Many Student Veterans Must Borrow or Work to Cover Housing Costs

The gap between the Post-9/11 GI Bill’s monthly housing allowance (MHA) and actual housing costs could lead veterans to borrow greater amounts through student loans, according to a survey done for The Pew Charitable Trusts.

A majority of veterans who qualified for the full MHA (63%)—the housing stipend that supplements the tuition payments from the GI Bill—said that it didn’t cover all of their housing expenses (see Figure 1). Almost a quarter of these veterans (24%) said that the housing allowance covered half or less of their housing expenses.

This finding is in line with a prior Pew analysis revealing that living expenses—and housing in particular—were the top expense category that veterans covered with student loans. The situation poses a potential obstacle for veterans’ long-term financial well-being and transition to civilian life for two key reasons:

• It may help to explain why veterans often take out student loans to pay for housing costs.
• It could put veterans at risk of dropping out of school when they must balance their studies with work.

The housing allowance is meant to defray veterans’ housing costs while enrolled in education or training programs, and the amount they receive depends upon a variety of factors, such as the amount of time the veteran served in the military, the veteran’s “rate of pursuit” (full-time or part-time), the location of the campus where the veteran attends most courses, and the mode of instruction (veterans enrolled in a 100% online program may only receive a maximum of half the national average MHA). Furthermore, there is no stipend for other living expenses, such as child care or transportation. Consequently, some student veterans may opt to use a portion of their MHA funds to partially cover those other living costs.

MHA shortfalls might increase borrowing, threaten degree completion

Pew’s survey finds that a majority of veterans who borrow to pay for their education primarily do so to pay for living expenses, and particularly housing, rather than educational expenses such as tuition and books. Student veterans who said the housing allowance covered half or less of their housing expenses reported borrowing an average of $4,279 more over a four-year period (2016-20) than their peers who said the housing allowance covered more than half of their housing costs (see Figure 2).

Student borrowing may add to veterans’ financial challenges as they transition to civilian life. Pew’s survey asked veteran borrowers to describe the financial impact of their student loans. Almost two-thirds of veteran borrowers (65%) indicated that they experienced some degree of financial stress as a result of their student loans. More than a fifth (22%) found their loans to be a “constant” or “overwhelming source of financial stress.”

Another consequence of housing allowance shortfalls: They often cause borrowers to work more, which could threaten their work-school balance and the prospects for completing their degree. Two-thirds of survey respondents (66%) who said the housing allowance didn’t fully cover their housing costs reported taking on work to make up for that shortfall.

This response raises concerns because veterans cite challenges balancing work and school as a leading reason for not completing their degree. Specifically, 22% of veterans who did not complete a degree or certificate at the first school they attended after leaving military service cited “the difficulties of balancing work and school” as a primary reason for withdrawing. Moreover, 26% of veterans who attended a second school after discharge/deactivation cited the same reason for not completing their academic or training program (see Table 1). Noncompletion could make veterans’ transition to civilian life difficult once they have dedicated time and energy to pursuing education, and potentially taken out loans, without getting the career and financial benefits of attaining a credential.

Table 1

Top Five Reasons for Not Completing a Degree/Certificate at First Two Schools After Leaving Military Service (2016-20)

Notes: The percentages sum to more than 100% because respondents could select all that apply from 12 response options. 561 of 1,921 student veterans did not finish their degree/program at School 1. 119 of 804 student veterans did not finish their degree/program at School 2.

Source: Veterans Engaging in Transition Studies Survey of 3,180 veterans discharged in 2016, conducted by Penn State’s Clearinghouse for Military Family Readiness on behalf of The Pew Charitable Trusts

Post-9/11 GI Bill’s MHA warrants a closer look from multiple angles

There has been increased interest in potential reforms to the MHA in recent months. These initial findings suggest that the adequacy of the allowance is not only an immediate concern to veterans trying to cover their monthly housing expenses, but it can also have long-term effects on their economic stability and transitions from military to civilian life. In future reporting, Pew will examine the efficacy of the MHA for various groups of student veterans, such as those enrolled in online programs, those with children, and those living in dense, high-cost urban areas.

This analysis is based on data from an online survey conducted by Penn State’s Clearinghouse for Military Family Readiness on behalf of The Pew Charitable Trusts. The nationally representative survey of 3,180 veterans was open to respondents from Nov. 14, 2020, to Jan. 5, 2021. The margin of error with design effect for the total sample is plus or minus 1.9 percentage points at the 95% confidence level.

Richa Bhattarai is an associate, Scott Brees is an officer, and Phillip Oliff is a director with The Pew Charitable Trusts’ student loan research project.