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The U.S. Navy offers service members a proud and venerable tradition, having patrolled the seas since its inception in 1775.

Almost 250 years later, the Navy still offers its sailors a remarkable life experience, a chance to serve the country, and a host of benefits that make life somewhat easier for military personnel.

One perk that may appeal to Navy members is the Navy Loan Repayment Program, the cornerstone of the service’s student loan relief and forgiveness efforts.

The Navy Loan Repayment Program can pay up to $65,000 toward a service member’s student loans. That makes it well worth a closer look for Navy members looking for help paying down their college loan debt.

Who Qualifies for the Navy Program?

The Navy Loan Repayment Program is designed to pay up to $65,000 of federally guaranteed student loans for Navy personnel who qualify. The program is offered to members of the service’s Delayed Entry Program who eventually enlist in the Navy full time.

The Delayed Entry Program, also known as the Delayed Enlistment Program or inactive reserves, is meant to provide an onboarding experience before official enlistment. In the case of the Navy, a future sailor who signs on to delayed entry agrees to report for active duty in the next year. Currently, delayed-entry members can remain on inactive duty for 365 days. At that point, they must enlist for active duty in the Navy to receive student loan aid.

The Delayed Entry Program is only one hurdle Navy members must clear before becoming eligible for the loan repayment program. Service members must also meet the following criteria.

•   They must be “first time” military service members (meaning applicants have never served in the U.S. military before).

•   They must have a high school diploma.

•   They must have achieved a minimum score of 50 on the Armed Forces Qualification Test, which the Navy uses to measure a potential sailor’s IQ and aptitude. A test score of 35 will get an applicant into the Navy, but a higher score of 50 is needed to qualify for the loan repayment program.

•   They must have a student loan that is not in default.

How Navy Student Loan Repayment Works

Through the program, the Navy will pay 33.3% of a service member’s outstanding loan balance or $1,500 — whichever is higher — for each year of naval service, up to three years. If the student loan balance falls below the 33.3% threshold and the borrower is in good standing with the Navy, the Navy will pay the remaining student loan balance in full.

Only specific federal student loans qualify for the loan repayment program. They are as follows:

Stafford Loans, subsidized or unsubsidized. Also known as Direct Stafford Loans, these low-interest loans are made to qualified borrowers for tuition and other college expenses. The funds come directly from the U.S. Department of Education.

Federal PLUS Loans. Otherwise known as Direct PLUS Loans, these loans are offered by the U.S. government to undergraduate and graduate students to cover tuition and college costs. In many cases, Direct PLUS Loans offer funds to college students to cover expenses not covered by other financial aid programs.

Consolidation Loans. Consolidation loans bundle multiple federal loans into a single loan, streamlining the repayment process.

Perkins Loans. Perkins Loans are low-interest loans geared toward college students (both undergraduate and graduate) who demonstrate financial need. Congress stopped making Perkins student loans in 2018, but naval personnel may still have outstanding Perkins loan debt and thus are eligible for help from the Navy Loan Repayment Program.

A future Navy member may apply for the loan repayment program early in the service enrollment process. A Navy applicant is given the option to enroll in the program at the Military Entrance Processing Stations.

MEPS, the stations funded by the U.S. Department of Defense to enroll military service members, handle their applications and assess their physical, mental, and emotional health to see if they’re fit for military service.

For student loan relief purposes, the Navy recruiter on hand (also known as the MEPS classifier) will process all of a Navy recruit’s paperwork, including loan repayment application documents, and submit them for processing.

What Documents Do You Need To Apply?

All documents are available at the MEPS recruiting center or through specific U.S. government websites. You will need all of the following documents to apply:

•   A copy of the Loan Repayment Program Worksheet.

•   A copy of the Navy Enlistment Guarantee. The Navy Loan Repayment Program must be noted as a guarantee on the document.

•   A copy of the Statement of Understanding.

•   A copy of the Future Sailor’s National Student Loan Data System printout (available at the Department of Education’s website. When filing the data system form, the applicant will be assigned a PIN. By and large, it’s the same pin assigned to a financial aid applicant on the Free Application for Federal Student Aid. If the applicant doesn’t have a FAFSA® PIN, one will be assigned).

•   A copy of the Personalized Recruiting for Immediate and Delayed Enlistment.

•   A copy of DD Form 2475, Annual Application for Student Loan Repayment, completed by the student loan lender.

•   A copy of the lender’s promissory note for each Parent PLUS Loan, which clearly designates the student dependent on the note.

If you’re already serving in the military or served, Public Service Loan Forgiveness is a great option. The program is for those working for a qualified government organization (municipal, state, or federal) or many nonprofit organizations.

Filling Out the Loan Repayment Form

The key document when applying for the Navy Loan Repayment Program is DD Form 2475, which is broken down into four sections.

