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Good deeds help pay down college debt

Doing good could catch you a break on your student loan payments.

Recent college grads can cancel part or all of their federal education debt by working in public service jobs -- lower-paying professional jobs that serve low-income communities -- or by volunteering.


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Loan forgiveness programs are available to everyone from teachers to nurses to young doctors and lawyers to Peace Corps volunteers.

Teachers who work in low-income elementary or secondary schools may be able to cancel as much as $5,000 of their federal Stafford loan debt.

The five grand gets eliminated from a teacher's loan balance after he or she completes five years at a designated low-income school.

"It's sort of like a salary bonus," says Carol Lindsey, vice president for policy and compliance at Texas Guaranteed, which has canceled $80,000 in Stafford loans for 17 teachers who already have completed five years and have returned to school for advanced degrees.

The program is available to teachers who borrowed Stafford loans after Oct. 7, 1998. Teachers, with student debt prior to that date are not eligible for the loan forgiveness program.

More information and a listing of low-income schools are available on the U.S. Department of Education Web site.

Teachers with recent Stafford loans should take a close at the program.

"There may be a lot more folks who qualify for the program than realize," Lindsey says.

Recent grads with federal Perkins loans should take note as well. There are a whole slew of forgiveness programs available.

Get with a program
You could cancel as much as 100 percent of your federal Perkins loan debt by:

  • Working as a full-time teacher in an elementary or secondary school that serves students from low-income families.
  • Working as a full-time special education teacher.
  • Working as a full-time provider of early-intervention services for the disabled.
  • Teaching math, science, foreign languages, bilingual education or in other fields designated as teacher shortage areas.
  • Working as a full-time employee for a public or nonprofit family services agency.
  • Working as a full-time nurse or medical technician.
  • Working as a full-time law enforcement or corrections officer.
  • Working as a full-time staff member in the educational side of a Head Start program.

With a Perkins loan, your school acts as your lender. Because of this, questions about deferring or canceling a Perkins loan should be directed to the financial aid department of your college or university.

A chart detailing federal loan forgiveness programs is available on the Mapping Your Future Web site.

More information on Teacher Loan Forgiveness programs is available on the U.S. Department of Education Web site.

Young medical and legal professionals that are pursuing service-oriented careers may be able to eliminate a big chunk of their education debt. And these folks need relief.

It's not unusual for a young doctor or lawyer to begin their professional careers loaded down with debt. Debt burdens of $50,000 to $100,000 are common.

The National Health Service Corps offers loan-forgiveness programs to physicians, nurse practitioners, physician assistants, midwives, dentists, dental hygienists, psychologists and therapists that work for two years in communities in great need of health professionals.

Participants in the program may wipe out as much as $25,000 in loan debt each year.

The NHSC Web site includes a listing of state-based loan repayment programs for medical professionals.

Similar programs are available to attorneys that pursue public interest careers. About 50 law schools offer loan forgiveness or loan repayment assistance programs. Equal Justic Works, formerly National Association of Public Interest Law, has a listing of the schools on its Web site. The site also lists state and employer loan repayment assistance programs.

Many attorneys would be unable to pursue lower-paying public interest law careers without these kinds of programs.

Save big bucks
Consider these numbers.

According to Equal Justice Works website, the average salary for a public interest lawyer is $35,000 a year, which boils down to a net income of about $2,916 each month. The average education debt for a law school grad is $84,400. Under a 10-year repayment period, a grad would shell out $703.00 a month in loan payments.

The loan-forgiveness program at the University of Virginia Law School offers 100 percent loan forgiveness to law graduates who make less than $35,000 and pursue legal careers in Virginia. Grads making $35,000 to $60,000 may have a portion of their loan payments forgiven as well.

At Harvard University, any Harvard law school grad making $36,000 or less a year may have their loan payments forgiven. Those making $36,001 to $81,000 may have a portion of their law school debt canceled as well.

Several volunteer organizations also provide assistance with student loan debt.

Peace Corps volunteers who complete a two-year term can wipe out a percentage of their Perkins loans' balance. Student loan payments may also be deferred while serving in the Peace Corps.

Members of Americorps and Teach for America receive educational awards of $4,725 for each year of service. These awards can be applied to student loans or future education expenses.

During service terms, members with student loans may qualify for loan forbearance. With forbearance, you are not required to make loan payments but interest will continue to accrue on your loans.

Americorps will pay some or all of the interest that accumulates during this time. Many members won't have to pay a penny toward their student loans while serving their terms.

"A lot of people would like to do a national service program like Americorps or teach in an under-resourced school, but the salary being what it is you won't be able to make loan payments," says Erin Tunney, an applicant communications associate with Teach for America.

Tunney called the loan forbearance and educational awards programs "a huge help."

She should know. A 1999 graduate from the University of Virginia, Tunney taught for two years in a school in the Bronx with Teach for America.

She owed more than $12,000 in student loans at the time. Not having to make student loan payments while living on a teacher's salary was a relief.

She received $9,450 in educational awards for her two years of service and was able to pay off three-fourths of her loan debt.

"As soon as I got the education award I would pay it right back to the loan company," Tunney says.

She made her final student loan payment two weeks ago.

"I'm 2-and-a-half years out of school, and I was able to pay off the whole thing," says Tunney, 24. "I'm completely debt-free. It's a wonderful feeling."

-- Updated: May 4, 2004





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