Education Loans

38 C.F.R. Part ..., Subpart F
in effectEffective: 2024-07-01

38 C.F.R. § 21.4500 Definitions.

(a) General. These definitions shall be applicable for subpart F of part 21. (b) Education loan. A loan made by the Department of Veterans Affairs to an eligible spouse or surviving spouse pursuant to 38 U.S.C. 3512(f) and 3698. (c) Academic year. The 9 month period usually from August or September to May or June, which includes generally two semesters or three quarters. (d) Loan period. (1) The Department of Veterans Affairs will make loans normally for a quarter, semester, summer term or two consecutive quarters. (2) The Department of Veterans Affairs may grant a loan to an eligible spouse or surviving spouse attending a course not organized on a term, quarter or semester basis if the course requires at least 6 months at the full-time rate to complete. A loan will be granted for not more than 6 months at a time. (i) The Director of the Department of Veterans Affairs facility of jurisdiction may waive the requirement that such a course must take at least 6 months to complete. Such a waiver of the length of the course shall be granted by the Director only if a school requests one for a course and the Director finds that: (A) During the previous 2 years at least 75 percent of the students enrolled in the course completed it. (B) During the previous 2 years at least 75 percent of the persons completing the course found employment in the occupational category for which the course is designed to provide training. (C) The default rate on all Department of Veterans Affairs education loans ever made to students at the educational institution does not exceed 5 percent or 5 cases, whichever is greater. (D) The default rate on all loans ever made to students pursuant to loan programs administered by the Department of Education does not exceed 5 percent or five cases, whichever is greater. (E) The course is at least 3 months long. (F) The course is approved for full-time attendance only. (G) No more than 35 percent of the students attending the course are receiving educational assistance from the Department of Veterans Affairs. (H) The Field Director for the region in which the Department of Veterans Affairs facility is located concurs in the waiver. (ii) If a school disagrees with a decision of a Director of a Department of Veterans Affairs facility, it may, within 1 year from the date of the letter from the Director informing the school of the decision, request that the decision be reviewed by the Director, Education Service. The Director of the Department of Veterans Affairs facility shall forward all requests to the Director, Education Service, who shall consider all evidence submitted by the school. He or she has the authority to affirm or reverse a decision of a Department of Veterans Affairs facility, but shall not grant a waiver if the requirements of paragraph (d)(2)(i) of this section are not met. (iii) A waiver will remain in effect until the date on which the course fails to meet one of the requirements of paragraph (d)(2)(i) of this section. A school which has received a waiver for a course must notify the Director of the Department of Veterans Affairs facility of jurisdiction within 30 days of the date on which one of those requirements is not met. (e) Total amount of financial resources. This term means the total of the following: (1) The annual adjusted effective income of the eligible spouse or surviving spouse, less Federal income taxes paid or payable by the veteran or other eligible person with respect to such income, as described in paragraph (h) of this section. (2) The amount of cash assets of the eligible spouse or surviving spouse, as described in § 21.4502(b)(2). (3) The amount of financial assistance received by the eligible spouse or surviving spouse under the provisions of Title IV of the Higher Education Act of 1965, as amended. (4) Educational assistance received or receivable for the loan period by the eligible spouse or surviving spouse under 38 U.S.C. chapter 35. This amount shall be exclusive of an education loan. (5) Financial assistance received by the eligible spouse or surviving spouse under any scholarship or grant other than the one specified in paragraph (e)(3) of this section. (6) Department of Veterans Affairs work-study allowance received or receivable by the eligible spouse or surviving spouse under 38 U.S.C.3537. (f) Actual cost of attendance. The term actual cost of attendance means: (1) The actual charge per student for tuition, fees, and books; (2) An allowance for commuting (this allowance will be based on 22.5¢ per mile for distances not exceeding normal commuting distance); (3) An allowance for other expenses reasonably related to attendance at the institution at which the eligible spouse or surviving spouse is enrolled; and (4) A room and board allowance that shall be determined as follows: (i) If the educational institution actually provides the eligible spouse or surviving spouse with room and board, the allowance shall equal the actual charges to him or her for room and board; (ii) If the educational institution provides some students with room and board, but does not provide room and board for the eligible spouse or surviving spouse, the room and board allowance shall equal either the actual expenses incurred by the eligible spouse or surviving spouse for room and board, or the amount for room and board that the educational institution would have charged the eligible spouse or surviving spouse, had the educational institution provided him or her with room and board, whichever is less; and (iii) If the educational institution does not provide any students with room and board, the room and board allowance shall equal either the actual expenses incurred by the eligible spouse or surviving spouse for room and board or the amount the eligible spouse or surviving spouse would have been charged for room and board had he or she been provided room and board by the nearest State college or State university that provides room and board, whichever is less. (g) Loan fee. This shall be a fee collected by discounting the amount of any loan granted to an eligible spouse or surviving spouse by an appropriate amount. The fee shall be collected for each separate loan authorized. The amount of the fee shall be 3 percent of the total loan amount. (h) Annual adjusted effective income. This income shall include: (1) Nontaxable income for the student only for the current tax year in which the application for the education loan is received by the Department of Veterans Affairs. This includes income from sources such as Department of Veterans Affairs compensation and pension, disability retirement, unemployment compensation, welfare payments, social security benefits, etc. (2) Adjusted gross income (wages, salary, dividends, interest, rental, business, etc.) for the student only for the current tax year in which the application for the education loan is received by the Department of Veterans Affairs, less: (i) Authorized deductions for exemptions; (ii) Itemized or standard deduction, whichever is greater; (iii) Mandatory withholdings such as Federal and State income taxes, social security taxes, etc. (i) School term. This phrase means: (1) In the case of an institution of higher learning operating on a quarter system, three consecutive quarters within an ordinary school year; (2) In the case of an institution of higher learning operating on a semester system, two consecutive semesters within an ordinary school year; or (3) In the case of an educational institution not an institution of higher learning or in the case of an institution of higher learning not operating on a quarter or semester system, a period of 9 to 11 months provided: (i) The program of education is divided into segments, and (ii) At least one segment is completed prior to or during the 9 to 11-month period.