Section 1 is completed and approved by the recruiting officer (i.e., the verifying official). The section includes the naval office address and contact information so the lending institution can forward the proper paperwork. If the section is blank, the lender is under no obligation to complete the form. Basically, Section 1 includes the recruiter’s name and signature and the date.

Section 2 includes the applicant’s name, address, telephone number, email address, and Social Security number. This section is completed by the service member/applicant.

Section 3 includes the student loan data (including the borrower’s name, the loan amount, outstanding balance, the original date of the promissory note, the loan holder address, email and phone number, and the loan application number). The section also includes a box noting whether the student loan is in default or not, and asks for the name and address of the financial institution where the loan aid is to be sent.

Section 4 is a grid where more information on the loan can be included to expedite processing. Sections 3 and 4 are filled out by the student loan lending institution.

The Navy mandates that Form 2475 be completed, signed, and transmitted to the lending institution within 60 days of the recruit’s arrival in the Delayed Enlistment Program.

If the recruit/applicant doesn’t know his or her current student loan servicer, the U.S. Department of Education can lend a hand by phone or online.

Important Things to Know

Loan repayment program applicants may want to know several key features and rules governing the Navy student loan program.

Payment dates. Annual loan relief payments are issued to the service member on the original enlistment day during the first, second, and third year of enlistment in the Navy.

Payments are taxable. Any payments made by the Navy to the service member are taxed, as the Internal Revenue Service deems loan relief as taxable income in the year the money is paid out. Expect to have between 25% and 33% of the payment withheld in both federal and state taxes (the amount depends on the state where the applicant resides).

Lenders only. The Navy will not refund any loan amount that is paid out by other parties (aside from the qualified student loan lenders).

If a Navy recruit has any questions about the loan repayment program, the Navy urges him or her to contact the loan repayment manager at Naval Command. The manager is directly responsible for managing the loan program.

Contact the manager at:

Navy Recruiting Command
Attn: LRP
5722 Integrity Drive, Building 784
Millington, TN 38054

Email: [email protected]

Other Ways to Repay Student Loans

Former students who are on the fence about a military commitment or who may be struggling to make student loan payments, have alternatives to military-supported repayment.

One is student loan refinancing with a lender like SoFi®. Someone with a combination of private and federal student loans can refinance both types into one single loan with one monthly payment.

While there are many advantages to refinancing student loans, there are disadvantages, as well. If you are thinking of taking advantage of federal benefits like income-driven repayment or Public Service Loan Forgiveness, refinancing may not be right for you because you’ll lose your eligibility for federal programs.

Borrowers who do not plan on using federal benefits and choose to refinance may qualify for a lower interest rate or lower monthly payments. They’ll have only one payment a month and may be able to either lengthen or shorten the term. Note: You may pay more interest over the life of the loan if you refinance with an extended term.

SoFi offers an easy online application, no fees, and competitive rates. It takes just two minutes to see if you prequalify and checking your rate will not affect your credit score.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

Filing for bankruptcy can be a chance to eliminate a great deal of financial stress, put an end to collection calls and letters, and provide an opportunity to remake your financial life. Even so, declaring bankruptcy is not something you should take lightly.

While bankruptcy can, in some cases, reduce or eliminate your debts, it can also have serious consequences, including long-term damage to your credit score. That, in turn, can hamper your ability to obtain new lines or credit, and even make it difficult to get a job or rent an apartment.

As you think about filing for bankruptcy, here are some things to consider.

What Does it Mean to File Bankruptcy?

For individuals, there are two main kinds of bankruptcy:

•   Chapter 7 Also known as “liquidation bankruptcy,” this is bankruptcy in its most basic form. With this type of bankruptcy, your nonexempt possessions, such as homes and cars, are sold to repay existing debts. After this, many (if not all) of your debts are canceled outright in a four- to six-month process.

•   Chapter 13 Also known as a “reorganization bankruptcy,” this is a court-approved plan in which you use your income to make payments on your debts over a three- to five-year period. Some of your debts may also be discharged.

The main difference between the two options is that Chapter 7 allows the debtor to eliminate all dischargeable unsecured debt, whereas Chapter 13 allows for payments to be made on those debts.

You may be prevented from filing for Chapter 7 bankruptcy if you earn enough income to repay your debts in a Chapter 13 bankruptcy plan. On the other hand, you may not qualify for Chapter 13 bankruptcy if your debts are too high or your income too low.

If you have substantial equity in your home, you could potentially lose your home if you file for Chapter 7. If you file for Chapter 13, you can keep your home and pay off any mortgage arrears through your repayment plan.

Chapter 13 bankruptcy stays on your credit report for seven years, while Chapter 7 bankruptcy stays on the report for 10 years.

Some debts, like child support obligations, alimony, student loans, and some tax obligations, cannot be wiped out in either type of bankruptcy.

