Planning to Eliminate Debt Post-Graduation

Image by GotCredit, Flickr

Image by GotCredit, Flickr

When preparing to apply for colleges and choose your major, it’s important to consider what kinds of debts you are getting into and how you are going to get out of them. Of course, for many, money will be a huge obstacle to obtaining higher education. With tuitions rising higher than inflation, there is cause to worry that many students get in over their head in debts that are near impossible to pay back.

It’s important to understand all the options available to you as far as paying back your loans, even before entering college your first year. There are certain fields and professions that make it easier for new graduates to wipe away debts in the long term at a fraction of the total repayment rate. If you prepare for those jobs ahead of time, and know what you are getting into, you can make the most of your college education to ensure you have the skills needed to succeed in those areas after graduation.

For example, most federal loans can be forgiven after 10 years of graduation and also offer low monthly minimum payments if you consistently work in the public sector or are working at either a Title 1 school, or elementary or secondary school operated by the Bureau of Indian Education (BIE). If you are planning to be an educator of any kind this is something to consider ahead of time.

Also, if you know you are going to be working in one of these situations after graduation then you can plan your studies accordingly, giving additional focus and attention to skills that will help you where you are going. In this way you might minor in ethnic studies so as to be more informed and sensitive to the issues facing the population you are planning to serve after graduation. Or choose to take language classes that might help you better communicate with students and parents.

In the case of doctors and dentists there are similar programs that help wipe out your student debts if you serve in underprivileged areas for certain amounts of time. The programs vary from state to state which is why it’s important to study up ahead of time and make a plan for yourself post-graduation.

You may not be able to work in a school or hospital in your hometown to start, but if you’re prepared to travel and are ready to live and work in new communities that you’ve worked hard to understand, then it will make the transition easier and the payback of loans that much more efficient.

Be aware of these loan forgiveness programs before you sign up for your student loan. Often times private bank loans are not forgiven so be sure you know what your options will be post-graduation.

Federal Loan Forgiveness Programs

The Public Service Loan Forgiveness Program
In 2007, congress created the Public Service Loan Forgiveness program to reward citizens who have chosen relatively lower paying jobs in the public sector, or work at non-profit organizations. This program forgives the remainder of a loan after 10 years of regular monthly re-payments. As an example, here is how the Public Service Loan Forgiveness program might work:
“Borrower is earning $40,000/year with a family size of four. The loan balance is $48,000, with an interest rate of 6.875%. Borrower could qualify for an income based payment of $52/mo. After making 120 qualifying payments, borrower would have paid $6,240 in student loan payments, and the balance of $48,000 – $6,240 = $41,760 would be forgiven. This does not include interest that would also be forgiven, and assumes that the person’s income and family size will not change for ten years.” ~Student Debt Relief

Teacher Loan Forgiveness Program
Arguably the most beneficial of all the forgiveness options is the Teacher Loan Forgiveness program – as certain qualifying teachers are eligible for both full forgiveness of the remaining balance after a 10 year term and principal reduction of up to $17,500. As mentioned above, an eligible teacher is one who is not currently defaulting on their loan and who is also working at either a Title 1, elementary or secondary school operated by the Bureau of Indian Education (BIE).The ten year Teacher Loan Forgiveness program is part of the public service loan forgiveness program, but in most cases teachers qualify for and receive benefits of both programs.

State-specific Debt Forgiveness Programs
In addition to federal student debt forgiveness programs there are also numerous state-specific programs that will alleviate all or part of your debts for certain types of service. Everything from volunteer firefighting, to dentistry, to volunteer work can help pay down your student debts.

Where loan-forgiveness is not an option, it may be suitable to consolidate loans into one lower monthly payment to at least avoid defaulting. This will put student borrowers in the position to seek out better employment and other opportunities for loan forgiveness in the long term.

Always read the fine print on any loan you are considering and consult with professionals regarding your long-term options before making any decisions about forgiveness or consolidation. Weigh the pros and cons of any option and also prepare to utilize the creative ways to pay off the loans after graduation so you’re not saddled with debt for the next three decades.

This article was contributed by guest author Barney Whistance.

, ,