How I Turned $80K in Military Education Benefits Into $2.1 Million in Lifetime Value
Have you ever wondered how good are the education benefits offered by the military? The media, our peers, parents, and even politicians bemoan the ever rising cost of a college education. Recent statistics from StudentLoanHero show that student loan debt in the United States now stands at greater than 1.3 trillion dollars with the average now at $37,172! For most people that don’t have wealthy parents or other assets set aside, it can seem daunting to consider paying for college when you see the potential cost of college. For most people it can be a huge sticker shock. Servicemembers are not immune from the rising cost of college. The most recent statistics from DoD in 2012 reports that more than 41% of all servicemembers have some student loan debt and that number has continued to rise.
Unlike many of my peers, I have a unique story as I have been able to receive more than $2.1 million in lifetime education benefits thanks to Uncle Sam. My undergraduate degree in Economics from Purdue University was 100% paid for thanks to an Air Force ROTC (Reserve Officer Training Corps) scholarship and a few other smaller merit scholarships. The Air Force then later paid more than 80% for my first Master’s degree in Military Studies and Strategic Leadership from American Military University, and my 2nd Master’s degree in Financial Planning from the College for Financial Planning is now being 100% paid for thanks to the generous benefits of the Post-9/11 GI Bill. When you add in all of the leadership training as well as my specific job training which took more than a year and a half where the Air Force paid me to do nothing but study and get proficient in my required duties, I’ve spent huge amounts of time learning and developing as a leader.
Many of the calculations I used in this analysis came from valuing these benefits in terms of opportunity costs. Opportunity cost refers to a benefit that a person could have received, but gave up, to take another course of action. Stated another way, an opportunity cost represents an alternative given up when a decision is made. This cost is, therefore, most relevant for two mutually exclusive events. Many of the education benefits are a huge value in opportunity cost because of what I would have otherwise had to pay of my own pocket to gain.
Caveat up front: There are more details associated with the respective branches ROTC scholarship programs so ensure you’re getting the most current data directly from each of their websites and the ROTC recruiting officer.
I’ll never forget the way my AFROTC recruiting officer phrased my scholarship offer to me saying “I had won the golden ticket.” While many of the AFROTC scholarships are only given to certain types of technical majors like engineering or meteorology, I was awarded a 4 year Type 7 scholarship. That meant that as long as I went to an in-state college, which I was already planning to do at Purdue, I could pick any major I wanted and have my entire undergraduate tuition covered along with book and monthly stipends starting at $250 my freshman and rising to $500 a month by my senior year. What was even better was I had the entire freshman year to try out AFROTC and see if I liked it or not. I could walk away at the end of that time and tell the AF thanks, but no thanks, with no requirement to pay back any of the scholarship benefits. Ultimately of course I decided to stay and continue on to get a commission. I’ve listed the actual financial numbers listed out below for all the benefits I received from my AFROTC scholarship during my 4 years at Purdue.
- Tuition and Fees
- Total = $31,874
- $900 — Book stipend each academic year = $3,600
- $18,970 — Monthly stipend + TDY training money over 4 years
- ROTC scholarship total = $54,444
Since my tuition was already covered, my other costs for housing on campus were covered by a few other merit scholarships including one funded by a generous alumni gift to the Krannert School of Management. I received over $27,000 in these other merit scholarships that helped cover 100% of my living expenses in college. Krannert and Purdue helped immerse me in an environment that valued excellence and inspired me to develop a deep academic foundation that still influences me every day which created a lifelong impact that no financial figure can truly capture.
- Krannert scholarship total = $27,000
- Scholarships grand total = $81,444
So what? Does student loan debt matter?
You bet it does! Graduating debt free from college allowed me to immediately start saving aggressively towards my goals of future retirement and other shorter term goals as well as having the flexibility to give generously to causes and ministries I was passionate about! While the general rule of retirement savings is 15% of your gross (not net) pay, I was able to start at a much higher level of 30% for a total starting savings rate of more than $16,000 a year. Why is this so significant? When you are in the initial accumulation phase, nothing has as much impact on the ultimate outcome as the savings rate, so a doubled rate that early will mean more than four times as much later on thanks to the power of compounding interest! See this article for proof. As Albert Einstein so aptly described it, “compound interest is the eighth wonder of the world.” I want my money to work as hard as I do, so the more I can save and invest the more my money is working for me.
