In 2012, over 70% of students graduating from four-year institutions were carrying student loan debt along with their diplomas. With the average student loan debt being $29,400*, it’s no wonder this is being termed a crisis.
While some graduates accept the fact that they will be paying student loans for the next couple of decades, others are still in denial because their loans are deferred or in forbearance. Some scramble to repay those loans as fast as possible and others look for alternative methods of taking care of their loans.
One of those alternative methods for dealing with student loan debt is student loan forgiveness. The idea of having your loans forgiven has some undeniable appeal for students weighed down by debt.
There are several different federal programs that offer student loan forgiveness. The terms and conditions vary by program, and programs vary by student loan type. One of the most well-known ways to receive student loan forgiveness is through the Public Service Loan Forgiveness (PSLF) Program.
What is the Public Service Loan Forgiveness Program?
Working in the private sector is much more profitable in just about any field than public service. The Public Service Loan Forgiveness program entices graduates to choose employment in public service even though it doesn’t pay as well.
Here’s how it works:
The Public Service Loan Forgiveness Program “forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.”**
A qualified monthly payment is one that is made:
- after October 1, 2007
- under a qualifying repayment plan
- for the full amount shown as due on your bill
- no later than 15 days
- while you are employed full-time by a qualified employer
The 120 monthly payments don’t have to be consecutive. Ten years is the minimum amount of time it could take to receive forgiveness, though it could be much longer.
Qualifying employment for PSLF is not based on the particular work you are doing, but rather who you are working for. For example, you should qualify if you’re employed by:
- Federal, state, local, or tribal government organization or agency
- Tax-exempt non-for-profit organizations
- Private not-for-profit organizations that provide services such as law enforcement, public health, public education, military service, public safety and more.
If you are interested in learning more, check out the details about the Public Service Loan Forgiveness Program.
We now qualify!
We recently announced a big change in our finances. Mr. SixFiguresUnder had been working as an attorney at a small law firm, but left that job and took a job as an attorney for the State of California. Since he was building a nice client base (and had a lot of matters already in the works), he has also opened his own part-time solo practice. An attorney “side hustle,” if you will.
Honestly, it hadn’t even crossed my mind that we would qualify for the Public Service Loan Forgiveness Program now that my husband is working for the state. Until readers started to ask about it, I hadn’t even thought about it.
I checked with my husband to be sure, and he said that his job would definitely qualify. In fact, some of the other attorneys in his office are planning on (I prefer to say “hoping for”) forgiveness.
Why we aren’t going to use the Public Service Loan Forgiveness Program
Even though my husband is working at a job that qualifies for loan forgiveness, we are not interested in seeking student loan forgiveness. Here’s why:
We’re impatient. We don’t want to wait 10 years to be debt-free. The burden of this debt hanging over us is real and we are eager for it to be gone as soon as possible so we can move on with our life and finances. Ten years is too long.
It’s too risky. We don’t trust that the program will still be around or have funding in ten years. With the way that government programs change, there is no guarantee that the program will even exist ten years from now. As of now, no one has received loan forgiveness through the PSLF program, since it hasn’t been ten years from Oct 1, 2007 yet.
It could be expensive. If for whatever reason we don’t qualify when the ten years of service are up, then we will have a hefty student loan bill which will have been growing for ten years! No thank you! We would rather pay extra now and get it paid off!
Case in Point
Just last week I read about two law school graduates who work for the state and have been making their required student loan payments for five years already. They thought they were halfway to loan forgiveness, but recently found out that their payments had not been credited toward the Public Service Student Loan Forgiveness Program because their loans weren’t the right kind.
You would think that someone who had been through law school would be able to do a thorough investigation on the program qualifications and be certain he or she met the criteria before investing time into the program. Apparently it’s confusing.
In order to qualify for PSFL, your loans must be Direct Loans or they must be consolidated into a Direct Consolidation Loan from other specific Federal loan programs. At this point they can consolidate their loans into a Direct Consolidation Loan and then work ten additional years for the state.
For five years they had been banking on forgiveness, paying only the minimum required. They thought they were half way to having their loans forgiven, but instead, they’ll be paying on their loans longer, with more interest.
