We spend quite a bit of time on this blog trying to convey the impact educational debt can have on your life after graduation. In one post, "Take Another Look at Student Debt Consequences," we even made up a couple of fictional future college students to personalize the issue. In this edition of the Mailbag Express (for those who are wondering, yes, it was inspired by the Pony Express), we want to share the real-world stories of people who are struggling to repay their student loans.
As always, our responses are not meant to provide specific legal or financial advice. Your situation is unique, and we encourage you to reflect carefully on your options and to consult a financial adviser.
[Get tips from the U.S. News guide to paying for college.]
Dear Student Loan Ranger: In 2008, I went back to college and obtained a B.A. I could not a find a job or go back to my former job as a real estate agent. I went back to school again and received an M.A. and recently moved to a rural town in the desert for a job. I have a huge student loan bill and at the rate I'm going it will take me 25 years to pay off. Is there going to be a forgiveness program for people who should be retired that still owe on student loans?—S.
Dear Student Loan Ranger: I need information about forgiveness or relief programs for private and federal student loans. I make $38,000 a year. I have five loans with Sallie Mae. The payments add up to $716/month. Any advice, help, or points in the right direction would be greatly appreciated.—M.
Dear S. and M.: If we all start lobbying for student loan forgiveness for retirees now, there may be a program by the time the Student Loan Ranger retires. (We don't hold out much hope.) In the meantime, let's review Income-Based Repayment (IBR) and Public Service Loan Forgiveness (PSLF), two programs that do exist and might be helpful.
As always, these programs are only available if you have certain federal loans. If you don't know what kinds of federal loans you have, you can find out by going to the National Student Loan Data System.
IBR is helpful because it calculates your monthly payment based on your income and family size and caps what you owe to 15 percent of your discretionary income. Both FFEL (Federal Family Education Loans) and Federal Direct Loans qualify for IBR, and it does not matter what kind of job you have. IBR also has a forgiveness component that kicks in after 25 years.
Earning Public Service Loan Forgiveness is a bit more stringent. To qualify, you must make 120 on-time monthly payments on your Federal Direct Loans (yes, only Federal Direct Loans qualify for PSLF) while in a qualifying repayment plan and working full time in public service.
Two pieces of good news are that IBR is a qualifying repayment plan (so your monthly payments will be affordable) and public service includes work for any 501(c)(3) nonprofit and any federal, state, local and tribal government.
Do all that, apply to the Department of Education while staying in your qualifying employment (they don't have a form yet, but they promise they will before 2017, when people will start being eligible), and the balance remaining on your Federal Direct Loans will be forgiven.
There are a lot of tricky details involved in both IBR and PSLF, so we suggest checking out the Student Debt Relief page of our website. The Department of Education also has a very helpful set of Q&As for both IBR and PSLF.
[Consider the surprising benefits of student loans.]
Dear Student Loan Ranger: I hope you will have another seminar on the College Cost Reduction and Access Act (CCRAA) [the federal legislation that created IBR and PSLF]; but in the meantime, I have questions: 1) Is the CCRAA still law and will Congress repeal it?; 2) Can I still get my loans forgiven if I work for my own nonprofit?; 3) Will all my loans be forgiven after 10 years of government/nonprofit work?; 4) Can I work for a local government, or must I work for the federal government to qualify for loan forgiveness?— "BigBusiness" Jones, a.k.a. The Mascot
Dear BigBusiness: We will host another awesome (and free) webinar about the CCRAA on September 8. Tell your friends!
I'll run through your questions in order:
1. Yes, the CCRAA is still law and we are cautiously optimistic that it will not be repealed. PSLF is not subject to appropriations or the budgetary process, which we hope will make it less of a target. And if a future Congress does abolish PSLF, we think there is a good argument for allowing those already relying on the program to complete the forgiveness process.
2. As long as your nonprofit is a 501(c)(3), it is paying you, and you are working full time, it should qualify as eligible employment for PSLF.
3. Only eligible Federal Direct Loans on which you have made 120 qualifying payments after Oct. 1, 2007 will be forgiven. If you have other federal loans (such as FFEL), you will want to consolidate them into a Federal Direct Consolidation Loan so they will be eligible for forgiveness.
4. Work for federal, state, municipal, or tribal government agencies or entities and any full-time employment with the government counts as qualifying employment for PSLF. There is one exception: service as a member of the U.S. Congress (as a senator or representative) is not qualifying employment. (You may, however, work for a member of Congress).
And with that, the Student Loan Ranger is galloping off into the setting sun. Remember to keep sending your questions to email@example.com, connect with us on Facebook, and subscribe to our Twitter feed. Follow the hashtag #StudentDebtHelp for more tips and information.
Isaac Bowers is a senior program manager in the Communications and Outreach unit, responsible for Equal Justice Works's educational debt relief initiatives. An expert on educational debt relief, Bowers conducts monthly webinars for a wide range of audiences; advises employers, law schools, and professional organizations; and works with Congress and the Department of Education on federal legislation and regulations. Prior to joining Equal Justice Works, he was a fellow at Shute, Mihaly & Weinberger LLP in San Francisco. He received his J.D. from New York University School of Law.