You CAN maybe Afford Pricey Grad Schools

This is a decent video that explains how the Public Loan Forgiveness Program (PSLF) and the Income-based Repayment Plan (IBR) can work in tandem to reduce your school loans.

In their example, Lee takes out $150,000 in loans to go to law school.  He graduates and gets a job making $40,000 a year in some nonprofit.  Without PSLF and income-based repayment plan, he'd pay $1,742 a month for 10 years, or 52% of his annual income.  But with PSLF/IBR, he'd pay $297 a month for 10 years, only 9% of his annual income, and when he makes 120 payments, he's done.  I hadn't realized in my previous post that income-based repayment would apply to a salary like $40,000.  Instead of paying back $150,000, he only pays back $35,640!  That's more than 75% off!  Let's ALL go to law school!  Because we can't find jobs.

If you don't work in public service but don't get paid much anyway, you pay into IBR for 20 or 25 years and then the rest is forgiven.  Much longer.

Again,"PSLF only works on federal "Direct" student loans. These are loans with the federal government as a lender. To participate in this program, you will need to consolidate your loans from Sallie Mae or other loan companies into Direct Loans. See http://loanconsolidation.ed.gov/ to learn more about Direct Loans. It doesn't work on Perkins or parent PLUS loans."

For more number crunching good times: finaid.org loan calculators.

Student Loan Forgiveness Extravaganza

While some college grads enjoy a time of whimsical life exploration after graduation, others realize that they owe $100,000 in student loans. Like everybody else, you want to spend a year in the Amazon basin studying pink river dolphins, but you can't just pause payment on the loans because Sallie Mae will hunt you down and slay all of your dolphin friends.

So you are stuck trying to strike a balance between what is financially responsible (making a large income to pay off loans quickly) and what you actually want to spend your time doing (riding dolphins). Or maybe you just want to take a low-paying public service job.

You've probably heard about the Public Service Loan Forgiveness deal where after 10 years of public service the balance of your federal loans are forgiven. A standard loan repayment plan usually is on a 10-year schedule, so this loan forgiveness is only really pertinent if you are on a different repayment plan. You have to make 120 payments, but they don't have to be consecutive. There are exceptions for PeaceCorps and Americorps. If you are planning to request this loan forgiveness, make sure you are keeping documentation of your employment and loan payments. Check out these PDFs for more specific info: (Q&As) and fact sheet. Honestly this program is a lot less useful than I thought, considering most people are on track to pay off their loans in 10 years.

There are loan forgiveness programs for:

• teachers in low income schools
• nurses in non-profits
• healthcare practitioners who serve min. 2 years at underserved sites with the National Health Service Corps (aka be a dentist in Arkansas)
  
• people who serve in AmeriCorps ($4,725 after completing 1700 hours)
• PeaceCorps volunteers (repay 15% of a volunteer’s qualified student loans for each year of service until 70% of the starting balance is repaid)
• health/science researchers
  
• lawyers in public service: ABA (see menu at left) and Equal Justice Works
• veterinarians who work in shortage areas
• law enforcement officers, armed services
  

Just google your state/field of work. You probably know more than I do about your profession/training, I'm just here to say TRACK IT DOWN because it may be thousands of dollars. Talk to your HR department, maybe they've got some sneaky tricks. Just because it's too late for scholarships doesn't mean the free money has run out. And if you're applying to grad schools, compare your potential schools' public service loan forgiveness programs. Or pull a Laura and go for a PhD where they pay you instead of a master's where you pay the school. High five!