The cost of college can be high, and the cost of borrowing to go to school can be even higher. Ideally you have run the numbers to make sure you can afford to pay off your student loans before receiving them. However, if you’ve entered the workforce and find your student loans are making your financial life difficult, there are a few programs designed to ease the burden:
1. Public Service Loan Forgiveness
If you’re a teacher, nurse, firefighter, military personnel or other qualifying public service professional, you may be able to get your federal direct loans forgiven. You’ll need to work full-time for the government or for a non-profit for at least 10 years to qualify. You may need to consolidate some of your loans, and all required paperwork. Since you must work in a qualifying field for some time, this is only an option if you already intend to work in public service.
This is a repayment program instead of loan forgiveness. You will pay a part of your monthly income toward your college loans. Depending on your plan, you’ll be forgiven the loan after you have steadily made the required payments for 20-25 years, depending on whether you choose Pay As You Earn, Income-Based Repayment, Income-Contingent Repayment or the Revised Pay As You Earn Plan. You’ll need to determine whether you qualify for any of these plans, but in general they’re designed for those borrowers who have large loans in ratio to their income.
3. Teacher Loan Forgiveness
If you have a Stafford or Direct Loan and work as a teacher, you may have your loans forgiven, up to a maximum of $17,500. To qualify, you must have taken out your loans after October 1, 1998, you must work in low-income high schools or elementary schools and you must work as a teacher for five consecutive years. If you plan on working in low-income schools and have smaller loans, this plan might work for you. As a teacher, you may also be able to get Public Service Loan Forgiveness. This is an option to consider if you’ll be working in private or higher-income schools or have larger loans.
4. Perkins Loan Cancellation
With a federal Perkins loan, you can have the full amount of your balance forgiven if you work in a public service job for five years or more. You may qualify if you work in positions such as public defender, firefighter, nurse, school librarian, teacher, police officer or other qualifying positions. Your loan will be forgiven a specific percentage amount for every year you work in a qualifying position. If you’re applying for this program as a teacher, your qualifying work must involve teaching in qualifying subjects such as special education, foreign languages, science or math and you must teach at low-income schools. If you qualify, ask for an application at your school’s financial aid office.
If you’re still in college or are just looking forward to applying, there are steps you can take now to keep costs low. Start applying for scholarships, start saving for college and use the Money Help Center net cost of college calculator to plan for the cost of your education.
How do you plan to pay for college?