accruing Post-9/11 GI Bill benefits.

The Department of Education has a fact-sheet available for those seeking information on student loan forgiveness, including how to sign up for notification when the forgiveness application becomes available “by early October.”

Davis Winkie covers the Army for Military Times. He studied history at Vanderbilt and UNC-Chapel Hill, and served five years in the Army Guard. His investigations earned the Society of Professional Journalists' 2023 Sunshine Award and consecutive Military Reporters and Editors honors, among others. Davis was also a 2022 Livingston Awards finalist.

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