PROCEEDINGS

	IN THE CASE OF:       

	BOARD DATE:           13 September 2001
	DOCKET NUMBER:   AR2001055770

	I certify that hereinafter is recorded the true and complete record of the proceedings of the Army Board for Correction of Military Records in the case of the above-named individual.  

	Mr. Carl W. S. Chun		Director	
	Ms. Rosa M. Chandler		Analyst	

  The following members, a quorum, were present:

	Mr. Fred N. Eichorn		Chairperson	
	Mr. John E. Denning		Member	
	Ms. Terry L. Placek		Member	

	The applicant and counsel if any, did not appear before the Board.

	The Board considered the following evidence:

	Exhibit A - Application for correction of military 
                records
	Exhibit B - Military Personnel Records (including
	            advisory opinion, if any)

FINDINGS:

1.  The applicant has exhausted or the Board has waived the requirement for exhaustion of all administrative remedies afforded by existing law or regulations.

2.  The applicant requests, in effect, that she be reimbursed $592.00 for a student loan that she repaid when, in fact, it should have been paid in accordance with her enlistment option for the Army Loan Repayment Program (LRP).  She also requests that her credit records be corrected to show that she did not default on a college loan. 

3.  The applicant states, in effect, that she is being wrongly held responsible for failure to complete the LRP packet and for failure to return the LRP packet to the Army Education Enlistment Incentives Branch for payment under the terms of her enlistment contract.  Her DD Form 149 (Application for Correction of Military Records), and supporting documents were submitted to the Board through the Office of the Inspector General (IG), Headquarters 3rd Corps Support Command, under a cover letter dated 30 March 2001. 

4.  Her supporting documents includes DD Form 2366 (Montgomery GI Bill Act 0f 1984(MGIB)); DA Form 3286-59 (Statement of Enlistment United States Army Enlistment Program-US Army Delayed Enlistment Program); DA Form 
3286-63 (Statement for Enlistment United States Army Training Enlistment Program); DA Form 3286-66 (Statement of Understanding United States Army Incentive Enlistment Program); DA Form 3286-67 (Statement of Understanding (Army Policy)); and DD Form 4/1-4/3 Enlistment /Reenlistment Document Armed Forces of the United States).  Her supporting documents also include an undated letter and two additional letters dated 14 February 1996, verifying her duty status as an active duty service member; two letters addressed to Northwestern Michigan College, dated 3 July 1998; a statement received from the US Department of Education, showing the applicant's student loan is in default, dated 2 September 2000; a letter addressed to the Department of Education, dated 13 September 2000; e-mail that transpired between the applicant and the Department of Education, dated 14 September 2000; a letter, addressed to the Total Army Personnel Command (PERSCOM), dated 14 September 2000; letters addressed to Northwestern Michigan College, dated 15 and 18 September 2000; a Deferment of Payment request, dated 18 September 2000; a letter written by Northwestern Michigan College, dated 18 September 2000; e-mailed correspondence that transpired between the Education Incentive Branch and the IG, dated 20 March 2001; and correspondence addressed to the IG, dated 
22 February 2001. 

5.  The applicant’s DA Form 3286-66 (Statement of Understanding-US Army Incentive Program) shows that on 10 August 1995 she enlisted in the Delayed Entry Program (DEP) and that her enlistment options included Option 9A, the US Army Training Enlistment Program, and Option 9C, the Army LRP.  Terms of the LRP were outlined in the applicant’s DA Form 3286-66 which she signed.  Her DA Form 3286-66 indicates that she acknowledged that she understood the terms outlined in Section 4, which are that the Army would only repay loans that she incurred prior to enlistment in the RA that were insured or guaranteed under Part B of the Higher Education Act of 1975 (Guaranteed Student Loan (GSL)) or any loan under Part E of the (National Direct Student Loan (NDSL)) after October 1975.  In addition, Public Law 99-145, Section 671(a)(1) confirms that loans eligible for repayment must be made under Title IV, Part B, D, or E of the Higher Education Act.  The applicant’s recruiter wrote on her DD Form 3286-66 that her loan contract was "Not to exceed $55,000."

6.  On 27 December 1995, she was discharged from the DEP and she enlisted in the Regular Army (RA) for 6 years and training in military occupational specialty 
67T (Helicopter Repairer).  

7.  Prior to enlisting in the military, while attending Northwestern Michigan College, the applicant received a $1,500 Perkins Loan/National Direct Student Loan.  The loan was made in three disbursements of $500.  The disbursements were made on 26 July and 11 December 1991 and on 3 February 1992.  Evidence contained in the available record shows that, prior to enlisting in the military, she had paid $910.00 on the loan and she had an outstanding balance of $589.91.  Her payments were current.

8.  The applicant contends that in 1996, when she was assigned to Korea, which was her first duty station, she completed the appropriate paperwork to ensure that her loans would be paid in accordance with the LRP.  Therefore, she was under the assumption that her loans were being repaid in a timely manner.  It appears that the paperwork for her Perkins Loan for $589.91 was filed, however, it was rejected by the lender because her unit did not use an official seal or stamp that was required.  There is no evidence available that indicates when or if the applicant was informed that the paperwork had been returned. 