Also keep in mind that bankruptcy won’t relieve you of your obligation to pay your mortgage, though it might make your mortgage payments easier to make by getting rid of other debts.

When To Consider Bankruptcy as a Solution

Life circumstances and financial situations can vary significantly from person to person, so there is no hard and fast rule for when to declare bankruptcy.

However, you may want to start by asking yourself the following questions:

•   Are you unclear on exactly how much you currently owe?

•   Are you only able to make minimum payments on your credit cards?

•   Are you getting calls from debt collectors?

•   Does the idea of solving your financial problems make you feel hopeless, out of control, or scared?

•   Are you using your credit card to pay for necessities?

•   Are you thinking about debt consolidation?

If you answered yes to two or more of these questions, you may want to at the very least give your financial situation more thought and attention.

You may also want to start doing some research (or, if possible, speak with a consumer law attorney) to see if your debt qualifies for bankruptcy, as well as how filing for bankruptcy would affect your life and financial situation.

Alternatives to Bankruptcy

While bankruptcy can sometimes be the best way to get out from under crushing financial burdens, it is not the only way. There are alternatives that can often reduce your debt obligations without some of the negative consequences of bankruptcy. Here are a few you may want to consider.

Credit Counseling

A counselor or counseling service specializing in helping people with debt problems might be able to come up with a solution that has not occurred to you, such as a modified payment plan or debt consolidation.

According to the Federal Trade Commission, you’ll want to look for a nonprofit credit counseling program, such as those offered by universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service. You can also find a nonprofit agency that offers bankruptcy counseling through the National Foundation for Credit Counseling .

Keep in mind that not all not all nonprofit organizations offer free services, so it’s a good idea to do your research before you sign up for any type of credit counseling services.

Negotiating with your Creditors

Creditors would often rather settle a debt with you than have it discharged in bankruptcy. Debt settlement is an agreement between you and your creditors that you will pay a lump sum, possibly far below what you owe, in order to settle the matter.

But it may not be quite as lovely as it sounds. The creditors take a loss, and likely so will your credit score. You’ll also still need to pay taxes on the forgiven amount, because it will be considered revenue (money you’re getting back).

There are debt settlement companies out there to help you negotiate with creditors, but not all are created equal — some of them charge steep fees and can’t guarantee they will get you the settlement that makes the most sense for you.

It’s a good idea to carefully vet any debt settlement company you are considering working with.

Recommended: Credit Card Debt Forgiveness: How Does It Work?

Cutting Back on Expenses

You may want to give some deep thought to the way you live and currently spend your money. Your lifestyle and financial habits may be what inched you toward bankruptcy in the first place. A good way to start is to set up a personal budget, which involves looking at what’s coming in and what’s going out each month, and then looking for places to trim spending.

Even small steps, like making your own lunch, walking instead of burning gas, keeping the heat or air conditioning use to a minimum, and brewing your own coffee could help you free up money that can go toward paying your debt.

While it can be tough to live on a budget at first, with time, you may find yourself becoming more solvent and less burdened.

Debt Consolidation

With debt consolidation, you roll all your debts into one new loan account, preferably with a lower interest rate. This can enable you to pay off your past-due amounts and make one monthly payment going forward.

Having just one payment may make it easier to manage your existing debt, and could possibly save you on interest as well.

Refinancing or Modifying Your Mortgage

If your credit is still good enough, you may be able to refinance your mortgage to a new rate that could get your monthly payment low enough that it saves you from bankruptcy.

If you’re not able to refinance at a lower rate, you may be able to qualify for a mortgage modification. A mortgage loan modification is a change in your loan terms that could reduce your monthly payment.

If your lender allows it, it could involve extending the number of years you have to repay the loan, reducing your interest rate, and/or forbearing (or reducing) your principal balance.

You’ll want to keep in mind, however, that if you receive a loan modification and you still can’t make the payments, you could be at risk of losing your home

The Takeaway

If you have large debts that you can’t repay, are behind in your mortgage payments and in danger of foreclosure, and/or are being harassed by bill collectors, declaring bankruptcy might be a good solution.

Bankruptcy can help you get out from under crushing debt. The process involves either liquidating (or selling off) your assets to pay your debts or adhering to a court-ordered repayment plan.

However, bankruptcy comes with consequences. The information stays on your credit report for seven to 10 years. It can also make it difficult to get credit, buy a home, or sometimes get a job.

Before considering bankruptcy, you may want to first explore other debt management options.

If you’re looking for a better way to manage your spending and saving, SoFi can help. With a SoFi Checking and Savings account, you can easily see your weekly spending on your dashboard in the app. This can help you stay on top of your spending, and make sure you are staying on track with your budget. With SoFi, you’ll also earn a competitive annual percentage yield (APY) and won’t pay any account fees.

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SoFi members with direct deposit activity can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/31/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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