The average college graduate owes $37,000 in student debt. For grad students, that number can soar up to $160,000. But increasing debt shouldn’t stop you from pursuing a career in the social impact space.
The Public Service Loan Forgiveness program (PSLF) makes it possible to pay your loans and follow your dream. Whether you are already enrolled in the program or are just reading about it for the first time, here is what you need to know about how to manage student debt while working for a nonprofit.
What is Public Service Loan Forgiveness?
PSLF began in 2007 when a bipartisan Congress passed the College Cost Reduction and Access Act. The law that created the program provided that borrowers who worked full time in a public-interest field would have their federal student loans forgiven after making 120 monthly payments, typically over the course of about 10 years. PSLF was defined broadly and applies to a variety of public service professions.
It has been 10 years since PSLF began, and this October will mark the first time that people will begin to reach the 120 monthly-payment mark.
Tips for qualifying for public service loan forgiveness
There are certain steps borrowers can take in order to determine whether their payments and jobs qualify for PSLF:
Make sure you have the right kind of loan. Only Federal Direct Loans are eligible for PSLF. Try to avoid taking out private loans, as they are not suitable for loan forgiveness. If you already have loans and are unsure what kind they are, check the Department of Education’s loan database to retrieve your information.
Make sure you have the right kind of repayment plan. There are a few types of payment plans that base monthly payments on income, allowing borrowers to qualify for PSLF. The most common plan for nonprofit employees is Income-Based Repayment or IBR. A benefit of IBR is that it allows married borrowers to file their taxes separately, which can reduce loan payment amounts by determining monthly payments based on only the borrower’s income instead of joint income.
Pro Tip: Learn more about the different payment plans by checking out the information provided by the U.S. Department of Education. There’s even a calculator to help you determine what your monthly payments would be under each plan.
The borrower must also make qualifying payments, meaning the payments cannot be made late or early and must be made while working full time in the public interest. Payments do not have to be made consecutively.
You must work for a qualifying organization. If you work for a 501(c)3 entity, or a state, federal, or tribal government job, it is typically clearcut that the employee qualifies. As a standard matter, partisan political organizations and religious work never qualify. But there is a gray area where it is not so easy to determine. The law states that employment that provides a public service qualifies. As written, the law then goes on to list specific types of jobs. Borrowers should also send employee-certification forms to their loan servicers every year, or when they start new employment, as this will help them track their progress toward the 120 payments.
Pro Tip: Just because you’re not earning a salary does not mean you shouldn’t consider signing up for an income-based plan and submitting employee certification forms. If you are a volunteer in the Peace Corps or AmeriCorps, any payments you make while serving will count as a qualifying payment. And your payments could even be $0!
Once you make your 120 payments you can submit your request for forgiveness. But don’t make any employment changes until you hear back from the Department of Education.
What does this recent lawsuit mean?
If you are one of the 552,000 people enrolled in PSLF you might be worried about the recent lawsuit alleging that the Department of Education is retroactively denying nonprofit employee eligibility. Last month, the American Bar Association sued the Department of Education on behalf of four plaintiffs who were initially accepted into PSLF but then later told that their previous employment didn’t qualify.
But according to student loan expert Isaac Bowers, most nonprofit employees will not be affected, regardless of the outcome in court.
“The lawsuit really only affects a small subset of borrowers who are working at private nonprofits,” said Bowers, Director of Law School Engagement and Advocacy for Equal Justice Works, a nonprofit organization which provides student-loan debt resources. “If they are working in government or for a 501(c)3, they shouldn’t see any rollback.”
More than 42 million people owe federal student loans, and about 25% of the workforce is eligible for PSLF. Don’t let concern over the outcome of this lawsuit stop you from pursuing your dream job. There are tons of resources out there for graduates with a lot of debt, from this free e-book published by Equal Justice Works to a plethora of information from the U.S. Department of Education.
Need additional resources?
Student loan expert Heather Jarvis offers advice for student-loan borrowers right here on Idealist Careers. In “3 Helpful Options While Paying Your Student Loans While Working At A Nonprofit,” Jarvis delves into PSLF and other forgiveness programs, repayment plans, and loan consolidation. In “Good To Know: A Loan Forgiveness Program For People Pursuing Public Service Careers,” she provides, even more, information about how to make sure you qualify for PSLF.
A final note: As a law-school graduate with over $140,000 in federal loans, this topic interests me greatly. I hope this article provides some suggestions for how you can manage your loans, but please don’t take this as legal advice. If you need legal advice, contact an attorney.