I am fortunate to have a job where I could be eligible, if I participated, in the Public Service Loan Forgiveness (PSLF) plan. PSLF can be a great thing for people who have huge amounts of student loan debt. However, after long hours of thinking it over I don’t think I am going to participate.
What Is Public Service Loan Forgiveness?
Public Service Loan Forgiveness allows people who are in eligible positions and meet certain income requirements to have their student loans forgiven after 10 years of service. Some of those jobs could include teachers, police officers, firefighters, doctors, etc. There are some basic requirements with this program:
1) You have to have a job that is PSLF eligible. It typically has to be a job where you work for a government agency or a non-profit. Some kind of job that is considered public service or you work for a public service organization.
2) Loan forgiveness can only occur with federal student loans, not private ones.
3) You must be income-eligible. In other words, you need to be making student loan payments under an income based program. Your loan payments would be based upon your income. Typically, that income based payment is 10-15% of your discretionary income.
4) You must make 120 (10 years) payments based upon that income eligibility.
5) You must be a full-time employee and stay at that position for 10 years to get the benefit.
6) You must submit documentation each year that qualifies you for an income-eligible payment and continually verify your employment with a public service organization.
My Student Loan Background
Don’t get me wrong public service loan forgiveness is a great thing for some people and I think is a great option. However, for most, even if you are eligible I don’t think it is a great option.
When I left graduate school I had over $97000 in student loan debt. I have been paying on my student loans for eight years and have reduced that amount to just over $66000. When I first got out of school there was no public student loan forgiveness and the income based repayment plans I was ineligible for because my income, with my ex-wife, made me ineligible for the program.
When I first started I actually was on the standard repayment plan for student loans which is basically a ten-year plan to pay off my loans. My initial payment was $1000 a month. Even though my ex and I were making close to six figures that payment was really tough to make. So after a year or so of gutting it out I switched to the extended plan. That basically meant I cut my loan payments in half, but my loan wouldn’t be paid off for 25 years (I am currently in my eighth year of 25).
So when Congress was developing these student loan forgiveness programs I was basically just making the payments and plodding along and I haven’t become eligible until really the last couple of years because Mrs. ROB’s student loans and mine combined make me eligible for the program.
So Why Haven’t I Applied?
There are several reasons why I don’t think PSLF is good for me and I think good for others. First, I have set a goal for myself to be debt free (excluding the mortgage) by 45. In order for me to do the PSLF program I have to pay on my student loans for another 10 years. I don’t want to stay in debt to the government I want out! I want to put my money into more constructive investments.
Second, I would have to lower my income even further to take full-advantage of the program. Over the past several years I have been teaching extra courses to pay off debt, visit my now lovely wife (we did a long-distance relationship for two years), travel, and ultimately afford a house. If I were to truly maximize the PSLF program I would basically need to cut back on the number of courses. I would have to purposefully lower my income to get loan forgiveness that is 10 years down the road. Does that sound stupid to anybody besides me? Why in the pit of hades would I lower my income to just be eligible for some loan program?
I have even had a couple of colleagues of mine turn down extra monies, extra courses so they could continue their eligibility for the PSLF program. Does that sound crazy to you? It certainly does to me. Why would I want to stay in debt? It makes no sense.
Now I can understand it if someone has over $100,000 in student loan debt or is perhaps the only income provider for a family or some other extenuating circumstance. But even then you turn down extra money so you can be eligible for loan forgiveness. That, in my opinion, is just plain DUMB!
So those are two good reasons why I am not going the student loan forgiveness route. In my next post, I will explicate why, for me, the math just doesn’t work for me to do the PSLF program.
So does the math work for you? Are you in a job that is eligible for student loan forgiveness? Are you going that route? Why or why not?