Debt relief! Loan forgiveness for public service and non-profit employment
If you work in certain government jobs or qualified non-profit organizations you may qualify for Public Service Loan Forgiveness or PSLF.
From the Department of Education: “The Public Service Loan Forgiveness (PSLF) Program was established to encourage individuals to enter and continue in full-time public service employment by forgiving the remaining balance of their William D. Ford Federal Direct Loan Program loans (Direct Loans) after the borrower has made 120 qualifying monthly payments (beginning anytime after October 1, 2007) while employed full-time by a public service organization.”
This presents a debt elimination opportunity for students that have large amounts of federal Stafford loans outstanding while entering a tough job market.
This adds a bonus to working for otherwise lower pay in government or non-profit organizations in exchange for a way to eliminate debt.
The trick to making this program work is the Income Based repayment option, or IBR. In IBR, a larger required monthly loan payment is reduced to a smaller payment to better match a reduced monthly income. This is a major benefit for students in heavy debt but with limited income prospects available.
The reason for this benefit is to help alleviate the stress that debt can put on a monthly budget. Because many public service jobs and non-profit organizations offer low starting salaries, recently graduated students with high debt would not be able to afford working there while making full payments on their debts. Public Service Loan Forgiveness combined with Income Based Repayment allows the student to manage a lower monthly payment, and at the end of 10 years, the remainder of unpaid federal loans are discharged. Yes you read that right.
Here is a scenario directly from The Project on Student Loan Debt:
- Public school teacher, qualified for Public Service Loan Forgiveness (PSLF)
- Owes $60,000 in student loans from undergraduate and graduate school
- Earns $36,000 as a public school teacher
Under a standard 10 year repayment plan, the student would have a $690 monthly payment due, adding up to $82,858 in total payments until debt freedom, costing $22,858 in interest.
Under an extended 25 year repayment plan, the monthly payment would be $416, adding up to $124,935 in total payments until debt freedom, costing $64,935 in interest.
Using IBR combined with the debt forgiveness in PSLF, payments would progress from $247 to $322 as income gradually increased over 10 years, ending with just $33,970 being re-payed, and the remainder of the loan balance being forgiven!
Just remember, this option is only available for federal loans, and requires specific employment at an approved organization, and requires 10 years of on time payments. Restrictions may apply.
If you have private student loans outstanding, make sure you get a consolidation to help eliminate the debt. They do not qualify for loan forgiveness programs as mentioned.
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