38 C.F.R. § 21.4501 Eligibility.

(a) General. Any eligible spouse or surviving spouse shall be eligible to receive an education loan if he or she meets the criteria of this section. (b) Eligibility criteria. To qualify for an education loan— (1) The eligible spouse's or surviving spouse's delimiting period as determined by § 21.3046 (a), (b), or (d), or § 21.3047 must have expired; (2) The eligible spouse or surviving spouse must— (i) Have financial resources that may reasonably be expected to be expended for education needs and which are insufficient to meet the actual costs of attendance; (ii) Execute a promissory note payable to the Department of Veterans Affairs, as provided by § 21.4504; (iii) Have unused entitlement provided under 38 U.S.C. 3511; (iv) During the term, quarter, or semester for which the loan is granted, be enrolled on a full-time basis in pursuit of the approved program of education in which he or she was enrolled on the date his or her eligibility expired under § 21.3046 (a), (b), or (d), or § 21.3047; and (v) Have been enrolled in a program of education on a full-time basis— (A) On the date his or her period of eligibility expired under § 21.3046 (a), (b), or (d), or § 21.3047; or (B) On the last date of the ordinary term, semester or quarter preceding the date his or her eligibility expired under § 21.3046 (a), (b), or (d), or § 21.3047, if the delimiting date fell during a school break or summer term. (c) Limitations. The period for which a loan may be granted shall not extend beyond the earliest of the following dates: (1) Two years after the expiration of the period of eligibility as determined by § 21.3046(a), (b), or (d), or § 21.3047; (2) The date on which the eligible spouse's or surviving spouse's entitlement is exhausted; or (3) The date on which the eligible spouse or surviving spouse completes the approved program of education which he or she was pursuing on the date the delimiting period determined by § 21.3046 (a), (b), or (d), or § 21.3047 expired. (d) Exclusions. No eligible spouse or surviving spouse shall be authorized an education loan if he or she has defaulted on a previous education loan and there is a remaining unliquidated payment due VA.

