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Student Loan Forgiveness

Posted on 13 August 2008

While you may not be able to convince Uncle Sam to entirely forgive and forget your accumulated debt, he might be able to help you find some ways to reduce some of those financial woes.

Tired of paying off your student loans already? Wishing that they’d just go away? Since that’s unlikely to happen and wishful thinking is probably not going to take care of your debts, you’re better off looking for some alternatives to help you either pay off or significantly reduce those loans. After all, this money put you through college, it would be downright indecent and unethical not to pay up.

That said, reducing the principal on your loan will most likely involve the bartering of your services to any one of several organizations. By performing volunteer work, teaching in certain locations and/or in certain fields, or by providing legal and medical services, you can chip away at that loan debt.

Here are several options to reducing your debt:

  • Americorps. The domestic arm of the Peace Corps offers up to $7400 in living stipends and about $4725 in education awards to be awarded upon completion of a year’s worth of successful service. The education award can be used for either college tuition or it can be applied to paying off student loans. While the work can be incredibly rewarding – from helping clean the environment to helping at-risk youths the stipend gives you roughly $616/month to cover housing and all other living costs. If you’ll be covering other expenses while you’re trying to reduce those loans (car payments for example), you might want to consider other options.
  • Peace Corps. This organization specializes in overseas projects in any number of developing countries. Conditions can be rough but the rewards can be innumerable. Volunteers that have outstanding Perkins Loans can receive a 15% cancellation on the debt owed for each year of their first two-year service term and a 20% loan cancellation for their third and fourth years of service. You can receive up to a 70% cancellation on your Perkins loans. Deferments on student loan payments while you’re in the Corps can also be arranged for the term of your service for the following loans: Perkins Loans, NDSL loans, Federal Direct Loans, Federal Consolidation Loans, and Stafford Loans. While the Department of Education will pay interest during the deferment period for subsidized Stafford Loans and Consolidation Loans that consolidate only subsidized Stafford loans, you must pay interest payments on the following unsubsidized loans during your service: Stafford Loans, Consolidation Loans that include unsubsidized loans, and Direct Loans. Also, it’s important to remember that in order to defer payment on any of these loans, you must contact the lender to make arrangements. Further information on specific loans and their repayment/deferment processes can be found on the College Students Guide section of the Peace Corps website.
  • Military. Service in the military may qualify you for financial assistance for college tuition. Students who serve in the Army National Guard, however, may be eligible to receive up to $10,000 through their Student Loan Repayment Program. The best way to find out about the program and your eligibility is to call your local recruiter.
  • Teaching. You can be eligible for cancellation or deferment of certain loans if you teach in designated school systems. To qualify, these teachers must:
    • For Perkins/NDSL loans made on of after July 1, 1987, teach in an elementary or secondary school that serves low-income students.
    • For Perkins Loans made on or after July 23, 1992, teach in an elementary or secondary school system with a shortage of teachers in a certain subject area
    • For Perkins/NDSL loans made on or after July 1, 1987, teach disabled students in a public or other nonprofit elementary or secondary school.

    If you qualify to teach under any of the three conditions listed above, you may qualify to have up to 100% of your loan reduced in proportion to how long you teach. You can have 15% of your loan cancelled after your first and second years of service, 20% after the third and fourth years, and 30% after your fifth year.

  • Legal and medical studies. Studying medicine or law can mean incurring thousands (and sometimes hundreds of thousands) of additional dollars of debt. Some law schools provide loan forgiveness to those students who serve in the public interest and or work for non-profit organizations. The National Association for Public Interest Law has an extensive site that provides the nitty gritty on the qualifications and conditions you must meet in order to receive the cancellations. Along the same lines, the National Health Service Corps offers forgiveness programs to doctors who practice in regions that lack adequate health care. In some areas, hospitals and private healthcare facilities use loan forgiveness as a recruiting tool for hiring occupational and physical therapists.

You don’t have to be in debt forever – or at least, a good portion of your adult life – if you’re willing to take on any of the activities detailed above. Do a little research and you might find some rather interesting ways to help pay off that loan.

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1 Comments For This Post

  1. Joe Sigmund says:

    I have worked for Cinnaminson Township Schools, New Jersey, on their Child Study Team as a school psychologist for the past 5 and a half years. I have been working with disabled students from low income and affluent families. I notice that teachers may be relieved of their Perkins student loans if teaching disabled students. Would this apply to me as well? Also, I have consolidated my loans. Do you have any contact information for the process to be investigated and perhaps started? Thanks! Joe Sigmund

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