This past week my Uncle Sam paid off over $17,000 of my federal student loans.Sweet.
When you join the Army, you have a two choices: Montgomery G.I. Bill or Student Loan Repayment Program (SLRP). Having already been to graduate school (and not interested in any more), I opted for the latter.
So for three years, at the end of each service year completed, the government pays off one-third of the principal. While you're waiting for the payments, you can put the loans in "deferal."
While in deferal, loans still accrue interest, but interest on subsidized loans is billed to the government. Interest on unsubsidized loans is your responsibility; you can make payments (to keep it from capitalizing and get the tax credit), or you can pay it later.
Either way, you've got to be careful when you make payments. Sallie Mae policy is to apply payments first to interest, then to principal. That's the way it should be (so you're not paying down any principal the government should be), yet I continue to have problems with payments being applied to principal. (I think it's because my two unsubsidized loans are in the same billing group.)
Another issue comes up when that end-of-service-year lump-sum payment comes in. It also goes first to interest, then to principal, despite U.S. Government policy that it be applied solely to principal. I wrote to my loan holder this past week to get that ironed out, but I haven't heard back yet.
One other note -- the SLRP doesn't apply to private loans. For official information, refer to this.
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One other thing -- I qualified for the SLRP because I was a "non-prior service officer candidate" when I enlisted. Though officially discharged on December 3 and commissioned on December 4, I retained that benefit. In my case, my term "end of service year" means one year after I enlisted.
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