More than $130,000 in student debt, Leah Burke, a 33-year-old employed at a not-for-profit medical college in New York City, overheard a public service announcement about Public Service Loan Forgiveness.
“I wasn’t sure about the specifications and heard an ad on the radio,” says Burke, who graduated three years ago with a Master of Public Administration from CUNY—Baruch College. “Among nonprofit professionals there is an understanding that loan forgiveness exists, but some people see it as an urban legend.”
Public Service Loan Forgiveness is a government program that forgives the federal loans of a borrower who works in the nonprofit or public sector after 120 qualified monthly payments.
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A qualified payment is a regular monthly payment for at least 10 years by an employee working full-time at a nonprofit or public institution. One caveat: a Perkins loan or a Federal Family Education loan need to be consolidated into a direct consolidation loan to be eligible.
After learning more about the PSLF program, Burke consolidated her student loans and submitted her employment information to FedLoan Servicing, the federal loan servicer for thePSLF program. FedLoan Servicing determines if a borrower’s employer qualifies and tracks the applicant’s progress in meeting the requirements for loan forgiveness.
“I’ll be out of student loan debt by the time I’m 45,” say Burke, who borrowed federal as well as private student loans, which aren’t eligible for forgiveness. “I thought that I’d be paying for school for the rest of my life.”
The first borrower with federal student loan forgiveness will be in October 2017 – 10 years after the program’s introduction.
Here are some career paths that may lead to student loan forgiveness at the federal or state level.
• Nonprofit employee: A borrower working at a tax-exempt nonprofit or a nonprofit organization that provides a qualifying public service, such as a not-for-profit hospital, is eligible for the federal program.
Burke’s work as an alumni coordinator is eligible for the program since it’s not the job that qualifies, but the type of employer.
• Civil servant: “The PSLF program provides forgiveness of federal loans if you’re working for a government job or a qualified nonprofit organization,” says Stephen Dash, founder and CEO of Credible, a student loan information site.
The government job can be at any level – federal, state, local or tribal.
The forgiveness amount is non-taxable income. This program is separate from the loan forgiveness offered to borrowers through the Income-Based Repayment Plan – a federal repayment scheme that offers forgiveness after 20 or 25 years of repayment, depending on the type of loan.
• Teachers: In addition to PSLF, there are additional programs at the federal level for teachers – the Teacher Loan Forgiveness and the Teacher Cancellation for Federal Perkins Loans.
Under the Teacher Loan Forgiveness program, a teacher can have up to $17,500 of federal loans forgiven after teaching five years at a low-income elementary or secondary school.
And if the teacher has Perkins loans, 15 percent of those loans will be forgiven after one year of service, teaching at a low-income public or nonprofit school.
[Learn how to avoid turning into a scary student loan statistic.]
“Around half of the states also offer benefits to teachers,” says Dash, and many states have special loan forgiveness programs for teachers serving high-need areas.
States with loan assistance programs for teachers working at schools in high-need areas, such as math and special education, are available in Montana, New York, Oklahoma, Texas and Tennessee, among others. The Teach for Texas Loan Repayment Assistance Program offers up to $2,500 annually in loan forgiveness to teachers working at schools in a high-need area, for example.
• Lawyers: While PSLF is available for attorneys working in public service, there are other programs at the local and state level for borrowers with debt from law school.
The District of Columbia, Iowa, Louisiana, Maine, New Hampshire, Oregon, Pennsylvania, Texas and Vermont have bar associations that offer loan repayment programs for attorneys who provide services to low-income residents.
“Both programs combined make it financially feasible for me to stay in the profession,” says Maggie Donahue, 34, an attorney at Legal Aid, who graduated with $61,500 in law school debt from American University’s Washington College of Law.
Donahue is banking on PSLF to forgive her federal student loans while receiving assistance from the District of Columbia Bar Association, which offers loan assistance to attorneys working in legal aid.
The D.C. Bar Association provides enough loan assistance to Donahue for her to cover her monthly income-based repayment of $416 a month, but that doesn’t cover all the interest on the loans, she says.
“I’ve been making financial decisions based on that promise that the loans are going to be forgiven after 10 years,” Donahue says.
• Physicians: Depending on the type of medical center where a physician or health care professional works, he or she may be eligible for the federal loan forgiveness program, student loan experts say.
Forty percent of borrowers graduating from medical school say they plan to seek loan forgiveness, according to the Association of American Medical Colleges.
There are programs in more than 30 states that offer physicians some form of student loan repayment assistance, many of which are designed to serve rural or under-served urban area, Dash says.
“The portion of lawyers that go into public defense is small compared with physicians or health care,” Dash says. “These programs are to fill skill shortages.”
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