The Student Debt Dilemma – Part 2
In part one, about the student debt dilemma and missions, we offered simple steps that incoming freshmen and graduating seniors can take right now to help eliminate student debt and prepare themselves to reach the nations with the Gospel of Jesus Christ. We feel these steps are essential building blocks to living a life overseas (e.g. living on a budget, setting goals). Now, in part two we want to dive a little bit deeper into programs that are available through the U.S. Government that may help pay off loans or reduce your monthly payments. However, please note that we are not saying that these programs are absolute. Government sponsored programs come and go, so you will need to do your own up to date research on these. Let’s dive into the current programs that are available as of this writing in January 2018.
Program #1: Public Service Loan Forgiveness (PSLF).
This program started on October 2, 2007. This applies to federal student loans (direct loan programs). It requires full-time work (30 hours or more a week) with a US-based non-profit organization or for the government. There is a catch that hours spent “proselytizing” don’t count. Also, worship services and religious instruction are excluded. So, if you are a church planter this is not the program for you. However, if you are doing relief work, working with refugees, or maybe in some sort of medical mission, this may be a viable option.
Here is a list of types of non-profit organizations that may be eligible.
- Emergency management
- Public safety
- Law enforcement
- Public interest legal services
- Early childhood education (licensed or regulated child care, Head Start, and State-funded pre-kindergarten)
- Public service for individuals with disabilities
- Public service for the elderly
- Public health (nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health support occupations )
- Public education (services that provide educational enrichment or support directly to students or their families in a school or school-like setting)
- Public library services
- School library services, or other school-based services
PSLF Nuts and Bolts: The details are IMPORTANT:
Like any program there are stipulations and regulations. PSLF is no different so there is a need to read the fine print. Here are some of those things to be aware of.
- You must make 120 qualifying payments toward your student loans. Payments do not need to be consecutive.
- Loans need to be consolidated into Direct Loan Program.
- Any balance remaining after 120 payments is eligible for forgiveness.
- An employer must submit certification that you do (or did), in fact work for them. You must be a current employee of a qualifying employer when you finish the 120 months to qualify for loan forgiveness.
- After completing the full 120 qualifying months, an application is submitted for loan forgiveness.
These are the key components in the PSLF, but once again you will need to research to make sure the information is current. Let’s move on to the other program that seems a little less convoluted.
Program #2: Income Based Repayment (IBR)
This program started on July 1, 2009. It caps the money loan repayment, with calculation based on income and family size. Borrowers will have a monthly repayment that is less than 10% of their gross income. If income is at or near 150% of federal poverty line, then your payment is zero. The eligible loans are similar to the PSLF and non-profit student loans should qualify (e.g. Stafford). Any outstanding balance after 25 years is forgiven. This DOES NOT apply if you’re part of PSLF.
If you have made it this far that is great. Let’s look at a few examples based on the PSLF & IBR programs.
Thor is finishing graduate school this year and plans to work 5 years in the US for a non-profit and then go overseas. He’s married with two kids. (You switch from “she” to “he” a couple times.)
Student debt -$150,000 at 6%
Income – $50,000
Monthly Payment with IBR – $178
Monthly Payment without IBR – $1,665 (Standard 10 year repayment cycle)
If he worked 5 years for a non-profit & 5 years on the field with the same income he would pay $178 per month, then PSLF kicks in after 120 months and the remainder is forgiven! As a result, Thor paid a total of just $21,360 of her $150,000 loan!
Gene the IT genius went to school forever for his IT training. He finally graduated and is going overseas to work as an IT consultant and trainer with a non-profit.
Student debt – $38,000 at 5.5% interest.
His support / earning will be $24,000 per year.
Monthly payment with IBR- $74 per month times 120 months.
Total payment over life of loan is $8,800.
Gene uses his IT skills and using an Excel spreadsheet realised that he will save 77% off his loan repayment. Gene may be a nerd, but he just saved almost $30,000.
At the end of the day, the reason we at Exchange Your World wanted share this information is because we don’t want student debt to be an obstacle to serving in missions. We want to see more people go out to reach these unreached people groups and student debt shouldn’t hold you back.