Senators Urge ED, DOD to Retroactively Apply Zero Interest Loan Benefit to Military Borrowers

By Allie Arcese, Sr. Director of Strategic Communications & Engagement

By Allie Bidwell, NASFAA Senior Reporter

Despite a decade-long existence of a benefit exempting military student loan borrowers from paying interest on federal student loans while serving in hostile areas, hundreds of thousands of eligible service members continued to pay interest, a group of Democratic senators wrote in a letter to the Department of Defense (DOD) this week. The senators applauded the recent announcement of a computer matching agreement between the Department of Education (ED) and DOD to correct the issue, and urged Acting Secretary of Defense Patrick Shanahan to retroactively apply the benefit to eligible military borrowers.

The senators—Elizabeth Warren of Massachusetts, Patty Murray of Washington, Margaret Wood Hassan of New Hampshire, Bernie Sanders of Vermont, Tom Udall of New Mexico, Edward Markey of Massachusetts, Tina Smith of Minnesota, Jeanne Shaheen of New Hampshire, Bob Casey of Pennsylvania, Michael Bennet of Colorado, Kamala Harris of California, Doug Jones of Alabama, Richard Blumenthal of Connecticut, Kirsten Gillibrand of New York, Tammy Duckworth of Illinois, Jacky Rosen of Nevada, Tammy Baldwin of Wisconsin, Mazie Hirono of Hawaii, and Tim Kaine of Virginia—wrote in the letter that the Higher Education Act (HEA) allows military borrowers to forgo paying interest on their federal student loans while serving in “an area of hostilities,” which would qualify them for special pay such as imminent danger pay or hostile fire pay.

Congress added this provision in the 2008 reauthorization of HEA, they wrote wrote, “to ensure that active duty military borrowers would not have to worry about interest charges accruing on their federal student loans while serving our country in hostile environments.”

Still, military borrowers who would be eligible for the benefit have “avoidably overpaid” $100 million in interest on federal student loans “due to a lack of communication” between the two federal agencies. The Consumer Financial Protection Bureau (CFPB) estimated that just 600 of about 250,000 eligible borrowers have obtained the benefit since Congress created it in 2008.

DOD last month published a notice in the Federal Register announcing the new computer matching agreement. NASFAA this week submitted a letter supporting the change, and encouraging the agencies to further collaborate “to facilitate servicemembers’ access to borrower benefits provided to them by law.”

"The new matching agreement should allow all eligible servicemembers and veterans-including those who were formerly eligible-to automatically receive refunds for any interest amounts that they paid to the federal government, but never owed," the senators wrote in their letter. "Student loan indebtedness can adversely impact the readiness of our military personnel, which is why your work to establish this matching agreement is critical."


Publication Date: 5/17/2019

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