Ways to avoid paying for student loans with loan repayment and forgiveness

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Ways to avoid paying for student loans with loan repayment and forgiveness
By Matt Doran, Contributor

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Published: Thursday, March 4, 2010
Updated: Thursday, March 4, 2010

Kallie Larsen / Staff Photographer
For those who will soon graduate, the real world is an impending dark cloud looming on the horizon. Not only will it block out the sun of sleeping in late and beer pong, it will also be raining student loan bills.

Students who have secured future employment can relax. But for most, job prospects are a serious concern, complicated by imminent student loan payments. The traditional path of finding a “9-to-5” job and slowly paying back student loans is an option, but there are alternatives to reducing the amount owed and decrease the burden for recent graduates.

Loan forgiveness and repayment programs
There are two options: student loan forgiveness programs and student loan repayment programs. Forgiveness programs offer graduates the opportunity to have federal Stafford or Perkins loans erased. Under certain circumstances, the federal government cancels all or part of a student’s loan in exchange for a term of service. This option can apply to those directly working for the government or with a private employer in the public service sector. Once employed, graduates can ask if they qualify.

Repayment programs offer funds that can be used toward any kind of loan. Within these programs, graduates can either receive funds as part of their paycheck to pay back their loan or their employer can make payments directly to the lender. But just because an employer participates in a repayment program does not mean all employees are automatically enrolled. Employees are chosen at the discretion of the employer.

There are hundreds of forgiveness and repayment programs available to recent graduates, and many times, specific fields will have directories of them.

For teachers and educators
There are and almost endless number of programs for teachers. For education majors and anyone interested in teaching, the American Federation of Teachers offers forgiveness and repayment programs. Students considering teaching can consult the federation’s Web site for a state-by-state directory of programs. Students who wish to teach in a designated low-income school district can have their Perkins loan canceled. Interested students can contact the district to find out about participating in the program.

There is also the Assumption Program of Loans for Education program in California, where students agree to teach in exchange for substantial loan forgiveness. All of these programs are aimed at helping young educators pay back their student loans so they can focus on teaching.

The Peace Corps and AmeriCorps
For students who are interested in teaching and have a passion for traveling, the Peace Corps is an opportunity to combine both and forgive student loans in the process. The Peace Corps offers a variety of vocations, not only teaching, for its volunteers to pursue, including business development, information technology and food security. Volunteering with the Peace Corps is an excellent way to add something unique to a résumé, as well as travel and experience a new culture while decreasing student debt.

If students don’t want to cross international borders with the Peace Corps, AmeriCorps offers something closer to home, or at least on U.S. soil. AmeriCorps volunteers perform many of the same duties as Peace Corps volunteers, but strictly in the service of fellow Americans. AmeriCorps was integral in the rebuilding of New Orleans and the Gulf of Mexico area post-Hurricane Katrina, and volunteers can choose to work in disaster relief areas. AmeriCorps has different programs such as Volunteers in Service To America and National Civilian Community Corps within the organization that cater to different career paths, and all offer student loan forgiveness.

The National Guard
For those looking for a more intense, physically demanding experience, the Army National Guard offers significant loan forgiveness for students who enlist. According to the National Guard’s Web site, students can receive as much as $65,000 for their service. Because this is only the National Guard and not full-time active service, graduates may also have a full-time job in addition to their obligation to the National Guard. State National Guard systems also offer to forgive loans. The California National Guard offers 100 percent repayment and is currently accepting applications from all undergraduate levels.

For nurses and health care workers
Joining the armed forces may be too extreme for some. Pacifistic students interested in service and pursuing a career in the health sector can consider the National Health Service Corps, which offers as salary of nearly $50,000 in repayment funds in exchange for two years of service according to its Web site. Similarly, the Nursing Education Loan Repayment Program offers nearly 60 percent of loan repayment for two years of service.
California residents interested in health care can contact the Office of Statewide Health Planning and Development at www.oshpd.ca.gov to learn about what other programs may be available.

Of course, there’s a catch, of sorts. Repayment programs, not forgiveness, can be considered income by the Internal Revenue Service and subject to income tax, though this is not always the case, because many of these programs are considered tax-exempt. The benefits of decreasing a loan expediently far outweigh paying a comparable pittance in income tax.

The Office of Financial Aid and Scholarships provides students with a plethora of information for obtaining funding for college. Unfortunately, the office does not provide much support for recent graduates looking for alternative means to repay student loans. To learn about different loan forgiveness and repayment options, visit www.finaid.org.