Now that you’re done with college, it’s time to find a J-O-B. But you don’t want just any job. You want to make a difference in the lives of others. You want more than just a paycheck – something that fills you with meaning and purpose.
If that sounds like you, you’re likely drawn to the nonprofit world. Nonprofits can provide a wide range of assistance to underserved communities.
The only problem is that while nonprofits seem like the perfect fit, your student loan balance is a heavy ball and chain – one that a public service salary can’t support. Luckily, a career in the nonprofit sector doesn’t have to mean being in debt forever.
Find out how you can pay back your federal student loans on a nonprofit salary and continue to thrive.
Nonprofit perk: Public Service Loan Forgiveness
Working in the nonprofit sector offers a unique benefit to student loan borrowers. Under the Public Service Loan Forgiveness program, student loan borrowers who work full-time at a nonprofit may be eligible to get their loans completely forgiven after serving for 10 years (yes, really) and making 120 consistent payments.
In order to qualify, student loan borrowers must work at a nonprofit with a 501(c)(3) designation, a government organization, or another qualifying public service organization. You’ll also need to have federal Direct Loans (though other types of loans may be eligible for PSLF if consolidated under the Direct Consolidation Loan program). Unfortunately, there is no such program for private student loans.
Opting for an income-driven repayment plan is the best way to qualify for forgiveness.The Standard Repayment Plan is designed to have your loans paid off in 10 years. By opting for income-driven repayment, your loan payments are capped according to your income (which likely isn’t very high at a nonprofit) making it more likely you’ll have a balance left over to be forgiven.
Mark Kantrowitz, publisher of Cappex.com, a free website that connects students with colleges and scholarships, advised student loan borrowers working in the nonprofit field to opt for the Pay As You Earn (PAYE) plan.
“If you are eligible for the Pay As You Earn repayment plan, choose it, as it will maximize the amount of forgiveness,” he said.
But what if you don’t qualify?
“Consider Income-Based Repayment (IBR) and the Revised Pay As You Earn (REPAYE) repayment plan. One of these will yield the lowest monthly payment. Generally, IBR will be better for borrowers who get married or who expect a big increase in income during the repayment term,” Kantrowitz recommended.
Typically, you are eligible for Pay As You Earn and Income-Based Repayment if your student loan balance is close to or exceeds your salary. Any Direct Loan borrower is eligible for the REPAYE plan.
However, Kantrowitz added a word of warning for choosing an income-driven plan specifically for the Public Service Loan Forgiveness program.
He recommended avoiding the Income-Contingent Repayment plan completely, as it can lead to higher monthly payments and less debt to forgive.
In addition, he said borrowers should “be cautious about selecting the Revised Pay As You Earn Repayment (REPAYE) plan, as it includes several features that are designed to reduce the cost to the federal government.”
One downside of the REPAYE plan is that it does not cap the monthly payment amount, so if your income grows significantly, you could end up paying more per month than on the Standard Repayment Plan. In addition, married borrowers may get the short end of the stick with this repayment plan, as it considers combined income for married couples, even if you file separate tax returns.
So before deciding which income-driven plan to sign-up for, think carefully about potential consequences.
How to apply for Public Service Loan Forgiveness
New grads working in the nonprofit sector can take the following steps to apply for Public Service Loan Forgiveness:
1. Contact your loan servicer and sign up for an income-driven plan.
2. Fill out the Employment Certification for Public Service Loan Forgiveness form each year and submit it to FedLoan Servicing.*
3. After working in the nonprofit sector for 10 years and making 120 payments, submit the PSLF application in order to receive loan forgiveness. The application is currently being developed and will be available before October 2017.
*Note: step number two above is crucial. FedLoan Servicing will let you know whether or not your employment qualifies for the program. If it doesn’t, better to find that out sooner rather than later, right? Not being eligible for student loan forgiveness is NOT the kind of surprise you want.
If your employment does qualify and you complete the 10-year term, you can get your remaining student loans forgiven. The best part? Under this program, your loans are not considered taxable income, so you won’t be hit with a hefty tax bill.
Pros and cons of pursuing a career in nonprofit
Working in the nonprofit field can be extremely rewarding. Some of the most meaningful moments in my life have come from working at nonprofits. It’s definitely a unique experience that varies a lot from any corporate environment.
The pay is low and the work isn’t necessarily glamorous, but the impact on communities can be huge. At the end of the day, you can feel good about what you are doing.
However, I will also say that nonprofit burnout is real. Nonprofit work is often taxing, requiring long hours with low pay. Depending on the type of community you serve, you might get a front row view of wild injustices and sad situations that can take a toll on your emotional health.
At some point, you may feel bound by the limits of your work — and at other points, wonder if you will still have a job when grant season is over.
Because of this, it may be difficult to commit to the nonprofit sector for 10 years in order to achieve student loan forgiveness.
According to the 2015 Nonprofit Employment Practices Survey Results, nonprofits reported that the biggest hurdle to employee retention is the inability to pay competitively (27 percent). Another big reason: high workloads and limited staff resources (19 percent).
If you can commit to 10 years of service at a nonprofit and get your loans forgiven, that is a great option. But if you find yourself unable or unwilling to deal with the low pay and high demands of nonprofit work, know there are other options:
- Become a consultant
- Work in the private sector and command a higher salary
- Work at a startup, with similar idealistic visions as nonprofits
- Start your own business
There are options out there and not all jobs outside of the nonprofit realm are corporate. You can still make a difference and can even obtain a higher salary to pay off your loans.
If you’re earning good money, you may be able to knock out your student loan debt in a matter of a few years instead of pursuing loan forgiveness.
New grads looking to pursue a career in the nonprofit world have options to get their federal student loans forgiven and should take advantage of the Public Service Loan Forgiveness program. It can help lessen the burden of student loan debt and make your current payments more manageable.
And if you can’t commit to 10 years of service to the nonprofit world, you still have options. It’s important to be sure you’re ready for a decade of public service before pursuing this type of loan forgiveness.
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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 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% 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.
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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.
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