If You're Already Working
Those who have already left school and want help repaying their loans have several places to turn.
- Government. For several years, the feds, the states, and many local governments have offered loan forgiveness to teachers, healthcare workers, and other in-demand professionals willing to work in underserved areas. That is still the case. The big news for all current and aspiring grad students is that, starting July 1, anyone with federal education debt can apply to lower his or her payments and get part of the loans forgiven.
Not everyone will qualify, of course. The first step will be to consolidate any existing loans with the federal government and apply for income-based repayment. Graduates who make less than 1.5 times the poverty level (which is currently $10,400 for a single person) won't have to pay a penny on their federal education debts. On any earnings above that level, the government will expect grads to pay about 15 percent.
After 10 years of payments, those whose income has remained low because they've been doing public service work (for a government or nonprofit employer) can have their remaining debt wiped clean. And after 25 years of payments, the same goes for other low-income grads.
- Nonprofits. A growing number of charities and professional associations are starting funds to pay down the debts of public servants. The California Dental Association Foundation, for example, is helping to pay off the loans of four dentists serving in low-income clinics on the West Coast. James Forester, who agreed to a salary half the going rate of private dentists to work at a clinic in Paso Robles, says his dental school debts of more than $150,000 scared him and his wife at first, but they're breathing much easier now that the foundation will pay off most of his remaining debt if he stays at the clinic three years. "It's no free ride," says Forester. "You have to work hard." But his experience shows that there are options for those with big debts and an interest in service.
A growing number of professional schools—law, business, public policy, and others—are offering to help grads who go into public service pay down their debts through tax-free vehicles known as LRAPs, or Loan Repayment Assistance Programs. Anyone considering public service should target graduate schools with generous LRAPs. Heather Jarvis, who has analyzed law school LRAPs for Equal Justice Works, a Washington-based nonprofit that supports public-interest attorneys, found that some schools' LRAPs have strict rules limiting the number of grads who can get help. And some cap the monthly assistance at a few hundred dollars, even though some of their grads might be looking at debt payments of closer to $1,000 a month.
But others are far more generous. Some LRAPs will help repay private loans, for example. And many will pay down at least some debts for those who perform only a year or two of public service. School-funded LRAPs can help out people who wouldn't benefit from the new government payment plans, Jarvis notes. Jarvis herself faced $125,000 worth of education debt (much of it private) but made it work through her LRAP. The programs can make it possible for debt-laden professionals such as herself to take public service jobs paying as little as $25,000 a year. "I don't regret it for a minute," Jarvis says—although she added that she's "not real sure how I am going to pay for my three children's education."
Spencer-Scheurich, the Texas attorney, says borrowing lots of money and then having to jump through bureaucratic hoops to get the debts repaid is a hassle. "But there are lots of paperwork in our lives," she adds. Keeping her payments low and arranging to wipe out tens of thousands of dollars of debt are worth it. Besides, she says, "I'm a lawyer. Hopefully, I can handle it."