Those pesky student loans

Amy is off to New York to see Obama, McCain, and maybe President Clinton at the Service Nation Summit, while I’m stuck in Portland contemplating the nuances of financial aid. At the least the weather is as close to perfect as can be.

I learned more about the Public Service Loan Forgiveness program. That’s the new law that allows people working at nonprofits to have their student loans forgiven after 10 years of steady payments, starting from October 2007. (One of the catches is that you need to have Direct Loans, but if you don’t, you can consolidate.)

For me the downside of the program is that if you don’t have huge loans, at the end of ten years of steady payments there won’t be much of a balance to be forgiven. Still, getting any student loan balance off the books is a wonderful thing and should be taken advantage of.

But then I learned about another program called Income-Based Repayment, with huge implications for AmeriCorps and VISTA members, as well as others earning low pay while working in the nonprofit sector.

It comes online in July 2009.

In a nutshell, the Income-Based Repayment program sets your loan repayment amount at a rate of 15 percent of your discretionary income. Without getting too much into the math, if you are below the poverty line, your payments could be $0 per month. Sure interest will accrue, but the idea is if you serve in AmeriCorps or VISTA for a year or two and hold a low-paying nonprofit job for the next nine or ten years, you could get your entire loan debt erased without making a single payment in that time. (You should check the list of qualifying loans. If you don’t have them, consider consolidating.)

The trick with either one of these programs is to start planning now if you think you might be taking advantage of these programs.

I will write more later about the pros and cons of the Income-Based Repayment program vs. the forbearance CNCS offers to AmeriCorps and VISTA members.

Update 11/07, from Put Barber, Senior Researcher at

The Department of Education has published final regulations for the College Cost Reduction and Access Act of 2007 (CCRAA). This Act provides for loan forgiveness for full time employees of “public service organizations.” Nonprofit full-time employees (at least 30 hours a week) who are making monthly college loan repayments can count each month of nonprofit employment towards the 120 months of payments needed to qualify for forgiveness of the remaining loan balance, beginning with payments after October 1, 2007. Current nonprofit employees with outstanding student loans of more than nine years future duration can look forward to an end to the loan payments in after about nine more years of work for nonprofits.

The National Council of Nonprofit Organizations (NCNA), along with other national groups, worked throughout the rule-drafting process to extend this provision to employees of all 501(c)(3) organizations. For more information, see a Q & A on the NCNA website.

One thought on “Those pesky student loans

  1. Pingback: Pres. Obama and Government Careers « The New Service

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