Want to explore the world and make a difference, but feel weighed down by your student loans? Like others in your situation, you may have considered joining the Peace Corps.
As with many aspiring volunteers, you’ve probably asked yourself: What will I do with my loans during the Peace Corps? Does Peace Corps loan forgiveness exist?
Keep reading to learn about your options for managing your student loans during — and after — your time in the Peace Corps.
Is Peace Corps loan forgiveness possible?
All right, here’s the bad news: Peace Corps student loan forgiveness is technically not a thing. So serving in the Peace Corps won’t make your loans disappear.
That being said, the Peace Corps can help reduce your student loan burden — and start you on the path towards forgiveness.
Here are two strategies, which you can pursue separately or together.
Option 1: Public Service Loan Forgiveness
If you plan to work in public service after the Peace Corps, the easiest option is to pursue Public Service Loan Forgiveness (PSLF).
This program forgives the federal loans of public servants after they make 120 monthly payments. Since your 27 months in the Peace Corps will count towards this, it’s a good way to get started.
However, only federal Direct Loans are eligible for PSLF. So if you have other federal loans, you can consolidate them into one Direct Loan to qualify. Just don’t consolidate Federal Perkins loans — with those, there’s a different path to forgiveness.
Not sure which loans you have? Click here to find out.
Option 2: Federal Perkins loans forgiveness
According to the office of Federal Student Aid, “A Perkins borrower may receive partial cancellation of interest and principal for each 12-month period of Peace Corps service for up to four years.”
More specifically, schools must cancel “15 percent of the original principal loan amount — plus any interest that accrued during the year — for each of the first and second 12-month periods of service.”
That amount jumps to 20 percent for the third and fourth years of service — meaning you could have 70 percent of your Federal Perkins loans forgiven by serving two stints in the Peace Corps.
If you want to go this route, don’t consolidate your Federal Perkins loans; that will make them ineligible for this forgiveness program.
As for private loans, options vary depending on your servicer. You can probably apply for deferment — but note you’ll still accrue interest during this period, so it might not be worth it.
How do you qualify for Peace Corps loan forgiveness?
As explained above, Peace Corps student loan forgiveness doesn’t exist on its own, but can be partially — or fully — accomplished through the strategic use of other programs.
For two sample scenarios that compare the different repayment tracks, check out this helpful explainer from the office of Federal Student Aid.
Below, we’ve included four steps you can take towards PSLF. But before following this plan, read the examples above and figure out what makes the most sense for you.
1. Sign up for an income-driven repayment plan
Just like they sound, income-driven repayment plans calculate your monthly payments based on your income. Which, if you’re not earning any money, is a good thing.
“For recent grads, Pay As You Earn (PAYE) is the best plan,” reported the Consumer Financial Protection Bureau (CFPB). “Income-Based Repayment (IBR) is best for older loans.”
Click here to read more about all your income-driven repayment options.
Once you enroll in one of these plans, most Peace Corps volunteers’ monthly “payments” will be $0, according to the CFPB. Here’s the cool part: Even if your payment is $0, it’ll still count towards the 120 months needed for PSLF.
Alternatively, you can sign up for an economic hardship deferment, but the office of Federal Student Aid recommends income-driven repayment for most people.
2. Certify your employment
If you want to apply for PSLF down the road, then you need to get your paperwork in order.
The first step is to certify that your employer is in the public sector. The Peace Corps can help you; just email firstname.lastname@example.org to get started.
Then, each year following, fill out the Employer Certification form. This is “the best way to keep your payment low and check to make sure you stay on track for loan forgiveness,” according to the CFPB.
3. Use your transition payment for your loans
When you’ve finished your service, the Peace Corps gives you more than $8,000 to help you transition back to regular life.
Although it’s not earmarked for education, you could set it aside to pay your monthly student loan bills in the years to come.
Or, you could use it to pay a lump sum on your loans — but that doesn’t make sense if you eventually hope to have your loans forgiven.
If, for some reason, you decide to go that route, heed this warning from the office of Federal Student Aid:
If you use your Peace Corps transition payment to make PSLF-qualifying payments, tell your loan servicer that your payment is not intended to cover future installments, or it may affect your ability to make qualifying payments in the future.
4. Remain in public service
If you want to continue down the path to PSLF, you’ll need to work in public service — and make monthly payments — for nearly eight years after completing the Peace Corps.
For the most part, that means working at a non-profit organization or government agency. You can take time off to work in the private sector if you wish; just be aware any payments made during that time won’t count towards the 120 needed to have your loans forgiven.
If you’ve always dreamed of joining the Peace Corps, student loans don’t need to stand in your way.
There might not be a direct path to Peace Corps loan forgiveness, but using the programs above can help you serve our world — without worrying too much about your loans.
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