Finances: Public Service Loan Forgiveness

In February, I first blogged about our finances and revealed the ghastly amount of debt that we have. At some times I would think about that number and feel nauseated. But now I truly feel much more at peace because of the plan we've laid out. Do I complain about it regularly? Yes. But it doesn't make me want to curl up in a ball and give up.

Also, proud to report that we've paid another nearly $3,000 to our loans since February. And that number would be much higher if we weren't saving for over $10,000 worth of trips this year.

I've spent a significant number of time researching what to do about my student loans, from which payment plan is the best to what loan forgiveness for which I am eligible. Coincidentally, my local teacher's union did a seminar called Degrees, Not Debt. Since I have an excess of degrees and a far greater excess of debt, I made sense to attend.

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I learned some new things. But first, a rant. Amongst other disturbing statistics I learned that while the average debt after undergrad in Minnesota is $30,894, it is over $50,000 for teachers. Over 70% of Minnesotans have student loan debt. While the costs of healthcare have increased 387% in 30 years, the cost of tuition has gone up 1000% in the same time period. In our country there is $1.3 trillion of student debt. Trillion. Student debt is also unique in that it can't be discharged in bankruptcy and can rarely be refinanced at lower interest rates.

All of this debt has terrible impacts. And not just in the obvious personal ways. All of that money that could be going into our economy, buying houses, cars, and other goods, only goes to student loans. It also has a terrible impact on the public sector, because who the hell would want to become a teacher or go work for a non-profit when they have to incur $50,000 of debt and having a starting salary of $35,000? Many teachers have to take 2nd and 3rd jobs, as I did my first and second years of teaching, just to make ends meet. But that time is directly taken away from time the teacher could be spending to better the educational experience of their students.

Fortunately there are opportunities for forgiveness.

Sometimes I feel like I should just suck it up and pay off all of my debt. But then I think about the above information. I really encourage people to embrace that they deserve this and take advantage of these programs.

The two that I learned about were:
1. Public Service Loan Forgiveness (PSLF)
2. Teacher Loan Forgiveness

Public Service Loan Forgiveness

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This program is open to anyone that works in public service, not just teachers. And some non profit companies qualify as well. That means nurses, city, state, federal workers, and many more people are eligible. 23 million people in our country are eligible for this program but only 3 million are enrolled. It's just because they aren't aware of it.

So how's it work?

• You make 120 (10 years) qualifying payments
• On Direct Loans and payments made after 10/01/2007 (find out your loans types here: www.nslds.ed.gov)
• On qualifying repayment plans
• While working full-time at a qualifying employer

THEN THEY FORGIVE THE REST OF YOUR DEBT

What's a qualifying repayment plan?

• 10 Year Standard (hint: don't do this one because then you'll have no debt left for them to forgive!)
• Income Based Repayment
• Pay as You Earn
• Income Contingent Repayment
• Repaye (new)

Summary of repayment options here: http://www.ibrinfo.org

Basically, all of these but the first help lower your payments to a certain percentage (usually 10, 15, or 20%) of your discretionary income (fancy word for amount of the poverty line).

Loan servicers are not always exceptionally helpful and definitely don't want to lose you as a client so they might not jump to help you understand the PSLF program, but it is definitely their job to help you understand their payment plans. I live chatted with a representative at my servicer for hours to figure out which repayment plan I wanted to use.

So what if they get rid of this program?? (That's what my husband asked) Good thing is, if you enroll now, then you're guaranteed the forgiveness at the end of the 10 years, as long as you follow all the rules.

What should I do next:

1. Find out if your loans are eligible: www.nslds.ed.gov

2. Get enrolled in the best payment plan for you

           Contact your servicer

           Remember to re-enroll every year (how annoying, right?)

3. Fill out the Public Service Loan Forgiveness Certification Form http://ow.ly/Sfq4i

           Follow directions carefully because they're picky!

Also, look at myfedloan.org or even call them at 855-265-4038 because it's their job to explain it to us.

Teacher Loan Forgiveness is different. I will write about that soon, as well as how to make the decision between which to choose.