Wednesday, July 1, 2009
Help is on the Way
If many of our readers are like me, they are committed to the nonprofit sector and they are working at an organization where they are not making too much money. If that's the case, they may share my excitement about the newly available income-based repayment (IBR). As of today, those of us who make meager sums may qualify for a program that reduces the amount of student loans paid monthly.
Even more exciting is the Public Service Loan Forgiveness program. Thanks to Congressional action, those who work in the public sector may have their loans forgiven after making ten years of payment. For those with tons of debt and a desire to stay in the nonprofit sector, help really is on the way.
The skeptic in me must warn our readers that you should do all your research and find out if IBR is a better option for you before you sign the papers. After all our goal is to be smart consumers, not just consumers.
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3 comments:
I couldn't agree with Kehinde more on that last point - BE SURE TO DO YOUR RESEARCH before you sign onto these new programs. Remember that consolidating your loans with the feds loops you into their rules and rates. Also, depending on your total loans, types of loans, and monthly payments, you may still not save money in the long run with these programs.
Pilar will kick me for saying this but my dad's libertarian streak makes me skeptical of a "deal" like this. Ultimately, I do not trust the government's interpretation of what constitutes "public service" and I'd rather keep my options for work/school open. Now that I've sufficiently rained on this parade, I will say that this will save money for many nonprofiteers out there. And that's got to be a good thing.
I am all for loan forgiveness. However, the ten years of service required before loans are forgiven happens to coincide with the repayment timeline for Stafford loans. In other words, by the time you are eligible for loan forgiveness, your Stafford loans will already be paid off. Now, if you have private loans, or you renegotiate your Stafford loans to pay them off in more than ten years (making smaller monthly payments, but paying a lot more in interest over the course of the loan) then this might work out for you. But if you are a responsible borrower making all of your payments on time, and you are fortunate enough to have a small debt burden, and your "public service" job (defined how?) pays enough to allow you to make your monthly payments, then this is no help at all. It's a nice idea, though. Worth looking into and considering the terms before signing up, however.
I certainly agree that we should be careful. In the same token, I hope the government would keep their definitions at the time the bill passed.
The definitions of eligibility are: "In most cases, eligibility is based on whether you work for an eligible employer. Your job is eligible if you:
* are employed by any nonprofit, tax-exempt 501(c)(3) organization;
* are employed by the federal government, a state government, local government, or tribal government (this includes the military and public schools and colleges); or
* serve in a full-time AmeriCorps or Peace Corps position.
If you don't meet these criteria, the Department of Education's regulations create a two-part test of other circumstances under which you may still be eligible:
(1) your employer is not "a business organized for profit, a labor union, a partisan political organization, or an organization engaged in religious activities, unless the qualifying activities are unrelated to religious instruction, worship services, or any form of proselytizing;"
and,
(2) your employer provides any of the following public services: emergency management; military service; public safety; law enforcement; public interest law services; early childhood education; public service for individuals with disabilities and the elderly; public health; public education; public library services; and school library or other school-based services. "
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