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Tag Archives: student loans

One Way to Get Student Loan Forgiven

Recently a Financial Tip reader shared some great topics she was interested in having covered in future tips, and this is one of those topics- breaking down student loan forgiveness programs (note, we always appreciate feedback from readers! Please feel free to send ideas for future tips or topics you want more information on to financialsuccess@missouri.edu).

For many students this time of year marks graduation, and for many of them graduation prompts thinking about student loans. Those graduating high school may be anticipating the disbursements of their first student loans in a few months to cover new tuition expenses. Alternatively, those graduating college may be expecting the end of student loan deferment and the beginning of repayment in the coming months. No matter where one is on the continuum of student loan debt, it is always important to think about the long term realities of student loans, including repayment options. This tip will outline one possible option for students who may go into careers in public service jobs.

Public Service Loan Forgiveness Program

What’s a public service job?

The definition of what is considered a public service job is fairly broad. Any employment with a federal, state, or local government agency, entity, or organization or a non-profit organization that has been designated as tax-exempt by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC). The type or nature of employment with the organization does not matter for PSLF purposes. Additionally, the type of services that these public service organizations provide does not matter for PSLF purposes. Some private, non-profit employers that are not tax exempt (i.e., 501(c)(3) status) can even be considered qualifying employment for the PSLF program, provided the employer provides certain public services (e.g., public health, safety, etc).

What types of loans are eligible?

Loans are either:

  • Federal- Made and/or regulated by the government, including Direct Loans, Federal Family Education Loans (FFEL), and Federal Perkins Loans; or
  • Private- Made by a bank/private lender and generally carry higher fees and interest rates than federal loans. For more information about avoiding deceptive private loans, visit http://missourifamilies.org/features/financearticles/cfe63.htm)

Private loans are not eligible for loan forgiveness programs, and not all federal loans are either. For a list of debt cancellation/forgiveness programs and which types of federal loan types are eligible for each program, visit https://studentaid.ed.gov/sa/sites/default/files/public-service-loan-forgiveness-common-questions.pdf. Regarding the Public Service Loan Forgiveness Program (PSLF), only direct loans are eligible (i.e., loans you received under the William D. Ford Federal Direct Loan Program). Federal Family Education loans and Perkins loans are not eligible, however, they do become eligible if you consolidate them into a direct consolidation loan.

What do I have to do to get my debt forgiven?

  • Work full-time: At least an annual average of 30 hours per week. For purposes of the full-time requirement, your qualifying employment at a not-for-profit organization does not include time spent participating in religious instruction, worship services, or any form of proselytizing. If you are a teacher, or other employee of a public service organization, under contract for at least eight out of 12 months, you meet the full-time standard if you work an average of at least 30 hours per week during the contractual period and receive credit by your employer for a full year’s worth of employment. If you have multiple eligible jobs, you must work a combined average of at least 30 hours per week.
  • Make 120 on time, full, monthly loan payments. Basically, you have to put in 10 years of full, on time payments before you can be eligible for the remainder of your loans to be forgiven. On-time payments are those that are received by your Direct Loan servicer no later than 15 days after the scheduled payment due date. Full payments are payments on your Direct Loan in an amount that equals or exceeds the amount you are required to pay each month under your Direct Loan repayment schedule.
  • Be paying back your loan through a qualifying repayment plan. You cannot necessarily choose a repayment plan that will greatly lengthen your repayment period so that you are eligible for most of your loans to be forgiven. For example, 30-year extended repayment plans are not eligible for the PSLF program. However, income-driven repayment (IDR) plans are eligible. Check out https://studentaid.ed.gov/sa/repay-loans/understand/plans to see the full list of repayment plans, which includes the four main IDR options (also, you may want to check out this recent Financial Tip for info on a newly released IDR planhttp://ofsmizzou.org/a-new-student-loan-repaye-ment-plan/). The 10-year Standard Repayment Plan is also eligible, however, after meeting the PSLF requirement of 120 consecutive payments, there would be no debt left to forgive!
  • Stay on top of your record keeping. When using an IDR plan, borrowers will need to re-certify their income annually. Your lender will communicate with you on when and how to do this, but missing this communication or not completing the re-certification process can take you out of an IDR plan and default you into the standard 10-year plan (which doesn’t help you maximize the PLSF program). Also, you will need to file a form certifying your public service employment (https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf). Each time that form is received, your past payments will show up as qualifying for the PSLF program. So, be sure to file the form as soon as you have a public service job, if you change public service jobs, or anytime your lender or the PSLF program prompts you to re-certify your employment eligibility.

