PROCEEDINGS

	IN THE CASE OF:     

	BOARD DATE:           29 May 2003                   
	DOCKET NUMBER:   AR2003084356

	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	
	Mr. Edmund P. Mercanti		Analyst	

  The following members, a quorum, were present:

	Mr. Luther L. Santiful		Chairperson	
	Mr. Lester Echols		Member	
	Mr. Frank C. Jones, II		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 that the interest on his student loans, which was converted to principal by the loan holder by a process termed capitalization, be paid under the terms of his Student Loan Repayment Program (SLRP) enlistment addendum.  He also requests that the money he has paid towards the student loans in order to keep them from going into default be paid back to him.

3.  The applicant outlines what he discovered from the Office of the Ombudsman, U.S. Department of Education.  That information was that while the Army paid $7,724.11 to the applicant’s loan holders under the SLRP ($6,493.08 in principal and $1,231.03 in interest), the loan holders converted $1,126.85 in interest on his loan to principal through a process called capitalization.  That process is provided for by law.  However, when that occurred, the Army was prohibited from paying the converted interest since the Army is limited to paying the original indebtedness, plus interest, under the laws and regulations governing the SLRP.  
4.  The applicant’s military records show that he enlisted in the Army Reserve on 10 January 1983.  He was awarded the military occupational specialty of illustrator and was promoted to pay grade E-5.  

5.  On 13 December 1988, the applicant immediately reenlisted.  In conjunction with that reenlistment he completed an SLRP addendum for $10,000.00.

6.  He was promoted to pay grade E-6 and immediately reenlisted on 20 November 1994.

7.  On 20 September 1997, the applicant immediately reenlisted once again.  In conjunction with that reenlistment, he completed a $10,000.00 SLRP addendum.

8.  Army Regulation 135-7, paragraph 5.1-8, states that all interest due on student loans will be paid in full.  This paragraph also states that disbursements on the student loans will not exceed indebtedness.

9.  The SLRP provides for the repayment by the Government of a designated portion of any outstanding student loan(s) secured after 1 October 1975.  The loan amount to be repaid is 15 percent of the original balance of the loan plus accrued interest not paid by the Department of Education, or $500.00 plus the accrued interest not paid by the Department of the Education, whichever is greater.  Payments will be made for each year of satisfactory service in the Selected Reserve.  The maximum amount of loans against which the 15 percent is computed will not exceed $10,000.  This equates to a maximum annual repayment of $1,500 plus interest.  If the amount set for repayment is less than $500.00, then $500.00 becomes the calculated amount for repayment that year.  

To be eligible for the SLRP incentive, a person must contractually obligate himself to service satisfactorily, must serve in the Selected Reserve for a full term of the contractual agreement and must further obligate himself to continue to serve in the same component and the same MOS unless excused for the convenience of the Government.  Entitlement to the SLRP will stop if the soldier contracted for an MOS authorized by Department of the Army for SLRP entitlement and moves to an ineligible MOS, or is reclassified, unless at the express direction of the Department of the Army.  A soldier will not be eligible for any initial or subsequent loan repayments until he or she has completed initial entry training, is MOS qualified, and has been awarded a high school diploma. Each complete satisfactory year of service performed under this SLRP agreement establishes an anniversary date.  As with the bonus incentive the SLRP is tied to service in a valid position vacancy.  By law (title 10, U.S. Code, section 2171), the Government cannot reimburse a soldier if he or she pays off a student loan.  The Government can only pay the lending institution.  As such, the Government cannot pay a student loan which has gone into default.

10.  In the processing of this case, the staff of the Board found it necessary to contact the applicant.  The applicant stated that, even though he was told by Sallie Mae that if he made a payment on his student loan it would not go into default, his loan was placed in default after he made the agreed upon payment.

11.  Title 10, U.S. Code, section 1552, the law which provides for the Board, states that “The Secretary may pay, from applicable current appropriations, a claim for the loss of pay, allowances, compensation, emoluments, or other pecuniary benefits, or the repayment of a fine or forfeiture, if, as a result of correcting a record under this section, the amount is found to be due the claimant on account of his or another’s service in the Army, Navy, Air Force, Marine Corps, or Coast Guard, as the case may be.”

CONCLUSIONS:

1.  The Office of the Ombudsman has verified that the interest on the applicant’s student loan was converted to principal by the lending institution, and that the Army cannot now pay the converted interest since it now appears as an amount greater than the original indebtedness (principal).  In view of the circumstances of this case, there is no question that the unpaid portion of the applicant’s student loan was not paid by the Army, and the loan has gone into default, through no fault of the applicant. 

2.  The inability of the Army to pay interest which would have been payable under the SLRP if it had not been converted to principal is clearly an injustice.  

3.  Since the applicant’s student loan is now in default, the Board cannot rectify this injustice by having the applicant’s loans paid under the LRP.  That is prohibited by law and the Board is not empowered to violate law.

4.  The injustice in the applicant’s military records may be corrected in an alternate manner.  That would be to show his DA Form 3286-66, US Army Incentive Enlistment Program, paragraph 4a, was altered to include the sentence “If a student loan is accepted by the officials processing you for enlistment, or subsequent to enlistment by the Army Board for Correction of Military Records (ABCMR), as payable under the LRP and it is later discovered that:  it is not payable due to it not being made or insured under the Higher Education Act of 1965 (Guaranteed Student Loan); it is not payable due to the student loan(s) no longer being outstanding; or it is not payable due to the loan being in default due to no fault of your own, the ABCMR may pay the loan(s) to include money paid to keep the loan out of default, or any portion of the loan(s), at its sole discretion, in accordance with Title 10, U.S.C., Section 1552.”  This would allow the Board to invoke that provision and pay him the amount of his loans principal and interest on the date he submitted his loans for payment, as well as the amount he paid due to Government delay, in the attempt to keep his loans out of default.

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

RECOMMENDATION:

That all of the Department of the Army records related to this case be corrected by:

	a.  showing that the DA Form 3286-66, US Army Incentive Enlistment Program, of the individual concerned, paragraph 4a, was altered to include the sentence “If a student loan is accepted by the officials processing you for enlistment, or subsequent to enlistment by the Army Board for Correction of Military Records (ABCMR), as payable under the LRP and it is later discovered that:  It is not payable due to it not being made or insured under the Higher Education Act of 1965 (Guaranteed Student Loan); it is not payable due to the student loan(s) no longer being outstanding; or it is not payable due to the loan being in default due to no fault of your own, the ABCMR may pay the loan(s) to include money paid to keep the loan out of default, or any portion of the loan(s), at its sole discretion, in accordance with Title 10, U.S.C., Section 1552.”  

b.  showing that the Board invoked that provision to pay him $1,126.85.

BOARD VOTE:  

___fcj___  ___lls___  ___le____  GRANT AS STATED IN RECOMMENDATION

________  ________  ________  GRANT FORMAL HEARING

________  ________  ________  DENY APPLICATION

		__________Luther L. Santiful_______
		        CHAIRPERSON

INDEX

CASE ID	AR2003084356	
SUFFIX		
RECON	YYYYMMDD	
DATE BOARDED	20030529	
TYPE OF DISCHARGE	(HD, GD, UOTHC, UD, BCD, DD, UNCHAR)	
DATE OF DISCHARGE	YYYYMMDD	
DISCHARGE AUTHORITY	AR . . . . .  	
DISCHARGE REASON		
BOARD DECISION	GRANT	
REVIEW AUTHORITY		
ISSUES         1.	128.50	
2.		
3.		
4.		
5.		
6.