38 C.F.R. § 21.4502 Applications.

(a) General. An eligible spouse or surviving spouse shall make an application for an education loan in the manner prescribed and upon the forms prescribed by the Department of Veterans Affairs. The Department of Veterans Affairs must receive the application no later than the last date of the term, quarter, semester, or 6-month period to which all or part of the loan will apply. The application shall be certified by the school as to the date required from the school by the Department of Veterans Affairs. (b) Information. The application shall provide the Department of Veterans Affairs with the following information and such other information as may be reasonable upon specific request: (1) A statement of nontaxable income for the student for the current tax year in which the application is received by the Department of Veterans Affairs; as well as a statement of adjusted gross income for the student for the current tax year in which the application for an education loan is received by the Department of Veterans Affairs less authorized deductions for exemptions, itemized or standard deduction, whichever is greater, and mandatory withholdings such as Federal and State income taxes, social security taxes, etc. (2) The amount of all funds of the eligible spouse or surviving spouse on hand on the date of the application including cash on hand, money in a bank or savings and loan association account, and certificates of deposit. (3) The full amount of the tuition for the course to be paid by the eligible spouse or surviving spouse during the period for which the loan is sought. (4) The amount of reasonably anticipated expenses for room and board to be expended by the eligible spouse or surviving spouse during the period for which the loan is sought, including a reasonable amount, not to exceed 22.5 cents per mile, for commuting normal distances to classes if the student does not reside on campus. Applications may also provide the Department of Veterans Affairs with a statement of the amount of charges for room and board which the school would have made had the school provided the eligible spouse or surviving spouse with room and board. If the school does not provide room and board, the application may provide the Department of Veterans Affairs with a statement of charges for room and board which the eligible spouse or surviving spouse would have received had he or she been provided room and board at the nearest State college or State university which provides room and board. (5) The anticipated reasonable cost of books and supplies required for the courses to be taken during the period for which the loan is sought.

38 C.F.R. § 21.4503 Determination of loan amount.

(a) General. The amount of the education loan shall be computed by: (1) Determining the total amount of financial resources of the eligible spouse or surviving spouse, as defined in § 21.4500(e), which may be reasonably expected to be expended for education needs in any academic year or other loan period. (2) Subtracting the available resources determined in paragraph (a)(1) of this section from the actual cost of attendance, as defined in § 21.4500(f), to obtain the net amount by which costs exceed the resources available for education needs. If the available resources and the costs are equal, or if the resources exceed the costs, no loan will be authorized. (b) Amount. A loan shall be authorized in the amount of the excess of cost over available resources as determined in paragraph (a) of this section subject to the following limitations: (1) If the costs exceed the available resources by $50 or less no loan shall be granted. (2) The aggregate of the amounts any eligible spouse or surviving spouse may borrow for an education loan may not exceed $2,500 in any one academic year. It also may not exceed an amount determined by multiplying the number of months of educational assistance to which the eligible spouse or surviving spouse would be entitled were it not for the expiration of his or her delimiting period under 38 U.S.C. 3511 times $376. (3) If a student is enrolled in a course organized on a term, quarter or semester basis, no single loan shall be authorized at one time for a period that is longer than two consecutive quarters. If a student is enrolled in a course not organized on a term, quarter or semester basis, no single loan shall be authorized at one time for a period that is longer than 6 months. (4) The Department of Veterans Affairs shall pay the following maximum amounts for these loan periods: (i) $1,250 for any semester. (ii) $830 for any term of 8 weeks or more leading to a standard college degree which is not part of the normal academic year or for a quarter. (iii) $1660 for two consecutive quarters. (iv) $270 per month for a course not leading to a standard college degree if less than 6 months long. (v) $1660 for a 6-month loan period based on a course not leading to a standard college degree which is 6 or more months long. (vi) $270 per month for a loan period of less than 6 months based on a course not leading to a standard college degree which is 6 or more months long. (5) No amount authorized will be paid by the Department of Veterans Affairs until the eligible spouse or surviving spouse is certified as being enrolled and actually pursuing the course. (6) An eligible spouse or surviving spouse may receive more than one loan covering separate loan periods, subject to paragraphs (b)(3) and (b)(7) of this section. (7) If the spouse or surviving spouse has a material change in economic circumstances subsequent to the original application for a loan, he or she may reapply for an increase in an authorized loan or for a loan, if otherwise qualified, if no loan was originally granted. However, the Department of Veterans Affairs will not decrease or revoke a loan once granted, absent fraud in the application.

