Can it be done? Can you eat more than Ramen noodles for the next decade and still work at the non-profit job you love while paying back your hefty student loans? YES. Enter the College Cost Reduction and Access Act (CCRAA). Under the CCRAA, you can: (1) pay your federal loans at a much lower monthly amount under the Income-Based repayment plan, and (2) have those federal loans forgiven after 120 payments under the Public Service Loan Forgiveness (PSLF) program for people who work for 501(c)(3)s and government agencies (10 full-time years, not necessarily consecutively) . Seriously, this two-step process is an incredible option for anyone working in the non-profit world or for the government.
Lowering Your Monthly Loan Payments
If you’re still in school (undergrad or graduate!), the first thing you’ll want to do is make sure that as many of your loans as possible are from the federal government. These are generally called “Direct Loans” and can cover most to all of what you need to go to school. It’s important to note that CCRAA does not apply to private loans, which will generally require you to pay them back at the terms agreed upon when you started (though there are usually some options for graduated repayment, etc.). Talk to your school’s financial aid department about ensuring that your loans are some form of Direct Loans to remain eligible for the program.
If you are about to start repayment, you need to do two things. First, consolidate all of your eligible loans into one single loan through the Department of Education’s Federal Direct Consolidation Loan. Doing so makes your loan payments much simpler to track, after their consolidated, at least, and it also allows some loans like Perkins that are not eligible for PSLF to be rolled into the consolidated loan and become eligible. Second, during consolidation, be sure to select the Income-Based Repayment plan. IMPORTANT: Do not select the Income-Contingent Repayment plan, as it does not qualify you for loan forgiveness. Income-Based Repayment (IBR) estimates your monthly repayment amount at 15% of your disposable income. You can calculate your payments here.
Qualifying for Public Service Loan Forgiveness Program
To qualify for loan forgiveness, you must make 120 payments while you work full-time for a registered 501(c)(3), a government agency, or in a “public service” position, which includes public health and public education jobs, military, and legal aid positions. You don’t need to make the payments consecutively, so you could switch sectors and then come back, but be aware that this reduces the benefits of both programs. More specifics, along with lots of other details, can be found here and answers to frequently asked questions can be found here.
Other Noteworthy Items
Are those who started working for a non-profit or in a public service job before this law took effect eligible? It depends on the state of your loans now. If you consolidated your federal loans, then you can switch to the IBR plan, which will almost definitely lower your monthly payments. Any payments you made (under any repayment plan) while working full-time at a public service job since October 1, 2007 will count toward PSFL.
It’s also important to know that even if you do not qualify for the Public Service Loan Forgiveness program but instead only have a relatively low-paying job in non-qualifying sector (e.g. private sector), you can still get your loans forgiven. It takes 25 years and you have to be on either Income-Based Repayment or Income-Contingent Repayment, but it can be done.
Melanie Hoekstra is the Operations Manager at The Plant, a vertical farm and food-business incubator. She is a graduate of Chicago-Kent College of Law and the University of Michigan. She cooks, reads, bikes, and sees her friends whenever she can.