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How Do Student Loans Affect GI Bill Payment Towards My College Expenses?

Author Ron Kness is no longer in the service.

Q: I’m eligible for the 9/11 GI bill at the 100% rate and the school I will be attending participates in the Yellow Ribbon Program. I’ve also applied for student loans. I’m curious how student loans affect payment of the GI Bill. Will taking out a student loans reduce the amount of tuition paid by the VA (ie: will the school use the student loan funds for tuition fees before using the funds from the GI Bill?).

A: It depends on the type of scholarship and if it is “fenced” money or not. If it is, your school has to apply it according to the scholarship rules. If it is not fenced, then they can apply as they want, however, I would ask them how they intend to apply it and let them know you are a Post 9/11 GI Bill user.

How scholarship money is applied can be important because the VA is the last payer, after all other sources of financial support pays. A new change to the law, the last payer clause now reads:

“The VA will pay the actual net cost for in-State tuition and fees assessed by the insti┬¡tu┬¡tion for the pro┬¡gram of edu┬¡ca┬¡tion after the appli┬¡ca┬¡tion ofÔÇö

– any waiver of, or reduc┬¡tion in tuition and fees; and

– any schol┬¡ar┬¡ship, or other Fed┬¡eral, State, insti┬¡tu┬¡tional, or employer-based aid or assis┬¡tance (other than loans and any funds pro┬¡vided under sec┬¡tion 401(b) of the Higher Edu┬¡ca┬¡tion Act of 1965 (20 U.S.C. 1070a)) that is pro┬¡vided directly to the insti┬¡tu┬¡tion and specif┬¡i┬¡cally des┬¡ig┬¡nated for the sole pur┬¡pose of defray┬¡ing tuition and fees.:

So if your money is not fenced or falls under Section 401(b), it can be used for anything. It really wouldn’t make sense to apply it to your tuition and fees if you are attending a public school, being the VA would pay 100% of these expenses. If you are attending a private school, these funds could be used for expenses over and above the $17,500 paid by the VA.

Talk to your school and press them for an answer. If the money in non-fenced or 401(b), then it could also be used to pay for other expenses, such as books, room and board, etc.

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