Student Loan Forgiveness

Millennials get a lot of grief these days about a lot of things; one of which is debt.  If you are going back to b-school, you are probably a millennial, so you likely have been thinking about your debt load. Wouldn’t it be great if your student loans could be forgiven?  Sound too good to be true?  Read on…

Out of all the millennials who use credit cards, more than half carry a balance every month, which means they are paying interest as well.  If you fall into this category, it’s not all your fault, because younger Americans today are making less on an inflation adjusted basis, thanks to a statistical decrease in real income. As a matter of fact, the average earning for a millennial today is at the lowest level since 1980. Good reason to go back to school so you can raise your income, right?

The last couple of blogs have touched on debt, fellowships and paying off student loans, but what many MBA candidates don’t realize, is that you can actually have your student loans wiped out completely by the US government.  That’s right!  In 2007, Obama passed the PSLF, which allows student loans to be forgiven entirely as long as a few pesky requirements are met.

The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.

Who is a qualified employer?  Generally speaking, any non-profit or public service organization will qualify.  While ten years of non-profit work is a pretty tall order, before you dismiss this idea out of hand, know that many MBA-level non-profit positions come with rather impressive salaries, so a bona-fide career can certainly be created if you go down this road. 

There are no salary limitations on the loan forgiveness, which means you can qualify for forgiveness no matter how much money you make, but you will be required to make income-based payments on your loan. Therein lies the rub, since in many cases, you will come close to paying off your student loans on your own as your income level and subsequent loan payments rise. But anything left after 120 payments is forgiven—not a bad deal, especially if you were planning to work in public service anyway. 

One additional requirement is that you will also need to consolidate and refinance your loan with the Federal government, but this is not an onerous obligation since the Feds generally have the lowest interest rates on the market.    

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