Graduating with thousands of dollars of loan debt is a daunting prospect for many American university students. Furthermore, with the cost of higher education rising each year and the availability of jobs for new graduates on the decline, students are borrowing large funds with no guarantee of employment or the ability to pay back their loans after graduation. This can be a disheartening situation, but there are several straightforward options available to assist students in reducing their loan debt.
Income-Based Repayment
For individuals with high debt relative to earnings, monthly loan payments can be reduced and any remaining debt is forgiven after 25 years. See FinAid.org for more information about the program and eligibility.
National or International Service Programs
- Peace Corps: Volunteers may defer repayment of Stafford, Perkins, direct loans, consolidation loans and some commercial loans. There is a partial cancellation benefit for students with Perkins loans (15 to 70% cancellation depending on length of service).
- AmeriCorps: Volunteers receive the Segal Education award ($5,550 for 2011) after a term of service (12 months or pro-rated for part-time service). There are currently 94 American universities that will match the award for their students.
- National Guard: Students who join the Army National Guard may be eligible for up to $10,000 for student loan repayment.
Teaching in Underprivileged Areas
Those who teach full-time in an elementary or secondary school that serves low-income families are eligible for partial Perkins loan forgiveness: 15% for the first and second years of service, 20% for the third and fourth years of service, and 30% for the fifth year of service. The American Federation of Teachers has a database of additional loan forgiveness programs for teachers.
Public Service Professions
Those who enter medical, legal, social work or clinical research fields and practice in underserved areas or non-profit positions may qualify for the Public Service Loan Forgiveness program. The American Association of Medical Colleges also maintains a database of loan forgiveness programs for medical school students. The National Institute of Health offers a loan repayment program for medical researchers.
Other Professions
The main opportunities for loan forgiveness are for those engaged in public service professions or volunteer service; however, the Student Loan Repayment Program allows agencies to pay federally insured student loans on behalf of employees. There are also many programs available for those in the military.
Get Advice
Before making serious decisions about your personal finances, it is important to discuss such matters with a professional or financial adviser. Advice is also available via financial aid counselors at your university or through the Department of Education. Your student loan provider will also be able to provide advice about changing your payment plan or whether you qualify for postponing payments.
Deferment or Forbearance
If you are struggling to make payments on your student loan, you may be eligible for a deferment or forbearance (i.e. postponement of payments for such reasons as economic hardship, return to school or unemployment). Be aware that such agreements do not reduce your loan payment and interest may still accumulate during the period of deferment/forbearance. At any rate, it is important that you take steps to avoid defaulting on your loan (i.e. failing to make a payment for 270 days or more), as this can negatively affect your credit rating and your eligibility for future financial aid.
Erin Connelly - Since 2003 Erin Connelly has been a writer for university, government and nonprofit publications. She has edited submissions for "Nature," ...
Join the Conversation