Special Considerations If You’re in the MilitaryUpdated January 31, 2016 Federal Student Loan Consolidation
If you’re an active-duty military servicemember, there are some special considerations and laws that you should be aware of when it comes to federal Direct Consolidation Loans.
Relief Under the Servicemembers Civil Relief Act
On December 19, 2003, President George W. Bush signed into law the Servicemembers Civil Relief Act (SCRA).
Under the SCRA and its amendments, military servicemembers are eligible to have the interest rate on their student loans (federal and private student loans, as well as other debts) reduced to 6% while on active duty if:
Check Your Eligibility
- the loans were taken out before entering military service, and
- your ability to pay interest above 6% has been materially affected by your military service.
If you qualify for a rate reduction, any interest amounts, fees, or charges since you began active duty that are above 6% are permanently forgiven. The interest rate reduction applies when active duty begins, even if you don't request the reduction until later.
However, If you consolidate your federal student loans into a Direct Consolidation Loan while you’re serving in the military, you won’t qualify for this benefit since the Direct Consolidation Loan would not be considered a pre-service debt.
0% Interest For Some Servicemembers
Some servicemembers may qualify to have the interest rate on their federal student loans reduced to 0% for a limited period of time.
Under federal law, a servicemember does not have to pay interest for up to 60 months on any type of Direct Loan Program loan made on or after October 1, 2008, when:
- serving on active duty during a war, other military operation, or national emergency; or
- performing qualifying National Guard duty during a war, other military operation, or national emergency and serving in an area of hostilities which qualifies the servicemember for special pay.
For Direct Consolidation Loans, interest does not accrue for up to 60 months on the portion of the Direct Consolidation Loan that repaid a Direct Loan Program loan or FFEL Program loan first disbursed on or after October 1, 2008.
Check Your Eligibility
Borrowers who have FFEL loans can consolidate into the Direct Consolidation Loan program to take advantage of this benefit.
Military Service Deferment
During certain periods of active military duty (such as during war, other military operation, or a national emergency), you can postponed (defer) your federal student loan repayment.
Also, if you are a member of the National Guard (or other reserve component of the U.S. armed forces) and you are called or ordered to active duty while you are enrolled at an eligible school at least half-time (or within six months of being enrolled at least half-time), you are generally eligible to defer repayment on your federal student loans during the 13 months following active duty service, or until you return to school on at least a half-time basis, whichever occurs sooner.