Our Plan
Instead of seeking loan forgiveness through the Public Service Loan Forgiveness program, we will just hustle and pay off these student loans ourselves as soon as possible. The sooner we get them paid off the sooner we will be free and we can move onto other financial goals! Our current goal is still to be debt-free by the end of 2016! That’s waaay better than 2026!
How About You?
- Would you be interested in the Public Service Loan Forgiveness Program if you qualified?
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Great post! I think you’re being wise not to wait ten years for someone else to *probably* pay off your debt.
It will feel so sweet to be debt free from the hard work that you do yourself and I’m sure you’ll reap more benefits from that hard work than solely paying off debt. 🙂
I know this is an old post but I just stumbled upon it so I’m going to throw in my two cents…
I am PLSF eligible.. Although I haven’t decided on if I will pursue it or not , it is a very appealing prospect.. I admit there are alot of “ifs” and “unknowns”…
In order to “hedge” my bets I am saving the difference between my IBR minimum payment and the interest that acceues monthly in an account out if reach.. I will be buying CDs every $1,000 that accumulates.. That way.. if something goes left I have the interest set aside.. Best case scenario that money can be put towards something else..
The othe benefit of IBR required for PLSF is that you can target your payments that are now excess but would be “standard” under the regular payment plan.. it offers the opportunity for those stiffled by their debt to progress in other goals..
Again, I haven’t decided to pursue it or not.. but I am keeping an eye on what happens to the program.. I also am at an advantage because I just started making qualifying payments. Unlike the individuals who were working towards forgiveness as they were trying to “build the plane while flying it”..
In thinking about this program after signing up and switching my payment plan to IBR, I am extremely nervous about the big question mark at the end of the ten years. After 10 long years of annual documentation, monthly payments, and worry; how does a person just jump right in and decrease payments and HOPE for the best?
Does anyone reading this know any information about after the ten years is finished? I know that it is not a guarantee that forgiveness will be granted. But that is all I know.
Funny how educational costs have gone up so far and so fast. When I obtained my B.S. At a well known private university in Georgia (Mercer University) in 1985, I was on the hook in total in educational costs for graduating after 4 years at that university for the approximate sum of $10,000 in Federal Student Loans.
A few years later, I pursued and acquired a graduate degree through the public University of North Carolina university system. At the time, I did not need to take out student loans in my pursuit of my grad degree in that UNC system, as I simply paid the tuition costs quarterly, with a personal check, and the tuition costs were less than $300 per quarter.
Come three decades forward to today, now that my son has acquired both a B.S., and a grad decree, and HE is on the hook for student loan debt slightly exceeding $158,000!
I went to brick and mortar schools that surely had facilities costs, full time staff costs, costs for on-site student equipment, housing, etc., to name just some of the costs brick and mortar schools are subject to.
On the other hand, my son attained both of his degrees remotely, attending courses electronically only. While he did obtain his B.S. at a for-profit school, he got his masters at a well known non-profit grad school. But, while in both cases, neither of his educational institutions had to make lighted, heated, appointed physical space available for his use in coursework, as he absorbed all of those costs in his own living expenses, still, look at the difference between my educational costs of about $14,000 for both my undergrad and grad degrees, where I sat in air conditioning or heated and lighted spaces I didn’t pay the monthly bills for, nor did I have to keep up ” the yard” (the school grounds), pay for the upkeep of the buildings or furniture I used while getting my degrees, and then compare that with my son’s education related costs.
He paid for the utilities and furniture and equipment he needed while taking courses. He paid all of the grounds keeping (is own yard) where he took courses.
And even so, although a little less than three decades separated our obtaining our undergrad and grad degrees, whereas mine cost me some $14,000 combined total, his cost him a bit more than $158,000 combined total. My educational institutions absorbed more of the operational costs associated with granting me my degrees, and my son’s schools absorbed far, far less of the operational costs for granting my son similar undergrad and grad degrees.
I’ve heard it said that since the 70’s, college costs have exceeded a 500% increase in costs to the students of the 90’s and beyond. Other than pure profit greed, I’d like to know why.
