In working with professors, one of the main concerns that continually pops up is student loan debt. In order to get a faculty position, most employers will expect an advanced degree. For many, taking on hefty student loans is a necessary evil in order to earn these degrees. Here are some interesting statistics according to StudentLoanHero.com:
- There is currently $1.23 trillion in total U.S. student loan debt
- 43.3 million Americans have student loan debt
- The student loan delinquency rate is 11.6%
Student loan debt is quickly approaching twice the amount of credit card debt in the U.S. For professors who have graduate and doctorate degrees, student loan debt could be a huge issue. Graduate students owe $57,600 on average. One-quarter of graduate school borrowers will owe nearly $100,000. These statistics are startling, but as a professor, you have a unique opportunity to get out from under these loans with Public Service Loan Forgiveness.
What is Public Service Loan Forgiveness (PSLF)?
The PSLF is a program that rewards people for entering into and who continue working full-time in public service jobs. When you make 120 qualifying monthly payments towards your student loans while working in a public service position, the remainder of your student loans will be forgiven. The amount of the loan that is forgiven IS NOT TAXABLE.
Are You Eligible?
You must work at a tax-exempt public service organization full-time and make 120 qualifying monthly payments while working in that capacity. Most public and private colleges and universities qualify as a tax-exempt public service organization. Then, you must be in a qualifying repayment plan. These plans include:
- Revised Pay As You Earn (REPAYE)
- Pay As You Earn (PAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
- Any other payment plan with monthly payments that equal or exceed standard repayment monthly payments.
Most borrowers consolidate their loans and use one of the top four repayment plans (shown above). The longest term for most loans is 25 years. This will result in a larger amount that ends up being forgiven.
Which Loans are Eligible?
- Federal Direct Subsidized Stafford/Direct Loans
- Federal Direct Unsubsidized Stafford/Direct Loans
- Federal Direct PLUS Loans
- Federal Direct Consolidations Loans
All of the above loans originate from the Direct Loan Program. All Federal Perkins Loans and Federal Family Education Loans (FFEL) are ineligible for PSLF.
Why You Should Consider PSLF:
If you are a professor and have $50,000 of student loans or more, you’d be crazy not to consider using the PSLF program! Let’s look at an example, Jim: Jim is married and just got hired as an assistant professor at a large university and will be making $60,000 a year. He has $75,000 in total student loans from both undergrad and grad school. The weighted average interest rate on his student loans is 6.8%. Using finaid.org’s calculators with a 20-year repayment term, Jim finds out that the total amount he would pay using an Income-Based Repayment plan (IBR, more on this later) is $52,800. The amount that would be forgiven is $72,660! Sounds nice, right? Isn’t it time you looked into whether the PSLF plan is right for you?
How Do I Enter Into the PSLF Program?
Print and fill out the Public Service Loan Forgiveness: Employment Certification Form. You will fill out a portion and your employer will also fill out a portion. You will then receive verification on your eligibility and how many qualifying payments you’ve made up to this point. Print and send this form in annually and be sure to keep copies for your records.
Want to know if you are eligible? I can help you to determine eligibility, the right repayment plan, and how the PSLF will impact your overall financial plan. CLICK HERE to set up a brief chat about your financial goals.