Failing a course will not affect your GI Bill® benefits, however withdrawing or receiving an incomplete grade for a course may affect your benefits. As long as you receive a grade (pass or fail) the VA will not ask for your GI Bill® money back..
However, if a student drops a course(s) or withdraws from school the VA will immediately stop paying education benefits for those classes and the student may be billed for the education benefits they have already been paid for that term. Students are strongly encouraged to notify the SAC VA Office immediately of a withdrawal to minimize overpayments.
The VA will bill a student in this situation unless circumstances beyond the student's control prevented the student from continuing in school or caused the student to reduce credits. These mitigating circumstances are presumed to exist the first time a student drops 6 or less credits. After the first drop a veteran must prove to the VA that mitigating circumstances were the cause of the drop/withdrawal.
Examples of mitigating circumstances include:
Mental or physical illness or injury afflicting the student during the enrollment period.
Illness or death in the student's immediate family.
Unavoidable change in the student's conditions of employment.
Unavoidable geographical transfer resulting from the student's employment.
Immediate family or financial obligations beyond the control of the claimant that require him or her to suspend pursuit of the program of education to obtain employment.
Discontinuance of the course by the school.
Unanticipated active military service, including active duty for training.
Unanticipated difficulties with childcare arrangements that the student has made for the period during which he or she is attending classes.
If VA rules that mitigating circumstances do not exist than the student will be charged for any education benefits they received for that academic term (e.g., tuition/fees, living allowance and book stipend).