When you also consider the lifetime income benefits of having a college degree versus just a high school diploma, the value of the military scholarship rises from an already generous amount of more than $54,000 to more than $800,000 – $1,000,000 based on the average lifetime income benefit.
All four service branches and the U.S. Coast Guard offer financial assistance for voluntary, off-duty education programs in support of service members’ personal and professional goals. The program is open to officers, warrant officers and enlisted active duty service personnel. In addition, members of the National Guard and Reserve Components may be eligible for TA based on their service eligibility. To be eligible for TA, an enlisted service member must have enough time remaining in service to complete the course for which he or she has applied. After the completion of a course, an officer using TA must fulfill a service obligation that runs parallel with – not in addition to – any existing service obligation. Each branch has slightly different variations on the enrollment requirements and service obligations.
Tuition Assistance Program will fund up to 100 percent of your college tuition and certain fees with the following limits:
- Not to exceed $250 per semester credit hour or $166 per quarter credit hour
- Not to exceed $4,500 per fiscal year, October 1 through September 30
I used TA to pay for 80% of my AMU Master’s degree from 2011 – 2013. During this time, I took one class at a time with a few short breaks in the middle and incurred a concurrent active duty service commitment (ADSC) that was shorter than my other ADSC from my initial AF training so it didn’t add any additional time to what I was already serving. When I initially started at AMU, tuition was $300 a credit hour so I only had to pay $150 a class. Towards the end of my degree, the tuition was raised to $325 a credit hour so my personal contribution went up slightly. The full breakdown is listed below:
- My contribution — 10 classes @ $150 a class + 2 classes @ $225 a class = $1,950
- Total USAF TA payment — 12 classes @ $750 a class = $9,000
- Career lifetime income increase from a masters degree over just a bachelors: studies have shown that the average career increase with a masters is $400K.
Had I chosen to pay for this degree out of my own pocket, that’s $9,000 less for long-term retirement savings. While $9K may not sound like much, that amount will grow over time. That $9K invested at 8% average annual return would be more than $167,000 by the time I’m 65! That figure doesn’t even consider the potential for increased earnings due to having that degree or any other career benefits. Bottomline: opportunity costs can be among the most valuable education benefits as you save and invest what you otherwise would have to spend acquiring that degree!
The 9/11 GI Bill benefits is among the most generous benefit available for servicemembers. While the actual amount the benefit pays out varies based on what school is chosen, I have seen some estimates as high as $166,000 when considering the full tuition amount and housing benefit it can provide! There are too many different possible combinations of the benefits which I’ll write about more in future posts. When I decided to pursue a second Master’s degree in Financial Planning from the College for Financial Planning in order to prepare me for my eventual post-AF career in financial planning, I sat down to evaluate whether I should use my 9/11 GI Bill benefits now or pay cash for this second degree in order to save my benefits for the future. I had not planned on transferring my benefits due to my wife not wanting to pursue further degrees and us not having children yet that I could transfer to. Even if I could transfer it to my children though, I would have to weigh that against the extension of an ADSC. For those that know for sure they wish to stay in the military though, this is certainly one of the best possible ways to leverage the education benefit on behalf of your family’s education planning.
Rather than saving my 9/11 GI Bill benefits for a future doctorate should I go down that route someday, I decided to use it now instead of paying out of my own pocket for this degree. Based on my current degree timeline, I will also only use about 18 months of the total 36 month benefit so I can still be able to use some of the benefit later on for that doctorate — win, win! I fundamentally made this decision based on the importance of my opportunity cost. This allows me to maintain my current high savings rate into the Roth TSP instead of diverting that cash flow to pay for a degree. Instead of paying about $17,000 for this masters degree out of what would otherwise go to retirement savings, that money will grow over time to be worth more than $271,000 by the time I’m 65 (I’m 29 now) assuming a 8% annual return in my Roth TSP.
That calculation doesn’t even consider the effects the education will have on my ability to start at a higher salary and increase my earnings faster once when I decide to transition into the civilian sector. According to the College for Financial Planning, graduates of the masters program report an average of 65% increase in earnings which is a rate of return I’m highly unlikely to find anywhere else. There is also the additional consideration of the lost salary opportunity I would incur should I go back to school full time post-Air Force for however long it would take me to complete the degree. When I added everything up, it made perfect sense to me to use half of my 9/11 GI Bill for some pretty impressive long term benefits!
