Veteran Student Loan Debt Draws New Attention

It may be surprising that many U.S. military veterans who have access to generous GI Bill education benefits take out student loans to pay for higher education, but a Pew analysis of survey data from the U.S. Department of Education shows that many actually borrow a substantial amount. This and related issues have taken on a higher profile recently as lawmakers and advocates express concerns about mounting student debt, including indebtedness among veterans.

The Post-9/11 GI Bill, signed into law in 2008 by then-President George W. Bush, offers comprehensive benefits for many veterans, covering full tuition and fees at public colleges and universities as well as housing allowances and stipends to cover books and other supplies. The law, in conjunction with the Yellow Ribbon Program run by the Department of Veterans Affairs (VA), also provides partial-to-full coverage of tuition and fees at private colleges and universities.

The need and reasons for borrowing by veterans—and the extent to which they struggle with their debt—are not well understood. A Pew research initiative will examine the scope and scale of veterans’ borrowing and seek to explain why so many are taking out student loans to pay for higher education. The work also will explore why many don’t take advantage of federal veterans’ benefits to pay for their educations.

Our analysis of data from the U.S. Department of Education for the 2015-16 academic year, the latest year for which complete data is available, finds that just over a quarter of undergraduate veterans took out student loans despite having access to significant federal veterans’ education benefits. One reason for such high rates of borrowing may be that many student veterans do not use the government education benefits available to them. Although provisions of the Post-9/11 GI Bill are robust and comprehensive, only 52% of eligible students used federal veterans’ education benefits to fund their educations in the 2015-16 academic year.

About a quarter of undergraduate student veterans took out student loans

The data shows that 27% of undergraduate student veterans took out federal or private student loans during the 2015-16 academic year, an unexpected amount given their access to VA education benefits. In addition, the median amount borrowed by undergraduate veterans exceeded the median among their closest counterparts: other independent students who are not veterans but who also took out student loans. Independent students are generally adults who are no longer dependent on their parents.

The Pew analysis found that the median loan amount among undergraduate veterans who borrowed for higher education was $8,000 that year, compared with $7,500 among undergraduate, nonveteran independent student borrowers. Even though student veterans and nonveteran independent students share important demographic traits—for instance, both are twice as likely than the general student population to have dependents of their own—veterans would be expected to borrow less because they can tap into VA benefits.

Only about half of student veterans use federal veterans’ education benefits for themselves

The data for the 2015-16 school year shows that just over half of undergraduate veterans (52%) enrolled that year used VA education benefits to cover any part of their education-related expenses. That means nearly half did not.

Among the possible reasons: Some veterans might have already exhausted their benefits before completing their degrees or were unable to meet eligibility requirements. In addition, many service members choose to transfer some or all of their Post-9/11 GI Bill benefits to dependents instead of using the assistance for themselves. In fact, Pew’s analysis found that during fiscal year 2016—which roughly corresponds with the 2015-16 academic year—dependents of veterans or service members accounted for 17% of the law’s beneficiaries.

There are probably a number of additional reasons that such a large share of student veterans did not use their VA education benefits. In the coming months, Pew will share the results of a nationwide survey of veterans conducted in late 2020 in order to gain a fuller understanding of student veteran borrowing. Among the issues that we plan to explore are the different rates of borrowing among veterans who attended different types of institutions (public, for-profit, or nonprofit institutions), borrowing patterns across demographic groups, student loan default, and delinquency among veterans.

Phillip Oliff is a director, Ama Takyi-Laryea is a manager, Scott Brees is an officer, and Richa Bhattarai is an associate with The Pew Charitable Trusts’ student loan research project.