Deciding whether or not the PSLF program is right for you depends on many factors, mainly how much student loan debt you have and how much money you will make during the first 10 years of your public service career. The more debt you have and the less you will make, the more attractive an option the PSLF may be for you (as payments tied to your income will be less when you make less money). Alternatively, if you make a high income you may very well have paid off, or be close to paying off, your student loans by the time you get to the end of the 10 year requirement under the PSLF.

There are many repayment options for student loans. A good first step would be to visit the Federal Student Aid repayment calculator at https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action to see what all your options may be. You can also look at past financial tips (achieved at http://mufinancialtip.blogspot.com/, especially the September and October 2011 tips).

Again, whether you are just starting to take out loans or have been paying them back for years, it is always good to consider your repayment options and realities. Even though the PSLF program may help some (and does encourage public service jobs), you will still end up paying back a substantial amount of the debt you take out, so never take out more loans than you need.

Public Service Loan Forgiveness

Graham McCaulley, Extension Associate, MU Personal Financial Planning Extension

For many students this time of year marks graduation, and for some, graduation prompts thinking about student loans. Those graduating high school may be anticipating the disbursements of their first student loans in a few months to cover new tuition expenses. Alternatively, those graduating college may be expecting the end of student loan deferment and the beginning of repayment in the coming months. No matter where one is on the continuum of student loan debt, it is always important to think about the long term realities of student loans, including repayment options. This tip will outline one possible option for students who may go into careers in public service jobs.

What’s a public service job?

The definition of what is considered a public service job is fairly broad. Any employment with a federal, state, or local government agency, entity, or organization or a non-profit organization that has been designated as tax-exempt by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC). The type or nature of employment with the organization does not matter for PSLF purposes. Additionally, the type of services that these public service organizations provide does not matter for PSLF purposes. Some private, non-profit employers that are not tax exempt (i.e., 501(c)(3) status) can even be considered qualifying employment for the PSLF program, provided the employer provides certain public services (e.g., public health, safety, etc).

What types of loans are eligible?

Loans are either:

  • Federal- Made and/or regulated by the government, including Direct Loans, Federal Family Education Loans (FFEL), and Federal Perkins Loans; or
  • Private- Made by a bank/private lender and generally carry higher fees and interest rates than federal loans. For more information about avoiding deceptive private loans, visit http://missourifamilies.org/features/financearticles/cfe63.htm)

Private loans are not eligible for loan forgiveness programs, and not all federal loans are either. For a list of debt cancellation/forgiveness programs and which types of federal loan types are eligible for each program, visit http://studentaid.ed.gov/repay-loans/forgiveness-cancellation. Regarding the Public Service Loan Forgiveness Program (PSLF), only direct loans are eligible (i.e., loans you received under the William D. Ford Federal Direct Loan Program). Federal Family Education loans and Perkins loans are not eligible, however, they do become eligible if you consolidate them into a direct consolidation loan (more on this at http://www.loanconsolidation.ed.gov/).

What do I have to do to get my debt forgiven?

  • Work full-time: At least an annual average of 30 hours per week. For purposes of the full-time requirement, your qualifying employment at a not-for-profit organization does not include time spent participating in religious instruction, worship services, or any form of proselytizing. If you are a teacher, or other employee of a public service organization, under contract for at least eight out of 12 months, you meet the full-time standard if you work an average of at least 30 hours per week during the contractual period and receive credit by your employer for a full year’s worth of employment. If you have multiple eligible jobs, you must work a combined average of at least 30 hours per week.
  • Make 120 on time, full, monthly loan payments: Basically, you have to put in 10 years of full, on time payments before you can be eligible for the remainder of your loans to be forgiven. On-time payments are those that are received by your Direct Loan servicer no later than 15 days after the scheduled payment due date. Full payments are payments on your Direct Loan in an amount that equals or exceeds the amount you are required to pay each month under your Direct Loan repayment schedule.
  • Be paying back your loan through a qualifying repayment plan. You cannot necessarily choose a repayment plan that will greatly lengthen your repayment period so that you are eligible for most of your loans to be forgiven. For example, 30-year extended repayment plans are not eligible for the PSLF program. However, the income-based repayment (IBR) plan (http://studentaid.ed.gov/repay-loans/understand/plans/income-based) and the income-contingent repayment (ICR) plan (http://studentaid.ed.gov/repay-loans/understand/plans/income-contingent) are eligible. The 10-year Standard Repayment Plan is also eligible, however, after meeting the PSLF requirement of 120 consecutive payments, there would be no debt left to forgive!