I agree with Dee. This is a great story, and I enjoy the hope and happiness you have found for your family. But my loans were taken out when I was 19 years old, and many many troublesome issues followed. (Ever have to chase a loan around, no one wanted my money lol.)
However Many people are NOT in your wonderful position for whatever reason. some people dont have the choice, and this long haul is all they have as a chance to get out. Im not sure if you have shared how or what methods you are using to pay off your loans by the end of this year? I would really love to know. Im sure being a lawyer helps immensely, but any advice for those of us that are not in the same line of work, or walk of life? Or a point to previous commentary you have written about it. I apologize if you have answered this request numbers times, I just had the pleasure of running into your blog. Thank you in advance. <3
Hi! Thank you for your comment. I actually replied to Dee’s comment in a post of its own. You can find it here. I make our personal finances public (I’m totally transparent with all the numbers), so each month you can see exactly what we earn, spend, and pay off in debt. Here is the archives of our budget reports.
When we started our journey to pay off $130K, my husband (although he is a lawyer) was only making $39K (before taxes). We have worked really hard to increase our income and made lots of sacrifices to reduce our expenses in order to get to where we are now (which is currently $49K away from our goal of being debt-free). I have numerous other posts talking about what we do to pay off our debt– it’s the main topic of this blog! 🙂
I am happy to answer any other questions you have, as I want you to be encouraged and motivated through this blog!
It’s not that the rest of us are okay with risk. We do not have a choice because we don’t have the option to live rent and utility free. What would you do if you had to actually pay for rent, utilities, child care, and health care? Those bills would wipe out the funds you currently use for debt repayment. I enjoy following your journey, but it’s like a fairytail to me. I have never had the option to live somewhere for free since I was a teenager.
Hey Stephanie,
Great post. Thanks for sharing what you found out and thinking through the pros and cons too.
I agree 2016 sounds much better than a dream in 2026:)
Keep it up!
We qualify for the IBR but not the PSLF so after the years of payments we would have to pay taxes on what was forgiven. Having the loans hanging over our heads for many more years doesn’t seem appealing to us so we’re working towards paying them off in the next 5 years or so.
That was our situation up until my husband got this new job. I’m glad that we are well on our way to getting rid of these student loans! That’s nice that you’ll be done in the next five years or so!
See, this is what scares me. We qualify for the forgiveness program you are talking about, and that is currently my husband’s plan for paying off the student loan debt. What scares me is what might happen if it loses funding! With the income based repayment plan (which we are also on) we are paying just a tiny bit of the interest that is accruing each month. My husband just doesn’t see any point in putting any extra money towards a loan that will be gone in 10 years no matter how much we pay. He would rather invest in our house (another debt) so that when we need to sell it, we will get more back… Provided we do actually receive the loan forgiveness we will be in good shape, but right now I am not super comfortable with it… I will believe it when I see it! Lol. I’m going to have to have him check and make sure all of our loans qualify too, after that story you shared.
I can definitely see both sides. If it looks like you are well on your way to student loan forgiveness, I can see your husband’s perspective of not wanting to throw money at a debt that will be forgiven. I can also see your perspective– being nervous about the whole thing! That’s good that you are working on your mortgage!
I’m 19 years old and thinking about retirement- I have no confidence social security will be available in 45 years. Which makes paying into social security a little upsetting, but that’s another issue. So with that in mind, I could never count on student loan forgiveness. If as a general belief I don’t think there is money for social security, I very much doubt there will be money to pay off student loan debt. Maybe it’s a little cynical, but I don’t want to take a ten-year chance on my student loans.
Yes! It will be interesting to see what happens in 2017 when those who were the first to start the program are up for forgiveness. There sure don’t seem to be any extra funds to handle it all.
As a sociology professor, I must put in that the statistics do not support the contention that public sector workers make less than private sector employees. In fact, federal employees earn considerably more than their private sector counterparts, a difference that is even greater when benefits are considered. We accept this inherited belief that government work is underpaid when compared to private sector employment. But few take the time to research the facts!
