PARRIS ISLAND, SC - FEBRUARY 25: Marine recruit Christina Wauchope waits with other female recruits to fire on the rifle range during boot camp February 25, 2013 at MCRD Parris Island, South Carolina.

Federal Programs Give Student Loan Relief to Service Members

Loan forgiveness and interest-rate caps can ease the student debt burden for members of the military.

PARRIS ISLAND, SC - FEBRUARY 25: Marine recruit Christina Wauchope waits with other female recruits to fire on the rifle range during boot camp February 25, 2013 at MCRD Parris Island, South Carolina.
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Military service members have reinforcements to protect them in the field. Training, weaponry, surveillance and logistic support all work together to help soldiers, sailors, airmen and Marines carry out their missions successfully.

But those same troops can feel abandoned when it comes to their student loans, despite a number of protections in place to help them manage college debt.

"One of the biggest barriers is that servicemembers may be unaware that they are eligible for student loan relief," Holly Petraeus, assistant director of the Office of Servicemember Affairs at the Consumer Financial Protection Bureau, said via email. "If they do realize that there is relief available, they may be blocked from accessing it by uninformed customer service staff at their loan servicer."

Many veterans know about the GI Bill, which includes educational assistance for active-duty military, reservists and National Guardsmen who serve for at least 90 days. In some cases, the bill covers tuition, fees, books and housing, allowing veterans to graduate without student loan debt.

[Learn how to transfer military skills to a college major.]

The GI Bill does not cover existing college debt, though, so those who have student loans when they enlist still need to manage their payments.

Service members struggling with student loan debt can find relief through federal programs that cap interest rates and offer loan forgiveness.

Public Service Loan Forgiveness

Active-duty members serving full-time can have any remaining balance on their direct loans canceled after 10 years, if they make 120 on-time, full, scheduled monthly payments. Only payments made after Oct. 1, 2007, count toward the requirement.

Loan forgiveness doesn't come without paperwork, though. The Department of Education recommends graduates submit an annual employment certification form to help track their eligibility over the 10-year span. When all of the required payments are completed, they need to submit another form to have any remaining balance forgiven.

[View the 2014 Best Colleges for Veterans rankings.]

Older loans taken out under the Federal Family Education Loan Program don't qualify for forgiveness. Perkins loans are also excluded. Service members can get around this loophole by consolidating these loans into a new direct loan.

Some borrowers miss out on this benefit because they put their loans on a military deferral, which halts payments while they are on active duty.

Instead of stopping payments, troops should explore options to lower the amount due each month, such as income-based, income-contingent and pay-as-you-earn repayment plans. Each option bases monthly payments on annual earnings and family size. The reduced amount still counts as a full payment for public service loan forgiveness, even if the total amount due each month is zero dollars.

Service members who leave the military before the 10-year mark can retain this benefit, as long as they move to another qualifying position. Any employment with federal, state or local government agencies, or a nonprofit organization with 501(c)(3) tax-exempt status, falls under this relief program, according to the Department of Education.

Servicemembers Civil Relief Act

This piece of legislation caps the rates on federal and private student loans at 6 percent while borrowers are on active-duty service. The rate reduction can save service members thousands of dollars over the life of their loan.

In a 2012 blog post, Petraeus, wife of retired four-star general David Petraeus, recalled a sailor who accumulated more than $100,000 in student loan debt without earning a degree.

"He joined the Navy because it was the only way he believed he could 'make it,' but most of his Navy paycheck was going towards paying off those loans," she wrote. "That young sailor could pay nearly $25,000 extra if he doesn't receive his Servicemembers Civil Relief Act (SCRA) six-percent interest-rate cap while he's on active duty."

[See photos of the Best National Universities for Veterans.]