Deciding whether or not the PSLF program is right for you depends on many factors, mainly how much student loan debt you have and how much money you will make during the first 10 years of your public service career. The more debt you have and the less you will make, the more attractive an option the PSLF may be for you (as payments tied to your income will be less when you make less money). Alternatively, if you make a high income you may very well have paid off, or be close to paying off, your student loans by the time you get to the end of the 10 year requirement under the PSLF.

There are many repayment options for student loans. A good first step would be to visit the Federal Student Aid repayment calculator at https://studentloans.gov/myDirectLoan/repaymentEstimatorLoginRedirect.action to see what all your options may be. You can also look at past financial tips (achieved at http://mufinancialtip.blogspot.com/, especially the September and October 2011 tips) or visit the Managing Student Finances and Debt area of our website: http://pfp.missouri.edu/financial/studentfinances.html. Again, whether you are just starting to take out loans or have been paying them back for years, it is always good to consider your repayment options and realities. Even though the PSLF program may help some (and does encourage public service jobs), you will still end up paying back a substantial amount of the debt you take out, so never take out more loans than you need.

We Plan For What We Can, And We Figure It Out As We Go, Too

by Lucy Schrader

It’s the beginning of a new year, and I’m going through financial papers at home to prepare for taxes, clean files and look ahead for the coming year.  I had our college fund statements out when my 9 year-old son asked what they were. Then of course, he wanted to know how much he had in his account.  After I told him, he very dramatically told me, “Mom!!  That’s not enough. That’s not anywhere CLOSE to enough.  How can I go to college? I don’t have a job.  I don’t have that kind of money!!”

At first I was impressed—wow, he’s actually developing a sense of how much things cost and learning that money doesn’t grow on trees.  My next actions were to try to help him realize that no, it’s not anywhere near the full amount to cover college and that’s ok; that we’re saving what we can and will have more by the time he goes; that there are different ways to pay for college (scholarships, loans, that he may have to help pay for some of it with a job, but he’ll gain new skills as he grows and can do more than he does now, etc); and that we will figure it out as we go.  We do not have to have all of the answers right now.

Now, being realistic, my very logical reasons did not completely calm him. What I hope, though, is that we’re beginning those many conversations and repeated messages of “we plan for what we can, and we figure it out as we go, too.”

I also have to admit, that I had a gut wrenching moment just the week before–we’re not saving enough; we don’t have everything planned out; “they” [magazines, media, etc] say we need more.  And that’s where I get stuck.  How on earth am I supposed to know how much I’ll need in the future and in retirement?  How can I truly guess at all of these things?  I don’t know for sure what tomorrow holds, let alone in 30 years.

I also had to talk myself through those moments and remind myself of several points I found very comforting to follow from the book The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money by Carl Richards (I was also lucky enough to see him speak at the 2012 MU Financial Symposium).  Mr. Richards, a Certified Financial Planner™, reminds us that we cannot control everything.  There are so many global and national events that happen that are out of our control, so we have to look at our personal lives and own financial lives and find what we do have control over. Have a plan, but be willing to adapt to the present situation.

In his book, he relays a story that he was working with a client and asked the client how much was enough to save for the kids’ college.  The man replied that in his mind it’s not about what’s enough—it’s about saving what he can at this time and that will be enough, because that is all he can do.  In my “it’s not enough” moment, I had to remind myself that, yes, we’ve got a plan.  We’re saving what we can.  It might not be enough to cover all expenses, but it’s what we CAN do right now.   Maybe in a few years we can save more, but at this moment it’s what is reasonable for our family.

Mr. Richards also suggests that once you have a plan, focus on shorter time frames and look at the next year or two years (or the next day, week or month). Find what you can control in those time frames, since we don’t know for sure what will happen in the future.

Instead of thinking “I don’t have enough saved,” think “what can I control right now to stay the course on my plan?” One example might be, I can bring my lunch today instead of going out to eat to save money on the food bill.  That in turn will help us save money for the college funds this month.  Spending is easy and saving can be more difficult, so give yourself credit for these day-to-day actions.  Instead of negative thinking that you are not saving more, shift your focus and thoughts to the positive, which helps reinforce the actions you want.

When I or my son start down that negative path, we need to help each other to “keep calm and carry on.”  Have a financial plan and follow it as you can, but realize you might not have all of the answers.  Follow through with things that make sense for your family.  Small steps DO make a difference.

Reference

Richards, C. 2012. The behavior gap: simple ways to stop doing dumb things with money. Penguin group: New York.

Lucy Schrader
HES Associate State Specialist and
Building Strong Families Program Coordinator
University of Missouri Extension
162 Stanley Hall
Columbia, MO  65211
573-882-4071 or SchraderL@missouri.edu

http://extension.missouri.edu/bsf