Student loan forgiveness sounds like a great idea. Help your community, earn some repayment assistance, and put the money toward your debt.
But even though it sounds like a good plan, it’s hard to get excited about it. For those with potentially high-paying professions, the idea of giving up years of higher income for a chance at student loan forgiveness isn’t always appealing.
Would you give up a high salary for student loan forgiveness?
Student loan forgiveness program requirements often revolve around working in an underserved community. Though 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 net if you take a higher-paying private sector job, even with loan forgiveness,” said Mark Kantrowitz, publisher of Cappex, a free website about college admissions and financial aid.
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, he added. It’s another thing altogether to give up a much higher salary for a full decade. “It might not make sense for a lawyer,” he continued, “but some doctors can gain a benefit, depending on their situations.”
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. You might qualify for income-based repayment and work toward forgiveness,” Kantrowitz said. “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.”
Other student loan forgiveness programs
Kantrowitz pointed to the current legal case put forth by the American Bar Association. He said the main problem with long-term programs like PSLF is that you can wait a decade for forgiveness just for the government to tell you they’ve changed the game.
“You have to trust it won’t change in 10 years after you’ve already given up all that money in potential salary,” he said.
Instead, Kantrowitz suggested looking into programs with shorter service commitments. You might not get as much loan forgiveness this way. But you can still get money to pay down student loan debts, feel good about your work, and move on to a higher salary.
“Earn education awards through AmeriCorps, VISTA, or PeaceCorps to pay down loans,” Kantrowitz said. “It’s money that goes toward your student loans … after a smaller time commitment.”
Kantrowitz pointed out that programs like PSLF make it affordable to make that choice. “Public Service Loan Forgiveness removes debt as a disincentive to stick with these jobs, but it doesn’t offer an incentive,” he said.
But those who seek forgiveness might not be willing to stay in that field for 10 years. “If you can get something that will knock tens of thousands of dollars off your loans without waiting 10 years before you start making much more, that can be a better choice,” Kantrowitz said.
For medical professionals especially, there are many more options for student loan forgiveness. If you’re not interested in qualifying for PSLF, check out the following:
- 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 $35,000 of student loan forgiveness per year.
- Faculty Loan Repayment Program (FLRP): For teaching full- or part-time at an accredited health school, you can get up to $40,000 toward your student loans.
Kantrowitz also suggested checking into state programs. Many states offer their own medical and legal student loan forgiveness grants and programs. These programs are more likely to have shorter service terms. Start your search with this full list of forgiveness and assistance programs.
Student loan forgiveness is more about passion
Trading a big salary for student loan forgiveness is a decision that’s made based on your long-term goals and lifestyle preferences.
“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.”
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 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 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% 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 Month/Day/Year, 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 08/21/18. 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@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 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.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 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.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.57% – 6.97%1||Undergrad & Graduate|
|2.57% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|