My Calculated 9/11 GI Bill Benefits
- Direct benefit of $17,000 tuition and fees
- Opportunity cost benefits:
- $17,000 saved in Roth TSP growing at 8% = $271,000 at age 65
- $55,000 – $65,000 in forgone annual starting salary in financial planning — this number assumes that I would otherwise be a full-time student for a year in order to finish the masters so I would not be earning a salary during that timeframe
- Saving 15% of that first-year salary for only one year for retirement in Roth IRAs growing at 8% = $122,000 at age 65
- 65% increase in earnings potential over my career in financial planning
- Still only using about 18 months out of my total 36 months of benefits
- Total 9/11 GI Bill Benefit
- Direct benefit = $17,000
- Compounded lifetime benefits = $500K – $1M (based on possible range of lifetime salary increases)
Although I knew the education benefits, especially the 9/11 GI Bill, were incredibly generous I was still blown away at the incredible value I have received in each aspect. Even assuming that my calculations might be far-fetched, if you halved all of the numbers it’s still pretty amazing. The bottom line is this: don’t underestimate the superb value you have in your military education benefits!
One note for other ROTC scholarship recipients or service academy graduates: the education commitment from undergraduate, 4 or 5 years respectively, must be completed before being able to earn time in service towards the 9/11 GI Bill benefits (being already ineligible for Montgomery benefits due to the benefits already received for the undergraduate degree). I didn’t start earning towards my 9/11 GI Bill benefits until 2013 when I completed my 4 year scholarship commitment resulting in achieving my 100% 9/11 GI Bill benefit in July 2016.
Invaluable Leadership Training
When you start to consider all of the other incredible training that the Air Force has given me over the years, the value of my military education increases exponentially. Although there’s no standard measurement for training costs, in addition to the official course costs that the Air Force uses, I also did some napkin math where I added up all of the salaries and estimated costs from each of my training opportunities in ROTC, initial qualification training time, and other leadership-specific training before annualizing all of them based on the amount of time I spent at each training assignment. Since I wasn’t the only student in each location, I then divided each training assignment figure by the number of annual students to arrive at my specific individual training costs. I won’t bore you with all the calculations I used, but my basic formula is listed below to give me an idea of how much my figures compared to the official Air Force answers I received. I won’t post all the numbers since that’s beyond the scope of this already long post.
[ (total annual salaries + all other annual training costs) x (# weeks I spent training / 52 weeks) ] / total # of annual students
Caveat up front: Every training pipeline has different timelines and requirements so this is not meant to be representative. My total training pipeline took a total of 18 months not counting the other formal leadership training opportunities and other associated training TDYs I’ve been on. I’m not counting any of my OJT leadership experiences since I’m assuming that I was being paid my salary for that. Many of the numbers were guessestimates only, but I did use some data from RAND and an older study from the GAO as a baseline for some costs. After adding up all the total costs for the major training opportunities I have experienced, the number was more than $1.2 million over my entire career so far (separate from the education benefit itself).
Other Military Education Benefits
I didn’t even cover all of the military education benefits that are offered, but I’ve listed some of the most other prominent ones below.
- Associate Degree opportunities through each specific branch
- Servicemembers Civil Relief Act (SCRA) Interest Rate Cap: Interest on student loans obtained prior to your military service is capped at 6% during periods of active duty
- Military Service Deferment: You can postpone loan repayment during certain periods of active duty and immediately following active duty
- Deferments After Active Duty: You can postpone repayment while you prepare to return to school following your active duty
- Public Service Loan Forgiveness: You may qualify for forgiveness of the remaining balance of your Federal Direct Loans. I will write more about this in the future since this program really doesn’t go into effect until October 2017.
- 0% Interest: While you are serving in a hostile area that qualifies you for special pay, you do not have to pay interest for up to 60 months
- Income-Driven Repayment Plans: Repayment plans that base your monthly payment on your income are available for federal student loans. Under these plans, you may qualify for a low or zero payment amount with the possibility of forgiveness of the remaining balance in 20-25 years
- HEROES Act Waiver: While you are on active duty, ED waives many of the documentation requirements attached to federal student loan benefits. For example, if you are on an income-driven repayment plan and military service prevents you from providing updated information on your family size and income, you can request to have your monthly payment amount maintained
- Department of Defense (DOD) Repayment of Your Loans: In certain circumstances, as determined by the DOD, all or a portion of your student loans may be repaid by the DOD
- Veterans Total and Permanent Disability Discharge: If you have a service connected disability, you may qualify for discharge of your student loans.
