I'm Half Way to $100K Loan Forgiveness: I’m in the 1%!

I'm Half Way to $100K Loan Forgiveness: I’m in the 1%!

You can imagine my sheer panic last month when I poured my morning coffee and read NPR’s headline, “Data Shows 99% Of Applicants For A Student Loan Forgiveness Program Were Denied.” Well, shit.

A notice arrived in my inbox stating I made 60 out of a total of 120 payments toward my student loan debt. As a teacher I qualify for the Public Service Loan Forgiveness, a government program passed by President Bush in efforts to support employees of non-profits who carry student loan debt. I enrolled five years ago.

Halfway into this 10-year loan forgiveness program I’m feeling both a sense of relief for how far I’ve come, mixed with the dread of another five years of indentured servitude. Don’t get me wrong, I love my job, but I do live under the thumb of the government if I want $100,000 of my debt to dissolve. If the industrious Mr. G&G had it his way, we would have thrown every penny at this loan - and many who qualify for forgiveness have chosen to do just that.

So here I am, five years from freedom, and that headline deflated any pat on the back I was going to give myself. I called FedLoan Servicing, whose representatives have been notoriously unhelpful, and was pleasantly met on the other end of the line by a woman who:

A. answered my question

B. had a pleasant tone

C. walked me through each criteria for PSLF and why I meet each one.

Maybe this NPR exposé on the shortcomings of the program actually incited positive change? Who knows, but for the first time in my life, I was told, “You’re in the 1%.” This of course referred to the small percentage of applicants who actually qualify for the program. The requirements might seem puzzling, but I just happen to be the perfect fit. To qualify applicants must:

  1. Be employed full-time at a non-profit

  2. Consolidate loans into a Direct Loan at a fixed 6.2% interest rate

  3. Be enrolled in a qualifying payment program (i.e. income-based, which lowers my monthly payment from roughly $800 to $90)

  4. Make 120 on-time payments, these don’t have to be consecutive

  5. Fill out and submit employer-verification form each year

Of 29,000 applications received and processed by FedLoan Servicing, only 289 were approved. One third, roughly 9,500, were denied due to missing paperwork (i.e. employer-verification form), but most were rejected because they did not meet one of the criteria (1-4) above. The problem lies in the fact that the ‘servicers,’ sub-contractors for the Department of Education, did not inform the applicants at any point in the last 10 years that they did not qualify. It’s tough to commit to a noble (and poorly paid) life in public service to be told after a decade, “sorry, not sorry.”

Alas, I’m sticking with it. My justification is this:

I am confident I qualify. I am employed by a non-profit and submit my verification form each year. I have consolidated into Direct Loans and make on-time monthly payments through the income-based repayment program.

Let’s say I end up paying my loan in full at some point in the future, after accumulating close to twenty years of interest. My loans are locked in at a 6.2% interest rate. For the past five years I’ve redirected monthly payments I could have made into monthly investments, which, over an average of 10 years, will likely yield a growth of 7%. So at the end of the ten years if I had to pay $100,000, I could pull it out of my investments and would be flush (or better off) with when I began ten years before.

In life there are trade offs. I’ve patch-worked a living that is wholly unconventional compared to friends with 9-5 jobs in the private sector. Would you work a low-wage job you love that qualifies for loan forgiveness, or triple your earnings working at a for-profit business? Would you take on debt for 10 years, knowing (with some certainty) it will disappear if you walk the line? Not everyone may agree with my plan, but hey, at least I’ve got one. I’m 33. We’ll see how it goes, stay tuned.

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