School loan forgiveness for human service workers

Posted: December 2nd, 2013

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School loan forgiveness for human service workers

            School loan forgiveness is a program that is designed to forgive a remainder of an individual’s federal student loan debt if the individual works for the government or a registered NGO. The working period is ten years and payments are made on time. Some programs also allow a person to stretch out their loan payment if income is below a particular level and the remainder of the debt is forgiven after twenty five years. Human service workers stand to benefit from such programs especially those with difficulties in repaying loans. However, the program also has some shortfalls. School loan forgiveness program is suited for human service workers.

The Public Service Loan Forgiveness Program (PSLF) was created in 2007 to help people join and continue work on a full time basis in public service. Federal student loans qualified for forgiveness under the program include; Federal Direct Stafford Loans or Direct Subsidized Loans, Direct Consolidation Loans, Direct Plus Loans and Direct Unsubsidized Loans. Some loans that can also be consolidated into the direct program include Federal Perkins Loans, particular health and nursing loans and Federal Family Education Loan comprising of unsubsidized Stafford Loans, Subsidized Stafford Loans. Consolidation of these loans is done so that other school loan programs are included in the PSLF Program.

For one to be eligible for loan forgiveness in the PSLF Program, there are some requirements. An individual must not have defaulted on the particular loan that he or she is requesting forgiveness. Loan defaults occur when a debtor does not meet the obligations of the debt contract (Fisanick, 89). The individual must acquire employment by an organization in the public service. This employment must be on a full time basis. Borrowers who have made reduced payments per month in the Direct Income Contingent plan will have a remainder balance. Balance arises after 120 payments are made on a loan.

Specific repayment conditions under the PSLF Program must include 120 monthly payments that are separate and paid after October 1 2007. Earlier payments made before this date are not counted towards meeting the set requirements. In each of the 120 payments, it is compulsory that payment is made for a complete scheduled installment total within 15 days of the date it is due. The monthly payments are undertaken in the Direct Loan Program repayment arrangement. This involves a Standard Repayment Plan that has a ten year period of repayment and other Direct Programs. In addition, other programs should have payments which are almost similar to the monthly payment that would be required in the Standard Repayment Plan. The program with the ten year repayment phase might be counted to the needed 120 payments.

To qualify for loan forgiveness, a person must work or serve in a Public Service Organization. The organization can be Government based, non-profit agency that is exempted from tax under the Internal Revenue Code and a private but non-profit association (excluding labor unions and political parties)  Such jobs are; public safety, emergency management, military, law enforcement, public interest law services and public services within libraries. The health sector jobs include; nursing practitioners, clinical nurses, health practitioners and nurses. In education, employment involves early childhood development, kindergarten and services that are school-based (Griswold).

The school loan forgiveness program has numerous advantages. PSLF Program has a variety of options for repayment. A person can choose to make an extension on the repayment plan. This is done by lowering the rates per month and increasing the interest. In addition, there is a graduate plan where monthly payments start at lower amounts and add over time. There is also the choice of an income-based repayment that considers the level of income of an individual and family size. These elements are used to asses a persons ability to repay the loan. Though the interest rates may be high, the payment rates have a significant impact in reducing the debt.

The loan forgiveness program is beneficial to an individual’s career. The program allows a person to work in their profession with convenience of debt forgiveness after ten years. Through the period, one is able to improve their skills and expertise. Opportunities for promotion are many. Human service workers who have more federal student debt than their annual earnings can benefit from the plan. Loan consolidation offers some financial assistance such as interest rate reduction and monthly payments. Consolidating loans provides public service workers opportunities to make a single payment to a particular lender for the two loans taken.

Current changes in the law are providing borrowers to lower loan payments to 10% of the flexible income. Loans will also be forgiven within twenty years instead of the previous 25%. These changes will boost the burden of workers in the public sector such as teachers, public defenders, nurses and other workers who have low paying jobs. The manageable money payments within the public sector will reduce the burden of payments by hundreds of dollars. Public sector suffers a shortfall of workers as majority of staff are in the midst of retiring or move to the private sector because of salary capabilities. With the initiation of the program more people are employed in public service (Nichols). Citizens in the country can have easier access social services.

The loan forgiveness program has some limitations. People eligible for the loan should only work in public service. Therefore, if a person works for any firm or organization that is not public or not for profit, they are not entitled. This limits individuals who may want to be under the plan but are working for privately owned companies (Bissonette). Sections of the public find the program unfair. Issues include people working for private companies but work for the greater good of society such as cancer research centers should be allowed in to the plan. Repayment and forgiveness programs also provide workers with suitable solutions from private lenders who have strict conditions and high rates on interest.

The program takes a long time to relieve individuals of their debts. Some people may not be able to work within the stipulated ten years or twenty five years. Some human service workers recommend the working period be reduced. Some students also have payment periods of up to ten years and feel shortchanged because after the ten years there will be no debt forgiveness. Strict conditions within the law specify that the person must work for the specified time and does not consider other factors that may cause an individual unable to work within the set time. The program also lacks clarity as most of human service workers do not understand how the process works (Smith).

In conclusion, the average debt for most graduates is around $80,000. Graduates in the 2011 class are considered among the most indebted citizens in America because of student loans. Loan forgiveness provides an opportunity for these indebted people to work and repay their loans while in public service. The benefits of the program outweigh the disadvantages. However, the loopholes in the plan can be adjusted through establishment of flexible policies. Many people are set to gain from the program.

Work Cited

Bissonnette, Zac. “Why the public service Loan Forgiveness Program is unfair.” Time business & money. July 12 2011. Web. October 31 2012.

Fisanick, Christina. Debt. Detroit: Greenhaven Press, 2010. Print.

Griswold, Alison. “How to do good work that will still pay off tour loans.” Forbes Magazine. July 7 2012. Web. October 31 2012.  

Nichols, Bryan. “Loan forgiveness aims to bolster public service recruitment. “ Maryland Bar Bulletin. March, 2008. Web. October 30 2012.

Smith, Lauren. “Congress Considers Linking Student-Loan Terms to Income.” Chronicle of Higher Education. 53.41 (2007). Print.