Question by chuckbell: Pay off student loans within 3 years or stretch them 10 years and qualify for public service loan forgiveness? I will have about 50,000 in student loans at the end of my doctoral program. The public service loan forgiveness requires 120 consecutive payments before the government pays the remaining portion. I could stretch the loan 10 years and qualify for loan forgiveness or make the necessary sacrifices to pay the loan in full within 3 years. Best answer for Pay off student loans within 3 years or stretch them 10 years and qualify for public service loan forgiveness?:
Answer by kiara
Why should taxpayers money sort out your mess? There's a recession on ya know?
Answer by NotAnyoneYouKnow
Chuck: The interest saved by paying the loan off in 3 years will more than make up for any amount forgiven by your employment in a public service profession. If you were already planning for a career in public service - good for you - and far be it for me to discourage you from pursuing that path. If you weren't sold on a career in public service - don't forget that the private sector pays far more in almost every instance. I love numbers, so let's look at an example: Paying off $ 50,000 at 6.8% interest over 3 years will require a monthly payment of $ 1539. After you make 36 of those whopping payments, you will have repaid $ 55,414 - which is only $ 5,414 in interest. Paying off that same $ 50,000 at 6.8% over 10 years requires a monthly payment of only $ 575. On the other hand, you'll pay $ 69,048 in total - that's $ 19,000 in interest - and 14 grand more than you'd pay on the 3 year plan. Your decision to participate in the public service forgiveness plan will not save you $ 14,000. Your decision to make the payments in 3 years will. If you can afford to make $ 1500 monthly payments - that's the far better option. Good luck!
Answer by jiayo23
to add to the second post, if you go with the public service loan, you are limiting yourself to available places to work (i.e. you can't work at a private business) and this can affect how much you are making. Taking the gov't job to stretch your loan payments to 10 yrs may pay a lot less than a private company would.
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For some federal student loans, if you work in the non-profit public service industry for 10 years you may qualify for federal student loan forgiveness. Along the same lines of financial hardship, an income-based repayment (IBR) option is available for ... Facts You Didn't Know About Private Student Loans
An education loan is the only option for many students wanting to undertake college eduction. Often this loan runs into hundreds or thousands of dollars. An eduction loan can therefore be stressful on college graduates, especially since most students take up jobs with entry-level salaries. In such a scenario, the burden of the loan increases.
To ease the burden, graduates can opt for a Student Loan Forgiveness/ Repayment Program. This is a method for reducing the repayable amount thereby making it easy for students to overcome debt. These programs can help in eliminating the debt by a few hundred/thousand dollars in return for choosing certain careers, voluntary work or even military service.
What are Loan Forgiveness & Repayment Programs?
A loan forgiveness programs is backed by the Federal Government.
A student loan repayment program is different from a loan forgiveness program. This program may be used to reduce any type of loan. It enables the provision of additional funds, through which a student can repay his loan. Sometimes, the payment is directly made to the lender on behalf of the borrower.
Both programs are extremely helpful in student loan debt management. However, the amount eliminated under these programs is considered as a taxable income. While this may be discouraging, these programs are quite beneficial, and carry more value than the tax incurred through them. If you do not want the repayments to be taxable, it is better to opt for student loans which provide for forgiveness. But this provision is available only when you work with certain professions and for certain employers for a required time period. For example, loan repayments under National Health Service Corps (NHSC) program are tax-free. Likewise, state programs which qualify for funding from the Public Health Services Act are considered tax-free.
Here is a list of institutions that provide the option of reducing/ eliminating student loans:
The American Federation of Teachers
The Association of Medical Colleges
The American Bar Association
AmeriCorps
Peace Corps
A student loan debt management programis a resourceful tool to reduce debts. Make sure that you avail these benefits. Choose your option wisely. If you want additional provisions, opt for the programs which offer them. There might be some expenses in the form of taxable income. However, from a broader perspective, the program is more profitable and outweighs the costs incurred.
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