Enter a Career in Public Service and Get Your Student Debt Forgiven
Now is a good time to enter the public service sector. Congress has recently signed into law the College Cost Reduction and Access Act to reduce the cost burden on college students. One of its provisions includes debt forgiveness for students who enter the public service sector and stay there a minimum of ten years.
It can be tough to enter public service, especially if you have an expensive degree in law, politics, or public service related degrees and a mountain of student debt to carry. Public service jobs often are not lucrative, and even students with the best intentions often cannot commit to these jobs for financial reasons. This bill aims to make public service more financially feasible for recent graduates.
The deal is this: the law will repay all federal student loan debt, including interest, that the graduate has left after making payments on the debt for a period of ten years. The catch is that the student must remain in a public service position for the entire ten-year period. The law applies to all public service employees, including lawyers, law enforcement, teachers, emergency services workers, and the military, as well as some employees of nonprofits that provide public health and welfare services.
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|An EMT is one career possibility where part of your student loans would be eligible to be forgiven.
The federal loans that are eligible for repayment include Stafford, PLUS, and federal loans made through the government’s Direct Loan program only. If your loan did not originate from Direct Loans, it doesn’t qualify. If your loans aren’t through Direct Loan, they can be consolidated under the program—although some loans may have more attractive repayment options before consolidation than after.
The general advice is to consolidate your loans under a Federal Direct Loan Consolidation Program as early as possible once you graduate, so you can start paying your balance and qualifying for the tuition payment as soon as possible.
This program provides a conundrum for some employees. If you absolutely know that you will stay in public service, it’s a smart choice to make the smallest payments on your student loan debt each month. This way, you’ll pay the minimum possible until the repayment option kicks in. But if you’re not absolutely sure you’ll stay in public service, you could wind up with more debt when you get out than you had when you came in if you adopt a low monthly payment strategy. The repayment option could trap some employees in public service jobs when they’d rather switch, or it could lead to financial trouble for those who have to leave their jobs unexpectedly.
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Bear in mind that your loan forgiveness may be treated as income under tax law ten years from now—so after ten years, you may be faced with a high tax bill. However, Congress may decide to exclude tax liability for these forgiveness programs sometime in the future—and it’s likely that your benefits under the plan will exceed the costs.
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