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Can You Use the GI Bill to Pay Off Student Debt?

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Johnnie, a veteran, has $12,000 in student loan debt he is struggling to repay. He wrote to us recently, wondering if there is a way to tap his GI Bill benefits to help pay off that debt:

I enlisted in the Marine Corps in May of 2002, ended enlisted service in December of 2008 (technically checked out of my unit in January of 2009), and received my Honorable Discharge and completed my DOD contract in May of 2010.

I never utilized my Montgomery GI Bill benefits, but not due to not trying. I got the run around every time I requested information or made appointments to speak with Veterans Representatives in the Student Financial Aid office of every school I attended.

Johnnie’s heard that other veterans have used those benefits to pay off student debt and wonders if he can do the same.

“The law does not provide authority to allow GI Bill benefits to be used to pay down or pay off student loans,” says VA Spokesperson Terry Jemison. “Individuals eligible for GI Bill benefits may use such benefits for training. Generally, VA can only pay retroactive benefits for training pursued no more than one year prior to the receipt of an application for benefits.”

Jemison suggests that veterans with questions about GI Bill benefits contact the Department of Veteran Affairs’ GI Customer Service department at 888-442-4551 or submit an inquiry online at gibill.custhelp.com.

But Julie Richardson with Valley Veterans Legal Assistance in Oakdale, Calif., also points out that the website for the GI Bill states:

You cannot request education benefits specifically to repay a student loan. If you’re enrolled and receiving benefits, you can use your benefit payments however you choose, including student loan repayment.

However, “I wouldn’t recommend that someone enroll in school specifically to get GI Bill benefits to pay off previous loans, as seems to be implied by the second sentence,” she says. “That would seem to be robbing Peter to pay Paul and also skirting the edges of benefit fraud. “

Plus, that strategy isn’t really going to work under the newer version of the GI Bill — the Post 9/11 GI Bill. Under that program, tuition is paid directly to the school. Under the older Montgomery GI Bill, payments were made to veterans and they could use them any way they wished.

Student loan debt is often overwhelming, and students like our reader need to make sure they look at all possible strategies for paying off student debt so they don’t default. Income-based repayment and loan forgiveness programs are two other options students — including veterans — may want to explore.

Veterans like Johnnie may also want to check out the Post-9/11 GI Bill program to find out what benefits they may be eligible for going forward Jemison says this newer GI Bill “provides the most generous VA educational benefit since the original GI Bill, giving Veterans and their family members an opportunity to accomplish life goals, whether in degree programs at more than 9,000 universities or in certificate or other training programs.” Information about benefits can be found at benefits.gov/gibill.

Additional resources include this free credit guide for college grads as well as the National Student Loan Data System at StudentLoans.gov. If you’re wondering how your student loans are affecting your credit, Credit.com’s free tools give you two credit scores, updated monthly, as well as an overview of the impact your credit history is having on your scores.

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