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 PAC 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).

Any veteran who paid the $1,200 buy-in for MGIB (Chapter 30) and elects to use the Post-9/11 GI Bill (Chapter 33) will be refunded the buy-in.  The buy-in or a portion of the buy-in will be refunded on the last payment of the monthly living allowance.  If a veteran has already used some of their MGIB (Chapter 30) benefits they will receive prorated refund.  If the veteran does not receive a living allowance check upon using their last month of new GI Bill entitlement the buy-in will not be returned.

The VA ruled that individuals will not receive an increased amount under the Post-9/11 GI Bill (Chapter 33) for additional contributions ($600 buy-up) paid under MGIB Chapter 30 or REAP (Chapter 1607).  This $600 will not be refunded if a veteran transfers from the old GI Bill to the new GI Bill.

 Enlistment and reenlistment kickers will continue to apply to veterans under Post 9/11 GI Bill (Chapter 33).  Any additional monthly benefits will be simply added to the monthly living allowance.  For example, if a veteran is entitled to a $200/month enlistment kicker and a $1400/month living allowance, then that veteran will receive $1,600/month.
Unfortunately,under the VA’s final rules state that they will not pay kicker or college fund bonuses if the veteran is not receiving a living allowance (e.g., while on active duty or exclusively distance learning).  IAVA is actively fighting to reverse the VA’s interpretation.

The Post 9/11 GI Bill pays generous benefits for part time students.  For example:
Tuition and Fees:  Tuition benefits are the same for full-time and part-time students.

Living allowance:  Paid to students who are enrolled more than half-time.  A student enrolled one unit above exactly half time will qualify for a prorated monthly living allowance.  For example, a student is taking 7 credits at a school that considers 12 credits full-time, that student will receive 60% of the normal living allowance rate.

Credits	% of BAH
12	100%
11	90%
10	80%
9	80%
8	70%
7	60%
6	0%

 
Book Stipend:  The payment will be $41.67 for every credit enrolled, but no more than $1,000 per academic year.  (e.g., a student enrolled in 12 units will receive $500 for that academic term).