38 C.F.R. § 21.4504 Promissory note.

(a) General. The agreement by VA to loan money pursuant to 38 U.S.C. 3512(f) and 3698 to any eligible spouse or surviving spouse shall be in the form of a promissory note which shall include: (1) The full amount of the loan. (2) Agreement to pay a fee not to exceed 3 percent for an insurance fund against defaults. (3) A note or other written obligation providing for repayment of the principal amount, and interest on the loan in annual installments over a period beginning 9 months after the date on which the borrower first ceases to be at least a half-time student and ending: (i) For loans of $600 or more, 10 years and 9 months after such date, or (ii) For loans of less than $600, 1 year and 7 months after such date for the first $50 of the loan plus 1 additional month for each additional $5 of the loan. (4) A provision for prepayment of all or part of the loan, without penalty, at the option of the borrower. (b) Interest. The promissory note shall advise the student that the loan shall bear interest on the unpaid balance of the loan at a rate comparable to, but not in excess of, the rate of interest charged students at such time on loans insured by the Secretary of Education, Department of Education, under part B of Title IV of the Higher Education Act of 1965. The rate shall be determined as of the date the agreement is executed and shall be a fixed amount. (c) Security. The loan shall be made without security and without endorsement. (d) Default. Whenever VA determines that a default, in whole or in part, has occurred on any such loan the eligible spouse or surviving spouse shall be notified that the amount of the default shall be recovered from the eligible spouse or surviving spouse concerned in the same manner as other debt due the United States. Once a default has occurred, the eligible spouse's or surviving spouse's subsequent reentrance into training at the half-time or greater rate shall not be the basis for rescinding the default. A default may only be rescinded when VA has been led to create the default as a result of a mistake of fact or law. (e) Death or disability. If the eligible spouse or surviving spouse dies or becomes permanently and totally disabled, even though he or she ceases to be permanently and totally disabled subsequent to the granting of the loan, the remaining liability of such person for an educational loan shall be discharged. (f) Fraud. Material misrepresentation of fact by the eligible spouse or surviving spouse, including omissions of relevant information, shall render the loan agreement null and void. The deferred payment provisions of the agreement shall not apply in such a case and the full amount of any loan balance shall become due and payable immediately. The amount due shall be recovered from the eligible spouse or surviving spouse in the same manner as any other debt due the United States. (g) Signature. An eligible spouse or surviving spouse may sign both the loan application and the promissory note required and payment of the amounts authorized will be made to such person, notwithstanding his or her minority, unless the person has a legal guardian. In such cases the legal guardian must sign and will be paid the loan amounts.

38 C.F.R. § 21.4505 Check delivery.

(a) General. Education loans by the Department of Veterans Affairs shall be made by a check payable to the eligible spouse or surviving spouse and shall be mailed promptly to the educational institution in which the eligible spouse or surviving spouse is enrolled for delivery by the educational institution. (b) Delivery and certification. (1) The educational institution, electing to participate in this program, shall deliver an education loan check to the eligible spouse or surviving spouse and shall certify the fact of delivery to the Department of Veterans Affairs immediately upon delivery. If the delivery is not made within 30 days after the institution receives the check, it shall return the check to the Department of Veterans Affairs. (2) The Director of the Department of Veterans Affairs facility of jurisdiction may direct that education loan checks be sent directly to spouses or surviving spouses when: (i) The educational institution demonstrates an inability to comply with these requirements; or (ii) The educational institution fails to provide adequately for the safekeeping of the checks prior to the delivery to the student or return to the Department of Veterans Affairs; or (iii) The educational institution elects not to participate in this program; or (iv) There is compelling evidence that the institution is unable to discharge its responsibilities under this program.

38 C.F.R. § 21.4507 Advertising.

(a) General. No educational institution or training establishment shall include a statement in advertisements or brochures intended to solicit students as to the availability of education loans from the Department of Veterans Affairs for eligible spouses and surviving spouses, except as provided in paragraph (b) of this section. (b) Form. The statement which is permitted shall be as follows: “Certain eligible spouses and surviving spouses may qualify for a maximum educational loan of $2,500 per academic year from the Department of Veterans Affairs depending upon need. Applications for such loans shall be made to the Department of Veterans Affairs on forms prescribed by it.”