I can’t speak to state government employee comparisons, since these may vary across states or across sectors. Anecdotally, however, in my state compensations at the university level are ridiculously cushy, while my husband’s private sector IT work (with terminal degree) cannot hope to compete. Protections and benefits do not compare.
Friends of mine who teach in private schools earn considerably less than those in public schools, even similarly credentialed, yet they contend with many who voice the cliche that they must be drawing enormous salaries because they teach “rich kids.” It’s a lazy out. My sister(from another state) is a dedicated and award-winning public school teacher in her own right, and she affirms that the compensations do not compare.
I very much enjoy your blog. It is always encouraging and thought provoking!
We live in a different country, but my husband and I have had a similar experience – I work at a public sector job and am well-compensated with amazing benefits; my husband works at a private-sector job and is well-compensated but doesn’t have nearly the same benefits that I have. I think what skews it is that when you look at “average” salaries, the “average” is pushed up in the private sector by people like Bill Gates and Mark Zuckerberg. Working in the public sector will never make you ridiculously rich (unless you manage to become POTUS and can retire on your speaking salary gig); however for most people, working in the private sector will also never make you ridiculously rich.
As an aside I have a friend who is a professor at an ivy league school who was offered a job that pays much, much better by a public university in the country where I now live. He couldn’t believe the salary; nor could he believe the incredible benefits that came with the job. So, salaries in general tend to be much higher where I live (personally my job would pay half as much if it was in the US).
Precisely, Becca! As you pointed out, averages are by definition inordinately influenced by extreme values. Not to mention that job markets in the United States vary broadly and private sector compensation is commonly based upon regional cost of living–what the market will bear. So national averages often can broadly overstate local realities.
In addition, you’re also right on the money (haha) that salary comparisons that neglect to take into account total compensation packages are invalid indicators of standard of living or income security .
As to the Ivy League bit–I know! Wouldn’t that be nice! 🙂 This only really applies to the more exclusive private universities (such as Duke, Vanderbilt, etc) that have very large endowments. Salaries/benefits at most private institutions do not compare to public university packages (and many are having to cut out pensions and cut benefits down to the bone. Fortunately, I’m at a sizable public institution, but still….
Anyway, in my mind, making the assumption that public sector employees are automatically more in need of extra help needs to be reexamined, perhaps? Or at least debated. But don’t worry, Rebecca, I know this wasn’t meant to be a policy assessment blog! 🙂
Cheers!
I totally agree Susan. It is an odd distinction that makes sense in some cases (like in law, where the District Attorney can start at less than $50K and being a attorney at a big firm in the city starts at well over $100K), but not in other cases, like the ones you mentioned. Thanks for pointing this out!
Haha, that last sentence obviously should have read, “Don’t worry STEPHANIE”….got mixed up between you and the commenter’s name with whom I was agreeing! 🙂
Hi Stephanie,
We do qualify for this program, as far as I understand. All of our student loans that we took out for law school were from the federal government, and my husband is working for a state agency. Your one comment about some students not getting credit made me nervous though – I should re-check what kinds of loans we have – I’m pretty sure they are direct.
We are like you in that we are not banking on this program. We pay as much as we can on our limited government salary and plan on throwing most of our tax return at it each year. I don’t fault anyone who uses it, though, as I consider it kind of the same thing as getting a scholarship to medical school in exchange for working for the Air Force for a particular number of years. I think this is one way that government institutions, which serve the public, can attract candidates who otherwise might head to the private sector. The public, who pays the bill for forgiving their loans, should theoretically benefit from the deal.
We want to be rid of our debt as soon as possible, not necessarily because the program may not be there, but because we want the freedom to move into a private sector job if that came up later. Also, we knew what we were getting into when we signed up for the loans, so as much as it is in our power to do so, we want to pay them off. But if some major emergency happened that prevented us from doing so in 10 years, and we qualified for the loan forgiveness, I think we would take it.
I don’t fault anyone using the program either. 🙂 It’s a nice potential back-up if necessary, just not something I’d bank on. And I agree with the idea of wanting to pay them back because we knew what we were getting into and want to be responsible and pay them back.
