Student loan forgiveness for nonprofit pros

As a nonprofit employee, one of the greatest and little-known benefits available to you is the Public Service Loan Forgiveness (PSLF) program. PSLF provides complete loan forgiveness after 120 consecutive monthly payments, and allows you to avoid paying taxes on the debt forgiven.

To receive forgiveness at the 10-year mark, you must work for a 501(c)(3) organization (or one of the other organizations listed below) at least 30 hours per week, make full payments on time, and be enrolled in an income-driven repayment plan.

Public Service Loan Forgiveness provides complete loan forgiveness after 120 consecutive monthly payments, and allows you to avoid paying taxes on the debt forgiven.

Qualifying employment for the PSLF Program is not about the specific job that you do for your employer. Rather, it is about who your employer is. Employment with the following types of organizations qualifies for PSLF:

• Government organizations at any level (federal, state, local, or tribal)
• Nonprofit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
• Nonprofit organizations that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code, if their primary purpose is to provide certain types of qualifying public services

In addition, serving as a full-time AmeriCorps or Peace Corps volunteer also counts as qualifying public service.

Although the eligibility rules appear simple, the devil is in the details. You will need to be prepared to spend a significant amount of time and effort ensuring you remain on track (read New York Times articles “Public Servants Do Get Loan Forgiveness: Meet one of the first,” and  “Panicked Borrowers and the Education Department’s Unsettling Silence”). Your diligence will pay off, however, as you can save tens and even hundreds of thousands of dollars after ten years.

The Trump twist

President Trump’s proposed 2019 budget calls for eliminating the Public Service Loan Forgiveness Program entirely, which would mean that loan forgiveness for nonprofit employees disappears; instead, everyone would be eligible for a (slightly less forgiving) loan forgiveness program. Here is a comparison of the two current plans and the proposed plan which would replace them both:

Current Student Loan Forgiveness Program, via Pay As You Earn and Revised Pay As You Earn:
1. Caps monthly payments at 10% of the borrower’s discretionary income.
2. Offers complete loan forgiveness after 20 years of payments.

Current Public Service Loan Forgiveness Program:
1. Caps monthly payments at 10% of the borrower’s discretionary income.
2. Offers complete loan forgiveness after 10 years of payments and “public service” employment (as defined above).

President Trump’s Proposed Loan Forgiveness Program:
1. Caps monthly payments at 12.5% of the borrower’s discretionary income.
2. Offers complete loan forgiveness after 15 years of payments have been made.
3. Eliminates consideration of “public service” employment.

Other forgiveness plans

It’s also worth keeping in mind that, currently, the federal government offers significant loan forgiveness benefits to anyone who:

• Works as a nurse (via PSLF, the Nurse Corps Loan Forgiveness Program, or the Perkins Loan Forgiveness for Licensed Medical Technicians Program)
• Works as a doctor or dentist (NHSC Students to Service Loan Repayment Program)
• Works as a teacher (via PSLF, Federal TEACH Grants, Perkins Loan Forgiveness, or Stafford Loan Forgiveness Programs)
• Works for the government (via the Government Employee Loan Forgiveness Program)
• Serves in the military (via Military Student Loan Forgiveness Programs)
• Is permanently disabled (via the Total and Permanent Disability Discharge Program)
• Holds debt from a school that closed before they could finish (via the Closed School Discharge Program)
• Can prove that they were lied to, promised something they did not receive, deceived, or illegally taken advantage of (via the Borrower’s Defense Against Repayment Program)

Adapted from this article, this article, and this article by Forget Student Loan Debt; this article by the Office of Federal Student Aid; and this article by Student Debt Relief

FOR MORE INSIGHT

On Public Service Loan Forgiveness
2018 Guide to Nonprofit Student Loan Forgiveness (Forget Student Loan Debt)

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