Members of the military have access to special benefits and legal protections that can make a huge difference in your family's personal finances. Make sure you take full advantage of what's available.
Free College for Yourself -- or for Your Kids
One of the most exciting new benefits for servicemembers and their families is the expansion of the GI Bill, which can provide sweet education benefits for yourself, your spouse and even your children.
The Post 9/11 GI Bill can cover the full cost of in-state tuition and fees for public colleges for up to 36 months (four academic years), or up to $17,500 per year for private colleges and foreign schools. In addition, you can qualify for a housing stipend and money for books and tutoring. You can use the money for undergraduate or graduate programs at colleges and universities, or for certain programs at vocational, trade and distance-learning schools.
Eligibility is based on the length of time you serve in the military. For maximum benefits, you must serve at least 36 months or serve on active duty for at least 30 continuous days and be discharged because of a service-connected disability. Partial benefits are earned if you serve at least 90 days on active duty.
And the Post 9/11 GI Bill offers important flexibility: You may be able to transfer your benefits to your spouse or your children. You can generally opt to transfer benefits if you're on active duty or selected reserve, have served at least six years, and agree to serve four more years. (Different service commitments apply for those eligible for retirement between Aug. 1, 2009, and Aug. 1, 2013.)
Spouses may use the transferred benefits right away; children must wait until you've served at least ten years. Servicemembers and veterans (and their spouses) must use the benefits within 15 years after leaving the military. Children aren't bound by the 15-year limit, but they must use the transferred benefits by age 26.
If you'd like to transfer GI Bill benefits to your children, it’s a good idea to apply for the transfer as soon as you're eligible. The four-year period begins on the date the transfer is approved. So even if you've been in the military 15 years, for example, you would need to serve an additional four years after you elect to transfer your benefits.
Col. Houman Tavaf, who has been an Army surgeon for 17 years, transferred his GI Bill benefits to his son, William, in 2010. Will is just 8 years old now, but Tavaf transferred the benefits right after he signed up to stay in the Army for another four years to start the four-year clock ticking. For maximum flexibility, the colonel transferred 35 months of benefits to Will and one month to his wife, Kim, in case she decides to return to grad school. Although you can't add beneficiaries after leaving the military, you can alter the allocation. "This gives us such a great start on saving for Will's college," Tavaf says.
For more details about transferring benefits, see the GI Bill Transfer page. If you (or your spouse or children)are attending a private college, going to graduate school or paying out-of-state tuition at a public college, your benefits may not cover the entire bill. But you may qualify for extra help from the Yellow Ribbon program. More than 1,000 colleges provide scholarships for a certain number of students each year, and the Department of Veterans Affairs matches the school's contribution.
To qualify for a Yellow Ribbon scholarship, you must be eligible for maximum GI Bill benefits (children or spouses using transferred benefits may qualify). Yellow Ribbon funding varies widely by school and program, and you apply for these scholarships directly through the college. For the 2011–12 school year, for example, Columbia University offered 300 $7,000 Yellow Ribbon scholarships to its undergraduate school of general studies, four $5,000 scholarships to its medical school, and 32 $2,500 scholarships to its graduate school of business, plus varying scholarships to several other of its programs. See the VA's Yellow Ribbon Program page for more information.
For more information about the Post 9/11 GI Bill and the earlier Montgomery GI Bill, go to the Veterans Affairs GI Bill page.
Interest-Rate Reductions and Other Special Legal Rights
Members of the military have special legal rights that come into play if you have to move unexpectedly, are deployed or leave a civilian job to go on active duty with the Reserves or National Guard.
One of the most valuable benefits of the Servicemembers Civil Relief Act (SCRA) is the interest-rate cap: In some situations, the rate on a mortgage, credit card, car loan or other debt can be reduced to 6% if military service affects your ability to pay -- as it may if you take a pay cut when activated to the Reserve or National Guard. This rule applies only to debts incurred prior to military service or activation, not to debts taken on while on active duty. Loans for which a nonmilitary spouse is jointly liable can also qualify for the rate reduction.
June Walbert, a certified financial planner for USAA and member of the U.S. Army Reserve, took advantage of the law when she was deployed to Iraq in 2003. She notified her mortgage company, sent a copy of her official orders, and had her rate reduced from 8% to 6% while she was on active duty for six months. That shaved her mortgage payments by about $200 per month.
The rate resets when your active duty is over, but the higher rate will only apply to the remaining balance -- the difference between the higher and lower rates is forgiven, not simply deferred.
If you qualify to reduce your credit-card rate -- imagine the power of slashing the rate from 18%, say, to 6% -- more of every payment will go to pay off principal rather than to interest. You need to send the lender a written request for the rate reduction, which you can do on your own or with help from an Armed Forces Legal Assistance Office. To prove that your income has been reduced, you may be asked to submit copies of your military orders, earnings statements and tax returns.
SCRA provisions can also help servicemembers who are deployed or have to move. You have the right to terminate an apartment lease if you have orders for a permanent change of station or are deployed to a new location for 90 days or more. You can terminate a car lease without an early-termination fee if you are deployed for 180 days or longer. And you can terminate your cell-phone contract without penalty if you receive orders to relocate for more than 90 days to an area that is not supported by the contract.
You'll find more about SCRA protections at www.service members.gov.