That is really interesting! In Canada we have nothing like this that I know of. Your student loans are your debt forever.
I probably wouldn’t apply for the program as I feel the same way as you do that debt needs to be paid off ASAP. While paying our vehicle off our financial advisor told us to stop and instead invest the money because the interest rate of the loan was so low. We went with our gut though and paid the loan off first and I am so glad that we did!
Good for you! If you’re going strictly on the numbers then your advisor’s advice makes sense, but there is definitely value (though un-measurable) in not having debt hanging over your head, not matter the interest rate!
Thanks for this nice post! It really helps to read about how other are tackling the debtproblem.
I have a question. I qualify for no monthly payments at all, because my income is to low. After 15 years my debt will be forgiven. Despite my low income, I can save a little. Maybe you have a little advise about what is a wise thing to do? Save , or start paying off debt.. Right now I decided to started paying off debt although I don’t have to, but isn’t that a silly thing to do?
I don’t know wheter this situation is recognizable in the US? (I live outside the US, so different regulations etc).
Joanne
Not a silly thing to do at all! We actually don’t have any payments due either. We are on the IBR (Income Based Repayment) plan. We don’t make enough according to our family size to owe any payments now (that might change with his new job- we’re not sure yet). We aren’t letting that stop us though! We’re still making sacrifices so we can pay down the loans as fast as we can.
In your situation, it depends on what you want to do. You’ll want to be all in or not at all. If you are confident that you will in fact get the forgiveness (and you are a good way into the 15 years), they you might just want to not worry about payments if you don’t have to. However, if you want to be debt free before 15 years and/or you are nervous about the forgiveness plan working out for you, then I would encourage you to make a plan to pay off your debt faster.
Thanks Stephanie for your comment!
I’m just starting the 15 years, so I have a lot to think about.
Anyhow, I love reading your blog, you have fans over here in Holland;)
Joanne
I thought about it, but like you thought the risk wasn’t worth it. I’m currently in a PSLF position and was in one from 2007-2009 before law school added another $145k to my $20k in undergraduate loans. We instead decided not to pursue IBR and just go full force and pay them off.
I think it was the right decision. At their height, my loans were accruing $20k/year in interest. I can’t imagine what that would be if the interest kept accruing. Way scary! The loans will be gone in April/May as long as we stay on track.
Wow- $20K in interest each year! Yikes! I think you made the right choice. And you are so close!!!
That is awesome that you are almost done paying them off – so inspiring!
I think everybody wishes a fairy would come down and wave a wand to forgive all your student loans after graduating from college. When I graduated, my classmates were consolidating their loans and stretching out the terms so the payment was affordable. I decided that since I was *only* making 3 payments, and could still afford to make the minimum payments on all of them, I didn’t want to consolidate unless I absolutely HAD to consolidate them. 5 years after graduation, I have one paid off, and making strides on the rest of them. I wish I would have been more serious about this stuff before so I wasn’t still working on them.
Better late than never! That’s great that you’ve got one down and you’re making strides on the others!
I’m so glad you brought this up! My husband is an attorney with the federal government. In theory, we could have taken this path. But we agreed with everything you said about paying off the debt sooner. Another bonus? With his loans paid off, it now feels like his career choices are truly his. There’s no magic date when he can consider other options without penalty. I think that’s a huge benefit that’s easy to overlook.
That’s true Abby! He doesn’t have to feel tied down and limited to certain employers or have to carry on in something that isn’t making him happy.
I think, had I known about this years ago and qualified, I might have been tempted to seriously consider student loan forgiveness programs. However, I’m grateful for the path that I took because, now, I’m debt free, and that feeling is worth so much more than another ten or even five years of payments.
I do know some folks who have gone to law school specifically who are looking into this sort of thing though, and I can understand why. Having a weight of debt almost twice as much as the weight I had when I left school would be so hard. I remember that I felt like I was drowning in debt at times after I graduated. I cannot imagine what people with bigger payments and similar salaries feel like.
That’s awesome that you are debt-free now Amy! To not have the weight of debt for those extra years waiting and hoping for forgiveness probably adds years to your life! 🙂