One of the more difficult parts of college has nothing to do with final exams or homework—it’s graduating with a mountain of student loan debt. 60 percent of students have, on average, $17,000 in student loans when they finish school and getting those loans paid back can be an undertaking spanning more than 10 years.
Student loan debt, in fact, is the reason more graduates are putting off buying homes, getting married, starting families, and even just moving out of their parents’ homes.
What if you didn’t have to pay part of your loans back? What if at least some or even all of your loans could get forgiven just based upon where you work after college? Turns out that student loan forgiveness is possible if you work for the right nonprofit organization.
How Does Nonprofit Student Loan Forgiveness Work?
The student loan forgiveness program is called Public Service Loan Forgiveness, or PSLF, and it’s offered by the U.S. Department of Education for federally-backed student loans. If you meet the criteria for forgiveness and have made 10 years of on-time payments, the federal government will wipe out a portion of your loan balance—or take care of the whole thing.
In order to be eligible, you’ll need to meet the following requirements:
- Qualified, full-time employment of 30 or more hours a week, for a government, 501(c)(3) organization, or other group that provides qualifying services.
- Must have a federal Direct Loan/FFEL, as opposed to a federal PLUS loan. Private student loans are not eligible; only certain federal student loans.
- Must be in a qualifying repayment plan.
- Must be making the full amount of the payment due on your monthly statement and doing it on-time.
- Not in school, in your grace period, on deferment, or in forbearance.
Once you’ve made 120 of those qualifying payments, you can have your loan forgiven. The best part is that, unlike most other programs, you don’t have to count the forgiven loan balance as income on your taxes.
Nonprofits to Look at for Student Loan Forgiveness
Two choices are AmeriCorps and the Peace Corps. Both are government nonprofits that qualify for the PSLF program. The downside is that they’re volunteer work, so you’d also need to find a way to make your payments while waiting to qualify for PSLF.
If you went to medical school and are now a doctor, PSLF will forgive your loans if you’re working for a nonprofit medical center such as St. Jude’s Children’s Hospital or even if you’ve joined the military as a medical officer. Newly credentialed residents are encouraged by the Association of American Medical Colleges to ask questions of prospective employers to see if their location would fit the bill for PSLF—before accepting a residency.
Attorneys doing public service for a nonprofit, such as criminal defense in underprivileged communities, may also qualify. Teachers can also have their loans forgiven, depending on the school district they work for.
One creative idea that’s difficult, but possible, is to create your own nonprofit for the purposes of getting PSLF. Your 501(c)(3) will need to employ you during your repayment, and you’ll need to maintain your nonprofit status, but if you are willing to put that work in, you could qualify for PSLF that way. Investors, however, say it’s a lot easier to just go work for one.
Students are advised to apply immediately—even if they haven’t come close to making 120 payments yet. One common mistake is to wait to apply, only to find out none of the payments counted as “qualifying.”
What Are Your Chances of Getting Student Loan Forgiveness From a Nonprofit?
It’s not too difficult to get your loans forgiven if you meet the proper criteria. However, due to law changes being discussed by the current presidential administration, the PSLF program may end in the future. To combat this, students are advised to file the paperwork for it as soon as they get employment with a qualifying nonprofit. It is expected that students already “in the program,” as in they already announced intent and are making qualifying payments, will be grandfathered in, even if the PSLF program is ended.
Potential legislation aside, the program is cut-and-dry; you don’t even need to stay at the same nonprofit for the entire 120 payment period, nor do those payments have to be consecutive. If you work for one nonprofit for two years, then another for eight, you can still qualify.
The key with nonprofit forgiveness is understanding if your employer qualifies, applying early, and keeping track of your qualified payments. If you can do that, you’ll see the remaining balance wiped clean when you reach the end of the 120 payments.