Note that the situation for student loans has changed due to the impact of the coronavirus outbreak and relief efforts from the government, student loan lenders and others. Check out our Student Loan Hero Coronavirus Information Center for additional news and details.
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While student loan forgiveness programs can wipe away your debt, they might require years of service in a low-paying profession. If you’re sacrificing your earning potential to meet a program’s requirements, is student loan forgiveness worth it?
The answer all depends on your professional and financial goals. And to get that answer, let’s ask the following questions:
- Is student loan forgiveness worth it?
- Are there forgiveness programs with shorter time commitments?
- Which is more important, PSLF or passion?
Student loan forgiveness program requirements often revolve around working in underserved communities. And although these jobs help those who need it most, they often offer a much lower salary than workers could find elsewhere.
For example, instead of earning $150,000 to $300,000 a year as a doctor or lawyer, you might only earn $50,000 to $60,000 in a job that qualifies for loan forgiveness. That’s a lot of salary to give up.
“In general, you’ll make more money if you take a higher-paying private sector job, even with loan forgiveness,” said Mark Kantrowitz, publisher and VP of research at SavingforCollege.com.
And when you consider the Public Service Loan Forgiveness (PSLF) program, the sacrifice becomes even greater.
“It’s a 10-year commitment, and it’s all or nothing,” Kantrowitz pointed out. “If you stop pursuing forgiveness at year nine, you’re not getting anything.”
It’s one thing to give up all those earnings for three or four years, but it’s another thing altogether to give up a much higher salary for a full decade. Whether or not this commitment is worth it, Kantrowitz noted, could depend on your field.
“It might not make sense for a lawyer, but some doctors can gain a benefit, depending on their situations,” Kantrowitz said.
One of the realities of medical school is that once you’ve graduated, you must still complete a residency.
“You’re earning a salary, but it’s $50,000 or $60,000 a year,” Kantrowitz said. “You might qualify for income-based repayment and work toward forgiveness. If you’ve been doing your residency and fellowship at a public hospital for several years, it can make sense to keep working at that public hospital for another four or five years to preserve the forgiveness you’ve earned so far.”
In the case of medical students, then, the PSLF program might be worth a few additional years of working at a lower-than-average salary.
While PSLF requires 10 years of service before it pays out, there are other student loan forgiveness programs with shorter service commitments. While they don’t necessarily offer full forgiveness, you can still get partial assistance paying down your student debt.
“Earn education awards through AmeriCorps, VISTA or PeaceCorps to pay down loans,” suggested Kantrowitz. “It’s money that goes toward your student loans … after a smaller time commitment.”
If you’re a medical professional, you can also consider these alternative programs to PSLF:
- National Service Health Corps (NHSC): If you’re willing to practice at an NHSC-approved site for two years, you can receive between $30,000 and $50,000 toward your student loans.
- National Institutes of Health (NIH): If you spend two years involved in certain health research funded by a domestic nonprofit or a government entity, you can get up to $50,000 of student loan forgiveness per year.
- Faculty Loan Repayment Program (FLRP): For teaching full- or part-time at an accredited health school for at least two years, you can get up to $40,000 toward your student loans.
Kantrowitz also suggested checking into state programs. Many states offer their own student loan forgiveness grants and programs, and these programs are more likely to have shorter service terms. Start your search with this full list of forgiveness and assistance programs.
Trading a big salary for student loan forgiveness is a decision that should be made based on your long-term goals and lifestyle preferences, not just your desire to get rid of student debt.
“You don’t take a public service job because you want to get loans forgiven, especially if you choose a high-paying profession,” Kantrowitz said. “You take these jobs because you want to do good for society and you’re willing to sacrifice.”
But while PSLF can make a public service job more affordable, it might not be a good enough reason alone to pursue this career.
“Public Service Loan Forgiveness removes debt as a disincentive to stick with these jobs, but it doesn’t offer an incentive,” Kantrowitz said.
But if you’re already inclined to work in public service, the promise of loan forgiveness could be an enticing perk. If you’re not, you might be better off pursuing a career with higher earning potential.
Then with that higher salary, you could make extra payments on your loans and get out of debt ahead of schedule.
Rebecca Safier contributed to this report.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.89% – 6.66%1||Undergrad & Graduate|
|1.89% – 5.90%2||Undergrad & Graduate|
|2.25% – 6.09%3||Undergrad & Graduate|
|1.99% – 5.34%4||Undergrad & Graduate|
|1.97% – 8.54%5||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of October 1, 2020.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of December 1, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.49% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.34% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of October 26, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 10/26/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 11/13/2020 student loan refinancing rates range from 1.97% to 8.54% Variable APR with AutoPay and 2.95% to 8.77% Fixed APR with AutoPay.