It irks me to no end that people in public service—social work, public health, government, teaching, public-interest law—are paid a pittance compared to those in, say, marketing. Where are our priorities, people?
However, a recent bill by Congress may make it more financially appealing to go into public service, at least if you are aiming to stick with it for the long haul. Under the new Public Service Loan Forgiveness program, if the borrower works full-time for ten years in such diverse areas such as government, law enforcement, public health, social work, and public education, their remaining debt will be dismissed.
Here’s how it works:
Eligibility.
The borrower must make 120 loan payments (that is, they make monthly payments for ten years). Only payments made on or after October 1, 2007 count toward the required 120 monthly payments. Those currently serving in public service cannot put their past payments towards the debt reduction. Eligible loans include Federal Direct Stafford Loans (Subsidized and Unsubsidized), Federal Direct PLUS Loans, and Federal Direct Consolidation Loans. Loans from independent banks may need to consolidate into Direct Loans.
Repayment Plans.
Currently, most student loan payments are designed to be paid off in ten years. However, those in low paying jobs, like public service, can apply for income-based repayment or income contingent repayment plans, which base monthly payments on adjusted gross income. Philip Schrag, a law professor at Georgetown University, gives this example in his 21-page review of the public service forgiveness program. Say for instance, that a student graduates from school with $200,000 in debt, goes into social work making $42,000 a year, and starts an income-based repayment plan. Her monthly payments might start out around $334 dollars, rising to $466 in her tenth year; much less than the $2,300 she would be paying monthly under a standard ten year repayment plan. During ten years of full time public service, she would repay around $45,000, as opposed to $276,000 under the standard plan. That means that with accumulating interest, she would still owe around $288,400. But, because she was in public service for ten years, the federal government would forgive the entire amount.