9.  Evidence available indicates that in addition to the Perkins Loan, the applicant had two other loans that were paid in accordance with the LRP.  The Defense Finance and Accounting Service (DFAS) paid USA Group Loan Services $2,867.91 and Sallie Mae $1,416.74; both loans were paid off between March 1997 and December 1998.  

10.  In 1998, while assigned to Bosnia, the applicant began receiving notices that her Perkins Loan was past due.  On 3 July 1998, she contacted her local Army legal services officer in Bosnia to assist her in resolving the payment of the loan. Between 1998 and 2000, the applicant attempted to have her Perkins Loan repaid through the LRP. Her unit became involved, she wrote many letters and she sent numerous e-mails to the Department of Education, Northwestern Michigan College, to the Army Education Incentives Branch and the IG.

11.  On 26 January 2000, Northwestern Michigan College notified the applicant that her military deferment expired in March 1998 and that her Perkins Loan was in default.  She was informed that she owed a total of $669.25 (the principal owed equaled $589.91, interest equaled $51.62 and she owed a late charge of $27.72). 

12.  On 4 October 2000, the US Department of Education threatened to garnish the applicant's wages among other things.  On 24 October 2000, the applicant paid the US Department of Education $705.00, the full sum of the outstanding balance on her Perkins Loan. 

13.  On 1 December 2000, the applicant was informed that the Army would make an exception to policy to repay the original unpaid principal of her defaulted loan. However, she had already paid the loan and there were no provisions for her to be reimbursed.

14.  In connection with her application, PERSCOM recommends disapproval of the applicant’s request.  PERSCOM opined, in essence, that there are no provisions to allow the Department of the Army to reimburse an individual for payments already made.  In fact, federal statute precludes the authorization of payments toward interest and the reimbursement of payments already made.  
Payments are only authorized on student loans that have been verified by the loan holder.  Loan verifications were received from USA Group Loan Services and Sallie Mae and the appropriate payments were made.  Loan verification was never received from the US Department of Education.  The applicant was given information regarding an exception to policy to pay on her defaulted loan with the US Department of Education based on the information that she provided.  The applicant paid off the loan prior to DFAS having a chance to pay on it.  Additionally, PERSCOM opined that the US Army does not assume an individual's loan; loan status is the borrower's responsibility.  Eligibility for the LRP does not exempt a soldier from their obligation to repay their loans.

15.  The above advisory opinion was referred to the applicant for comment or rebuttal.  She responded to the advisory opinion by stating that she feels she has not received cooperation regarding her problem because the chronological order of events is not being considered.  Loan verification was never received from the US Department of Education or from the University Accounting Services, because neither was the original loan holder.  In 1996, the original loan holder was known as CRK.  CRK did not appropriately process the LRP packet, as it should have.  The applicant states that she was not notified that her Perkins Loan had changed hands even though she made numerous attempts to obtain the status.  Regulations governing the LRP specifically states that the Army will not make payments on loans that are in default.  She paid the loan in full when the Department of Education told her that this was the only way to get the loan out of default.  Five weeks later, the Department of Army Education Incentives and Counseling Branch notified her that an exception to policy would be made to pay off her loan. 

16.  The LRP is an educational enlistment incentive which provides for payment of 33 1/3 percent or $1,500.00 of the unpaid principal of approved federal student loans, whichever is greater, for each year of active duty a soldier completes. 

CONCLUSIONS:

1.  Information available to the Board shows that the applicant appears to have taken reasonable and responsible measures to ensure that her loans, to include her Perkins Loan, would be repaid by the Army in accordance with the LRP.

2.  The evidence available indicates that the applicant's Perkins Loan, in the amount of $589.91 was a federally approved loan that should have been paid in accordance with LRP.  The loan went into default due to no fault of the applicant. 
Therefore, the Board believes that equity requires the Army to pay this loan. 

3.  The Board is not empowered to correct civilian credit reporting records.  However, the Board recommends that the DFAS furnish the applicant an explanatory letter that she may provide to her creditors indicating that she was not responsible for the student loan default.

4.  In view of the foregoing, the applicant’s records should be corrected, but only as recommended below.

RECOMMENDATION:

1.  That all of the Department of the Army records related to this case be corrected by reimbursing the individual concerned the amount of $705.00 for payment of her defaulted Perkins Loan, which includes the amount of the original loan, accrued interest, and penalty fees that were assessed against the loan. 

2.  That the DFAS furnish an explanatory letter to the individual concerned for her use in explaining to her creditors that she was not responsible for the default on her student loans.

3.  That so much of the application as is in excess of the foregoing be denied.

BOARD VOTE:  

__FNE__  __JED__  ___TLP___  GRANT AS STATED IN RECOMMENDATION

________  ________  ________  GRANT FORMAL HEARING

________  ________  ________  DENY APPLICATION

		_     _Fred N. Eichorn___
		        CHAIRPERSON

INDEX

CASE ID	AR2001055770	
SUFFIX		
RECON	 	
DATE BOARDED	20010913	
TYPE OF DISCHARGE	(N/A)	
DATE OF DISCHARGE	(N/A)	
DISCHARGE AUTHORITY	(N/A)	
DISCHARGE REASON		
BOARD DECISION	(GRANT)	
REVIEW AUTHORITY		
ISSUES         1.		
2.		
3.		
4.		
5.		
6.