The average graduate of the college class of 2018 owed $29,200 in student debt at the time they finished their degree. For grad students, that number can soar up to $160,000. That's a lot of money, but increasing debt shouldn’t stop you from pursuing a career in the social-impact space. There are options.
The Public Service Loan Forgiveness program (PSLF) makes it possible for you 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 therefore applies to a variety of public service professions.
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:
- First, 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 eligible 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.
- Second, make sure you have the right kind of repayment plan. There are a few types that base monthly payments on income, which allows borrowers to qualify for PSLF. The most common plan for nonprofit employees is Income Based Repayment, or IBR. One benefit of IBR is that it allows married borrowers to file their taxes separately, which can reduce loan payment amounts by basing them on only the borrower’s income rather than the couple's 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.
- Another thing to keep in mind is that the borrower must make qualifying payments, meaning they cannot be made late or early, and must be made while working full time in the public interest. However, the payments do not have to be consecutive.
- You must also work for a qualifying organization. If you work for a 501(c)3 entity or a state, federal, or tribal government job, the employment typically 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. For example, the law states that employment providing a public service does qualify. 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 required 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 required 120 payments, you can submit your request for forgiveness. Just don’t make any employment changes until you hear back from the Department of Education.
What do the 2017 lawsuits mean?
If you are one of the hundreds of thousands of people enrolled in PSLF, you might be worried about the effects of certain lawsuits. In 2017, for example, the American Bar Association sued the U.S. Department of Education, accusing it of retroactively denying the eligibility of certain employees to receive PSLF. However, the ABA won its case, demonstrating that the government cannot move the goalposts when it comes to who gets loan forgiveness.
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 the 2017 lawsuit stop you from pursuing your dream job. There are tons of resources out there for graduates with a lot of debt, including 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. 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 that, contact an attorney.
About the Author | Samantha Fredrickson has worked in communications and nonprofit advocacy for more than a decade. She has spent much of her career advocating for the rights of vulnerable populations. She has degrees from the University of Nevada, Reno and New York Law School.