The following guest post comes from YNPN Chicago member Melanie Hoekstra and originally appeared on YNPN Chicago's blog. We wanted to share this post as a follow up to guest post earlier in the year from blogger Heather Jarvis about newly released details on the documentation that nonprofit employees need to substantiate their eligibility for the student loan forgiveness program. Melanie does a great overview of how you make the "loan thing" work on a nonprofit salary.
You can also find more information on the public service loan forgiveness program by checking out the list resources Heather has curated.
Paying for Student Loans on a Nonprofit Salary
Can it be done? Can you eat more than ramen noodles for the next decade and still work at the non-profit job you love while paying back your hefty student loans? YES. Enter the College Cost Reduction and Access Act (CCRAA). Under the CCRAA, you can: (1) pay your federal loans at a much lower monthly amount under the Income-Based repayment plan, and (2) have those federal loans forgiven after 120 payments under the Public Service Loan Forgiveness (PSLF) program for people who work for 501(c)(3)s and government agencies (10 full-time years, not necessarily consecutively) . Seriously, this two-step process is an incredible option for anyone working in the non-profit world or for the government.
Lowering Your Monthly Loan Payments If you’re still in school (undergrad or graduate!), the first thing you’ll want to do is make sure that as many of your loans as possible are from the federal government. These are generally called “Direct Loans” and can cover most to all of what you need to go to school. It’s important to note that CCRAA does not apply to private loans, which will generally require you to pay them back at the terms agreed upon when you started (though there are usually some options for graduated repayment, etc.). Talk to your school’s financial aid department about ensuring that your loans are some form of Direct Loans to remain eligible for the program.
If you are about to start repayment, you need to do two things. First, consolidate all of your eligible loans into one single loan through the Department of Education’s Federal Direct Consolidation Loan. Doing so makes your loan payments much simpler to track, after their consolidated, at least, and it also allows some loans like Perkins that are not eligible for PSLF to be rolled into the consolidated loan and become eligible. Second, during consolidation, be sure to select the Income-Based Repayment plan. IMPORTANT: Do not select the Income-Contingent Repayment plan, as it does not qualify you for loan forgiveness. Income-Based Repayment (IBR) estimates your monthly repayment amount at 15% of your disposable income. You can calculate your payments here.
Qualifying for Public Service Loan Forgiveness Program To qualify for loan forgiveness, you must make 120 payments while you work full-time for a registered 501(c)(3), a government agency, or in a “public service” position, which includes public health and public education jobs, military, and legal aid positions. You don’t need to make the payments consecutively, so you could switch sectors and then come back, but be aware that this reduces the benefits of both programs. More specifics, along with lots of other details, can be found here and answers to frequently asked questions can be found here.
Other Noteworthy Items Are those who started working for a non-profit or in a public service job before this law took effect eligible? It depends on the state of your loans now. If you consolidated your federal loans, then you can switch to the IBR plan, which will almost definitely lower your monthly payments. Any payments you made (under any repayment plan) while working full-time at a public service job since October 1, 2007 will count toward PSFL.
It’s also important to know that even if you do not qualify for the Public Service Loan Forgiveness program but instead only have a relatively low-paying job in non-qualifying sector (e.g. private sector), you can still get your loans forgiven. It takes 25 years and you have to be on either Income-Based Repayment or Income-Contingent Repayment, but it can be done.
There’s a lot of information about the College Cost Reduction and Access Act out there, but many people don’t know about it – so tell your friends! And find out more information here and here.
Melanie Hoekstra is the Operations Manager at The Plant, a vertical farm and food-business incubator. She is a graduate of Chicago-Kent College of Law and the University of Michigan. She cooks, reads, bikes, and sees her friends whenever she can.
This post comes to us from student loan expert Heather Jarvis. YNPNers around the country have been relying on her eagle eye for advice and updates on the federal government's student loan forgiveness program (which many nonprofit employees qualify for). We are grateful for her latest blog post- info that many of us have been waiting for! You can also find more information on the public service loan forgiveness program by checking out the list resources Heather has curated.
3 New Documents Everyone in Government and Nonprofit Services Needs Right Now
The Department of Education today released the long awaited Employment Certification for Public Service Loan Forgiveness form! Woot!
Folks in government and 501(c)(3) nonprofit service* can finally get that warm and fuzzy feeling that will come from the government saying “yes” your employment qualifies and “yes” you made x number of payments that count towards forgiveness.
Why This Is Important
Student loan borrowers can earn Public Service Loan Forgiveness by making 120 of the right kind of payments, on the right kind of loans, while working in the right kind of job*. But you also have to PROVE that you met all the requirements of the program. That’s where the paperwork comes in.
Nothing about Public Service Loan Forgiveness is automatic. Not one thing. Student loan borrowers will need to jump through a whole lot of hoops to establish that they have earned the forgiveness. Flaming hoops probably. But student loan borrowers aren’t afraid of a little paperwork, right? We say Bring. It. On.
If you think you are working for a qualifying public service employer and you’re working toward Public Service Loan Forgiveness, YOU NEED THIS FORM. You love this form. This form is your BFF.
Run, don’t walk, and download these documents:
Instructions for Completing the Employment Certification for Public Service Loan Forgiveness form
Employment Certification for Public Service Loan Forgiveness form
Department of Education’s Letter to Borrowers about the process
Read it all. Fill out your part and take the documents to your work. Figure out who is authorized to sign for your employer and ask that person to fill out their part fully and carefully. Make sure everything is totally filled in and then submit the form to:
P.O. Box 69184
Harrisburg, PA 17106-9184
Or Fax to 717-720-1628
Do this every year and whenever you change jobs. Keep copies of your W-2s and paystubs, and whatever else you think documents your employment or supports your employer's eligibility. Keep this stuff until the end of time. Forever. And then keep it some more. I recommend the paranoid method of record keeping in this case.
For help with the form call FedLoan Servicing: 855-265-4038
More from the Department of Education: www.studentaid.ed.gov/publicservice
More details and opportunity to ask Heather during upcoming Free Public Service Loan Forgiveness Webinars.
*Note for all clergy, rabbis, priests, imams, preachers, pastors, ayatollahs, and others: New language included in these forms indicates the Department of Education is taking the position that an individual borrower’s employment does not qualify when the borrower is employed in a nonprofit organization and their job duties are related to religious instruction, worship services, or any form of proselytizing. Heather will post more analysis and information about this recent development ASAP.