Be Aware of This GI Bill Surprise That May Hurt Your Wallet

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The GI Bill is an awesome benefit of military service, and the ability to transfer Post-9/11 GI Bill benefits to eligible dependents means a more diverse group of students going to school with that financial assistance.

In addition to tuition payments, the Post-9/11 GI Bill offers a monthly housing allowance tied to the ZIP code of the school. In many cases, this monthly housing allowance is enough to pay for a dorm room or apartment and a meal plan or groceries.

One aspect of the monthly housing allowance payment that surprises students, and their parents, is the fact that on-campus dorm and meal plans usually need to be paid upfront. However, the monthly housing allowance portion of the Post-9/11 GI Bill is paid out at the end of each month. This time of year, I often hear from students and parents who didn't realize that they'd have to pay for the room and board, and are scrambling to cover that bill.

How does a student or parent pay that dorm and meal plan bill if they haven't received the monthly housing allowance payments yet and they don't have cash on hand?

You have a couple of options.

College Payment Plans

Most colleges have a payment plan, often handled by an outside company. There is usually a fee: My kids' colleges both charge $50 a semester, and break the payments up over the semester. The exact payment dates may vary from school to school.

Another option is to ask whether the school will just make a note on your account that you're waiting on benefits from the Department of Veterans Affairs, and let you pay monthly without enrolling in the payment plan. I have heard of a few schools doing this, but I would consider it to be an exception rather than expected. The schools do have a way to code a balance as waiting for payment because that's what they do while they are waiting for the tuition payment to be paid. Most schools are not willing to do this, but it doesn't hurt to ask!

Student Loans

Almost all students are eligible for federal student loans -- $5,500 the first year, $6,500 the second year, and $7,500 the third year and beyond. Based upon the family's financial situation, the loans may be subsidized (the federal government pays the interest while the student is in school) or unsubsidized (interest accrues while the student is in school). Either way, no payments are required while the student is still in school at least half-time.

The student can borrow the money for the first semester's room and board, and then save each month's payment to cover the following semester. If the numbers work out, the student also can make payments along the way to pay off that loan while still in school.

There is a loan fee of just over 1% of the loan amount, so be sure to figure that into your calculations to see whether this option makes sense for you.

Use a Credit Card

Another option, if you have the available credit, is to pay the college bill using a credit card, and then make payments on the credit card balance as you receive the housing allowance each month.

Most colleges will charge a fee, perhaps 2%-3%, to pay with a credit card, and you'll be charged interest from the credit card company. This is not the least expensive option, but it may be the easiest, depending on your specific situation.

Preparing for Next Semester

Once you've covered this first semester's bill, work out a plan to have the money upfront to pay next month's bill. Save each month's housing allowance payment (if you don't need to repay it right now), add a few hours a week to your part-time job, search for scholarships that will cover room and board, or apply for an on-campus position that will pay for your housing.

No one knows how to use the GI Bill until they use it, and the need to pay room and board in advance surprises a lot of people. Thankfully, you do have options to get that bill covered until you start receiving the monthly housing allowance payments.

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