After seven years as a social worker, Megan Kent knew she wanted to make the switch to public interest law. But she also knew it wouldn’t be cheap.
“There’s a lot in the media right now, and there has been for a few years now, about how expensive law school is and what it means to take on that level of debt,” says Kent, 34.
That’s where the Public Service Loan Forgiveness Program comes in. Created as part of the College Cost Reduction and Access Act of 2007, the program makes your remaining loan balance disappear if you’ve made 120 payments on your student loan while working in a qualifying public interest job.
Kent graduated from Lewis & Clark Law School in Portland, Oregon, last spring. “The 2007 loan forgiveness program was a huge factor in that decision,” she says of her choice to enroll.
She’s now an Equal Justice Works AmeriCorps Legal Fellow at OneJustice in Los Angeles, and she also has about $160,000 in student loan debt. But the one-two punch of income-based repayment and Public Service Loan Forgiveness (PSLF) is reducing her current payments and will eventually allow the remainder of the debt to be forgiven. Here’s how you too can make the most of these programs so your desire to help others helps you.
Careers that qualify you for loan forgiveness
After you graduate from college or grad school, you’re eligible for PSLF if you take a full-time job at a federal, state or local government agency; at a 501(c)3 tax-exempt nonprofit; in the military; or in an AmeriCorps or Peace Corps position. Workers who qualify include military personnel, teachers, social workers, emergency medical technicians, police officers, firefighters, librarians and nurses. A campaign by the National Young Farmers Coalition is also underway to add farming to the list of PSLF-eligible jobs.
The key to PSLF is that it doesn’t matter what you do at a nonprofit or in government, as long as you work for an entity focused on public service. So you can be an administrative assistant at a public school, not necessarily a teacher, and still qualify. You can also work for a private organization that’s not a 501(c)3 as long as your job falls into the buckets of public safety, public health, public education or library services. Jobs at religious or political organizations or labor unions aren’t eligible.
Check in with the human resources representative at your job, or have him or her read through the Consumer Financial Protection Bureau’s tool kit for employers, to see whether you can certify as a public service employee.
How it works
Beyond choosing a career in public service, you’ll have to jump through a few additional hoops before you’re mercifully debt-free.
Make sure the loans you took out fit the criteria. Only federal loans, not those you received from a private bank or financial firm, qualify for PSLF. They must be in the form of a federal Direct Subsidized Loan (which the government pays the interest on while you’re in school) or a Direct Unsubsidized Loan (you pay the interest while in school and during your grace period).
You can repackage other types of federal loans, including Perkins and Federal Family Education (or Stafford) loans, into a Direct Consolidation Loan so they can be forgiven under PSLF. Consolidation is free and will not only make you forgiveness-ready, but it will also bundle your loans into a single, less-complicated monthly payment.
Enroll in a qualifying repayment plan. You have a lot of options for how much you pay per month on your federal loans and for how long. But only some of those options make sense for PSLF. For instance, you can choose the 10-Year Standard Repayment Plan, which breaks your total loan balance into 120 separate payments. But by definition you won’t have any loans to pay off once PSLF kicks in after 120 payments. So it’s a better idea to sign up for an income-driven repayment plan.
Income-based repayment lets you set aside 10% to 15% of your disposable income, instead of a flat amount, to pay off your loans each month. On a day-to-day basis, that’s what allows Kent to live on her current salary, she says.
“If there weren’t income-based repayment plans, I wouldn’t be able to afford my monthly payments,” she says. “It would be very difficult to work in public interest even if you knew you could get those loans forgiven in 10 years.”
Apply for forgiveness after making 120 on-time monthly payments. For most borrowers, that means 10 years of loan payments at the amount you’ve signed up for. Submit to the federal government an employment certification form annually, or any time you switch public service jobs, to keep track of your employment as you pay off your loans. Keep your W-2 wage statements and pay stubs from work organized so you’re easily able to recertify each year.
You’ll officially apply for forgiveness after you’ve made your 120th payment. PSLF requires you to work in public service during both the application and forgiveness stages, so make sure to stay in a qualifying position until your loan balance has been completely dissolved. Then get ready to celebrate: After working for a good cause and being debt-free, you’ve earned it.
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