For more information about these programs and other opportunities, check out the links below:
Federal Student Aid
Servicemembers Civil Relief Act (SCRA)
DOD and VA Military Information Programs
My Overall Education Benefits
ROTC Total Benefits
- $54,444 direct scholarship payments
- $800,000 lifetime income increase
TA Total Benefits
- $9,000 direct tuition payments
- $167,000 projected lifetime opportunity cost benefit
- $400,000 projected career increase in earning
9/11 GI Bill Total Benefits (using only 18 months of benefits)
- $17,000 direct tuition payments
- $677,000 projected lifetime opportunity cost benefit
Even using very conservative calculations all told, I’ve received more than $2.1 million in lifetime education benefits!
Whether you’re in the military now or thinking about joining, there are so many educational opportunities to take advantage of! Many servicemembers do not fully take advantage of all of their education benefits either through not knowing about some of the programs offered or because information isn’t easy to find about some of them. I hope this post informed you and helped point you towards learning more about how to take advantage of all the education benefits the military provides as well as a deeper understanding of the value of opportunity costs and benefits.
January 4, 2017
I love this analysis, Daniel. Opportunity cost is often overlooked when running these types of evaluations. Completing your education before you separate from the military is also hugely important. I know dozens of servicemembers who said they would go to college after they got out. But it doesn’t always work out that way. Many of them had families they needed to support and had to find work right away. They earned enough to get by, but perhaps not as much as they could have earned with a degree. (Note: I’m a big believer that a college degree is not necessary to be successful, but an education or marketable skills are necessary. A college degree is also required by many employers, regardless of your skill set).
Like you, I used Tuition Assistance to complete my degree (bachelor’s while on active duty). I was able to find a job within six months after separating. That’s a little longer than I had hoped it would take, but much shorter than the 3 or 4 years it would have taken to complete my degree, then begin my job search. Completing my degree while on active duty jump-started my civilian career, helped me start earning money more quickly, and helped me avoid debt. I’m not sure it’s at the $2.1m level from your numbers, but it’s easily in the hundreds of thousands of dollars. (and at most, it cost the military less than $15,000). Win-win.
January 6, 2017
Ryan, thanks for your comment! I’m thankful to my economics teachers who first taught me the importance of analyzing opportunity costs because of how critical they are in both seeing the benefits and tradeoffs of anything we do, especially with our time and money. You’re definitely right that a college degree is not a definite requirement for success as there are other paths as well. Most servicemembers though should still take advantage as much as possible of the military education benefits they earn though especially while still in the military too to help set them up for the challenges and opportunities of the civilian workplace. I was at first pretty surprised at how high the lifetime benefit calculation came to be until I realized just how valuable being debt-free was to my savings rate all of these years allowing me to continue to save and invest along with the lifetime salary potential. Our greatest asset is our human capital which the military training and education benefits can be incredibly beneficial in developing!
May 12, 2017
This is great! I do have a clarifying question about this – did you (or can you) use any of your education benefits on the Leadership Training you mentioned? If the training was internal through Army, understandably you would not, but if any of it was through a consultant/nonprofit/third party, could you have used your GI Bill education benefits on this?
May 15, 2017
I was lucky enough to be eligible for student aid and did not have to take out any loans my entire college career. I do not envy having to be in that position of starting to pay off thousands of loan debt out of college. It is unfortunate the level at which you must be financially in order to receive aid. My niece is taking out loans and my sister is the only bread winner and does not make much..but according to the government she does…
May 23, 2017
This immediately reminds my of the quote by Robert Orben – “If you think education is expensive, try ignorance.” You’ve made an investment in your future self and the best investment anyone can make is in themselves. Luckily I received a full scholarship to attend college but I will also keep this in mind.
November 2, 2017
Oldest kid was awarded a full ROTC scholarship to the local, $$$ private university, attended for a year, while re-applying to (& now attending) the service academy that was their first choice. They are hoping to go to medical school on Uncle Sam’s dime as well.
Next kid is applying to their (different) choice of service academy as well as pursuing 4-year ROTC scholarships, but they’d join AROTC even w/o a scholarship and also the local Guard (under the SMP) while re-applying for 2-3 year ROTC scholarships.