When big student loans await, graduating can be terrifying.(AP Photo/Seth Wenig, file)
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In these challenging times, people are rushing to school to improve employment opportunities and to change careers all together. One of the major selling points of going back to school for careers in traditionally low paying professions - such as teaching, nursing, and public service - is that there are a variety of incentive programs for student loan forgiveness.
In California, the APLE program for teachers is administered by the California Student Aid Commission. The program requires that teachers serve in one of 13 identified shortage areas for 4 consecutive years to qualify for up to $19,000 in student loan assumptions by the agency. Many other states run comparable programs.
The Public Service Loan Forgiveness (PSLF) program, in effect since last July, forgives borrowers’ remaining student loan debt after 10 years of full-time employment in public service. To be in the program, borrowers must be employed by the federal, state or local government; or any nonprofit, 501(c)(3) organization; or work full-time for AmeriCorps or Peace Corps. To qualify for loan forgiveness, the borrower must have made 120 payments during a decade as part of the Department of Education's Direct Loan program. If the payments are not complete or the borrower stops working full time, there is the risk of being kicked out of the program, with no loan forgiveness.
Under the College Cost Reduction and Access Act of 2007 the Income-Based Repayment (IBR) and Public Service Loan Forgiveness (PSLF) could make student loan forgiveness more accessible. Beginning July 2009, the IBR program qualifies borrowers for a reduced payment according to the IBRinfo calculator. Monthly payments are capped at 15% of monthly discretionary income, and after 25 years of reduced payments, the remaining balance on the loan is forgiven. What is important to understand is that under current tax law, the amount of debt that is forgiven is considered taxable income. Just as in the PSLF program, if borrowers do not comply with the payment schedule, they can be removed from the program and forfeit loan forgiveness.
For more information regarding topics of interest to graduate students view:
The shelter of grad school in a challenging economy
Choosing a cost effective teacher credential program
Guard your transcript like a credit report
Janelle is the founder of Edusistance and the creator of the Race to College Success program. You can reach Janelle with comments and suggestions for future articles via email.
Comments
This is a rare article in that it lets graduates know far ahead of time that they will be taxed for their loan forgiveness. The same applies to the Income Contingent Repayment programs. Borrowers are stuck no matter what promises are made to them. Our national defense shields are weakening by the minute.
Beware the student loan forgiveness especially APLE. Since California has been having a budget crisis they have no longer been paying student loans. Teachers who have followed all the rules and who have lived up to the end of their bargain are basically out of luck. Apparently, the state of California does not consider this a priority and they are looking into ways to legally renege on their obligation all together. Not even IOU's.
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