Loan Repay or Enlistment Bonus?

Navy Student Loan Repayment

September 19th, 2008

To be eligible for the Navy Student Loan Repayment Program (LRP) you must meet the following; You must be Non-Prior Service, a High School Diploma Graduate, get at least a 50QT on your ASVAB test and qualify for and enlist in one of the LRP qualifying ratings. Even if the job you select is eligible for an enlistment bonus you can not be given both - you must choose only one.

What student loans qualify? Existing education loans must meet all of the following requirements in order to qualify for repayment:
a. Must have been made towards your education.
b. Must qualify under part B, D, or E of Title IV of the Higher Education Act of 1965 (20 U.S.C. 1071 et seq; 1087a et seq; 1087aa et seq). Unless you are actually listed as the student on Parent Loans for Undergraduate Students (PLUS), this type of loan is ineligible for repayment.
c. The loan must have been made after October 1, 1975 and before your active duty service date (date you go to boot camp).

The LRP application is complete when you select the LRP option during the classification process at the Military Entrance Processing Station (MEPS). You will provide all items on the LRP checklist your Recruiter will provide. Once all the items from the checklist are obtained MEPS will forward the information to the Commander Navy Recruiting Command LRP Coordinator (CNRC N5312) for final approval and enrollment into LRP. All these items must make it to CNRC N5312 within 60 days after entry into the Delayed Entry Program.

Understand this, you will be automatically disenrolled from LRP and forfeit all future loan repayments if any of the following occur:
a. The last payment has been made on loans submitted at initial enlistment (your loans are paid in full).
b. You receive a commission or warrant appointment (Your an Officer Now!).
c. You are discharged or released from active duty.

So, what is the benefits of LRP? The United States Navy will pay the lesser of the original loan amount or the unpaid principle balance at the time you ship off to Recruit Training Command (not to exceed $65,000). Any accrued interest, fines, penalties, or processing fees cannot be paid for by the Navy. Loan payments will be made directly to lender(s) in payments of 33 1/3 percent of the loan or $1,500 (whichever is greater) for each completed year of service. If the outstanding principle balance becomes less than 33 1/3 percent of the initial balance, the outstanding balance will be paid. The loan(s) must be in good standing to be eligible for repayment. According to the Internal Revenue Service (IRS), loan repayments are subject to federal and state taxes. Taxes will be withheld from your pay for the LRP payment amount and the amounts will be included in your W-2 form. The Navy will not refund any amount of the loan paid by other parties!

Enrollment in the LRP does not exempt you from all obligations associated with the repayment of the loan. Since the first LRP payment cannot be made until you have completed one year of service, you may choose to seek loan deferment or forbearance to prevent defaulting on loans. It is YOUR responsibility to secure deferment or forbearance on your loans and you must communicate such intentions directly to the lender.

Special stuff - If you do not complete your initial term of enlistment may qualify for prorated credit if you completed at least one full year of enlisted service. If you do receive a commission or warrant appointment or are selected to any pre-commissioning programs you lose your LRP eligibility. The Navy will prorate any eligible payment, the prorated amount is based on the number of years completed at the time of commissioning/appointment.

You may utilize the GI-Bill however, the law currently does not allow LRP participants to use GI-Bill benefits unless you enlist for a second term (and have served a minimum of 24 months of that second term). If you want the GI-Bill, you will have $100 per month deducted from your pay for the first year of enlistment. This amount is not refundable if you do not reenlist.

Only you can determine if this program is right for you. Weigh your options and do the math! Some enlistment bonuses may bring the loans down to a manageable amount or may even cover the total.