New Federal Regulations Affect Student Loan Provisions for Military Service

Federal regulations published Oct. 23 include new provisions and revisions to existing provisions affecting certain military personnel and veterans. These changes are effective July 1, 2009, but lenders may implement the changes earlier than that date.

• Post-Active Duty Student Deferment — New regulations clarify that a borrower who was serving on active duty on Oct. 1, 2007, or began a period of active duty service after that date, is entitled to the new post-active duty student deferment. Some of the eligibility criteria are amended, as follows:
  • The borrower must be enrolled at least half time. Eligibility for the post-active duty student deferment ends on the date that the borrower ceases at least half-time enrollment or 13 months following the end of the borrower’s active duty service or any applicable grace period. Previous rules did not stipulate the level of enrollment necessary to qualify for the deferred period.
  • The period of active duty must have been at least 30 days. 
  • The regulations further clarify the definition of qualifying active duty with respect to National Guard service to be any of the following circumstances:
    • Active duty at the state level, if that duty is served under an order by which the governor activates the National Guard, and the state pays for the Guard activities.
    • Active duty at the state level when that duty is served as full-time National Guard duty ordered by the governor of a state with the approval of the president or U.S. secretary of defense, and the federal government pays for the Guard activities.
    • Active duty by a full-time permanent employee of the National Guard only if that employee is reassigned to active duty as noted above.

  A borrower who is a member of another reserve component of the U.S. Armed Forces is not further defined.

  If a borrower qualifies for both a military deferment and a post-active duty student deferment, the 180-day period of post-mobilization military service deferment and the 13-month post-active duty student deferment run concurrently.

  • Military Deferment — A lender is permitted to grant a military deferment based on its confirmation that the borrower has received a deferment on a loan held by another lender, by a school participating in the Perkins Loan Program, or under the William D. Ford Direct Loan Program.
    If the lender grants military deferment without having documentation of the borrower’s status, the deferment must be granted for no more than 12 months from the date that the initial qualifying service began.
  • Military Forbearance — A lender is required to provide a period of forbearance for certain borrowers who serve in the National Guard. If the borrower qualifies for a post-active duty student deferment but, because of the type of service rendered, does not qualify for the military service deferment, the lender is required to provide a period of forbearance. The lender must grant the forbearance in increments of 12 months or less, depending on the borrower’s eligibility. Borrowers are eligible for this forbearance if engaged in active duty service at the state level — if that service meets any of the following criteria:
    • Active duty at the state level, if that duty is served under an order by which the governor activates the National Guard and the state pays for the Guard activities.
    • Active duty at the state level when that duty is served as full-time National Guard duty ordered by the governor of a state with the approval of the president or U.S. secretary of defense, and the federal government pays for the Guard activities.

  The borrower must have served for a period of at least 30 consecutive days beginning on either of the following:

  • The day after the grace period expires for a Stafford loan that has not entered repayment.
  • The day after the borrower ceases at least half-time enrollment on any Federal Family Education Loan Program loan that is in repayment.

  If you have questions about these new provisions, send e-mail to USA Funds^®' policy advisers.