Editor’s note: This is part one of a two-part series on student loan repayment options. Part two covers how to determine if you qualify and should participate in the Public Service Loan Forgiveness Program.
With many job opportunities available at hospitals, schools and other nonprofit institutions for communication sciences and disorders professionals, the Public Service Loan Forgiveness (PSLF) Program offers applicable and helpful loan repayment options. Navigating the qualifying requirements, however, can cause more frustration than learning to insert a flexible fiberoptic endoscopic examination of swallowing scope.
Why it’s awesome
Created as part of a larger congressional act in 2007, PSLF allows qualifying professionals working full-time in public service to get their federal direct student loan balances forgiven after 120 qualifying payments. Keep in mind, it was given life by Congress and they can take it away at any time.
It’s a fantastic program. No matter your balance—even if it’s six figures—you can be rid of your loans after 10 years of making reasonable payments. Turn that frown upside down!
To take advantage of the PSLF, you have to meet criteria in the three categories of employment, loan type and repayment plan.
The two areas to focus on within the employment criteria are full-time and public service.
According to the rules of the PSLF, a public service institution is a government organization at any level, a 501(c)(3) organization, or other not-for-profits providing qualified public service. The two obvious employment candidates for ASHA members are hospitals and schools, as long as they aren’t a for-profit version. While those two are the most abundant options, they aren’t the only ones. Don’t be afraid to get a little wild! For example, if you’re an SLP here in the Phoenix area, working for Arizona Autism United completely qualifies, given the organization’s 501(c)(3) status.
Tip: Look up your employer at 501c3lookup.org
To qualify as full-time under PSLF, you need to average 30 hours a week or meet your employer’s definition of full-time, whichever is greater. If you work for a school, your contract for the school year is considered full-time even though you’re not technically working the full year.
Tip: You don’t need to average 30 hours with a single employer! If you are a PRN employee for 20hrs/week at one hospital and 15hrs/week at another, that should qualify.
Only loans under the Direct Loan program qualify. Those loans are:
- Direct Unsubsidized
- Direct Subsidized
- Direct Plus
- Direct Consolidated
These loans do not qualify:
- Loans made under the Federal Family Education Loan (FFEL) Program
- Federal Perkins
- Private loans
Tip: Loophole! You can make FFEL and Perkins loans eligible by consolidating them into a Direct Consolidated loan. Be very careful, though; consolidating loans can have unintended consequences.
Payments must be made after October 2007, plus fall under one of the income-driven plans to qualify, and leave a possible balance for forgiveness. This leaves you with five options. Each has its own wonky requirements detailed on this student loan cheat sheat.
I call the following options The Terrific Two:
- New Income-Based Repayment (New IBR)
- Pay As You Earn (PAYE)
Why? They’re the best plans and the first ones you should investigate. In addition to the aforementioned loan requirements, your total federal loan balance will need to be within a couple thousand of your annual income or higher. Peruse the graphic to see how payments get calculated for each plan.
If you get rejected by The Terrific Two, try one of the following three options. Each has its own unique issues, but are still worth using with a well thought-out strategy.
- Old Income-Based Repayment (Old IBR)
- Revised Pay As You Earn (REPAYE)
- Income-Contingent Repayment (ICR)
Tip: Many CSD professionals should avoid REPAYE. Learn more about why REPAYE is a sneaky bad option.
Jacob W. Parish, a certified financial planner™ professional, focuses on helping audiologists, SLPs and other young health care professionals navigate financial planning issues. Visit his website, Schooner NextGen, or follow him @SLP_Finance. Securities and Advisory services offered through Geneos Wealth Management, Inc. Member FINRA/SIPC. firstname.lastname@example.org