December 6, 2023 3:26 am
December 6, 2023 3:26 am

Montgomery GI Bill: Don’t Waste Your Money on it

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There is no reason to spend $100 on each of your first 12 paychecks to get the benefits of the Montgomery GI Bill. Although you might wonder what if, there is no scenario I’ve found in which the Montgomery GI Bill outperforms the Post 9/11 GI Bill

Here’s why you should save your money by opting out of the Montgomery GI Bill..

This is the most valuable money of your life

A dollar this year isn’t the same as a dollar next year. The dollar you have today can be invested so that it grows and can be worth more next year. These gains are exactly why a dollar today is more valuable.

When you’re at the beginning of your career, you have the longest amount of time for your investments to grow and compound on itself. At 20 years old, the money you save for retirement today can grow for another 50 years. Thanks to the power of compounding, the amount that you save today can be worth many times its current value in the future. I’m not talking about a larger dollar amount with higher prices due to inflation. What I mean is that because of compounding, the money you save today will have greater real purchasing power in the future.

Compounding Illustrated

Let’s say you take the $1200 and instead of blowing it on hookers and beer immediately off post, you invest it in the Vanguard Total Stock Market index fund VTSAX. The stock market has historically returned an average of about 6% above inflation. Since the Vanguard index fund is meant to match what the market does, we’ll use this 6% rate to illustrate compounding.

In the first year, $1200 invested will grow to $1284. An increase of $84. In the second year you will earn investment income on both your initial investment and last year’s gains. Your total after two years will grow from $1284 to $1374, an increase or $90. That’s another $4 more than last year for doing nothing other than waiting. Sure, we’re talking about an increase that amounts to one extra cup of coffee, but this pattern will repeat over and over until you retire. In the example of $1200 invested over 50 years, the total amount will grow to over $35k. Almost enough to buy a Tesla!

No strength in sight for the Montgomery GI Bill

The people who pitch the Montgomery GI Bill will say you can rollover the Montgomery GI Bill to the Post 9/11 GI Bill, but you can’t rollover benefits in the opposite way. This is true. They will also say that only way to have the option of the Montgomery GI Bill is to pay $100 over each of your first 12 months in uniform. This is also true. What they may not say is that the option to use the Montgomery GI Bill is only valuable if it pays out more than the Post 9/11 GI Bill. This is important because for my research indicates the Post 9/11 GI Bill is 100% the better deal for college or university. Don’t yet believe me? Here’s an overview of where the Post 9/11 GI Bill offers greater value.

High Cost of Living Area

In a high cost of living area (HCOL), the Post 9/11 GI Bill will always be superior to the Montgomery GI Bill. This is because the payouts for the Post 9/11 GI Bill include an allowance for housing that is based on the cost of housing where a school is located. For a school like Cal, otherwise known as UC Berkeley, the housing allowance can be substantial. With 100% eligibility you can laugh yourself to the bank to the tune of $3,366 for each month of schooling. Between the generous housing allowance and additional benefits for books and tuition, you could receive over $26,000 more in benefits annually using the Post 9/11 GI Bill. It’s a no brainer!

Post 9/11Montgomery
Housing Allowance$30,294$19,098
Book Stipend$1000$0
Tuition and Fees$14,312$0
Benefits calculated using 3 years of qualifying service and applied to UC Berkeley undergraduate studies for 2021

High Tuition Public School

Since the Post 9/11 GI Bill explicitly covers tuition in addition to housing, it becomes more valuable for schools that charge higher tuition and fees. For public schools, it will cover up to 100% of the in-state rate of tuition and fees. In addition, a veteran can expect to be charged only the in-state rate for tuition and fees regardless of where they were previously stationed or where they initially enlisted from.

When I left the military and explored different universities, I considered a school in Pennsylvania near where my parents live. At the time legislation to provide veterans with in-state tuition had not been passed at a national level so my options for in-state tuition were limited. I could go to school in Pennsylvania or a handful of states that had already passed local laws to give veterans in-state rates like Virginia. However, I quickly found that the in-state rates for Pennsylvania were quite high compared to tuition in nearby Virginia. According to Forbes, Pennsylvania has some of the highest rates for state universities in the nation.

Pitt, or the University of Pittsburgh, makes a good example of a public school with a relatively high tuition but a relatively low cost of living. Even though the housing allowance for Pitt is nearly half that of Cal, the Post 9/11 GI Bill again brings far more value than the Montgomery GI Bill. The difference between the two GI Bills amounts to a whopping $75,000 over four years!

Post 9/11Montgomery
Housing Allowance$17,199$19,098
Book Stipend$1000$0
Tuition and Fees$19,679$0
Benefits calculated using 3 years of qualifying service and applied to University of Pittsburgh undergraduate studies for 2021

Private Schools

Tuition benefits for the Post 9/11 GI Bill work slightly different for private schools. With 100% eligibility, the US government will cover up to $25,000 annually for private school tuition. The tuition payment alone tops the housing payments for the Montgomery GI Bill and is supplemented by its own housing allowance and book stipend. Furthermore, at 100% eligibility a veteran is also eligible for the Yellow Ribbon Program. The Yellow Ribbon program provides allows for schools to provide additional scholarship funding which is matched 1:1 by the US government. Depending on your choice of school, the Yellow Ribbon Program might result in your entire tuition being covered.

With less than 100% eligibility, the Post 9/11 GI Bill still comes out ahead. For example, at two years of service the Montgomery GI Bill will pay out $15,500 annually. This amount falls short of the tuition payments alone of $20,000 annually.

No table for this one folks. If you intend to go to a private school, the Post 9/11 GI Bill is the way to go.

How about a low-cost public school in a LCOL area?

We’ve already considered schools in HCOL areas, public schools in LCOL areas with high tuition, and all private schools. You might ask: But what if I plan to go to a low-cost public school in a LCOL area? Surely, that must be a scenario in which the Montgomery GI Bill makes sense!

Nope, the Post 9/11 GI Bill wins out in this scenario as well.

Leslie Nielsen is serious that the Montgomery GI Bill isn't worth the $1200 investment. And don't call him Shirley.

The same Forbes article I referenced earlier also includes the states with the lowest tuition for public schools. Florida comes in narrowly behind Wyoming with the second lowest annual tuition and fees for public universities. For this comparison I’ll use the University of Florida. Due to a variety of factors including climate, accessibility, and the variety of state schools to choose from, a school in Florida is more realistic for most vets so we’ll use it for this comparison.

The University of Florida, UF, is truly a steal. It ranks #25 in the US in the latest Forbes ranking yet only charges $6300 a year for in-state tuition. It’s cheap, dirt cheap by US standards!

Post 9/11Montgomery
Housing Allowance$13,068$19,098
Book Stipend$1000$0
Tuition and Fees$6381$0
Benefits calculated using 3 years of qualifying service and applied to University of Florida undergraduate studies for 2021

However, even with the combination of low cost of living in Gainesville and the low tuition, the Montgomery GI Bill still can’t best the Post 9/11 GI Bill!

Save your money!

With the increased support for the Post 9/11 GI Bill there isn’t a scenario in which the Montgomery GI Bill offers more value. Instead, keep that money for saving and later investing.

If there’s a scenario I’m not thinking of, please leave me a comment. I want to make sure I provide accurate and reliable information to my readers. Thanks!

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