Show Reducing student loan debt Nancy Trejos The Washington Post When hen she graduates from Columbia University next year with a masters master's degree in public health Erin Wheeler is hoping to get a job in international reproductive health The year old Washington native has always wanted to work in public service She spent two years in the Peace Corps in Senegal and plans to spend next summer working on an early childhood development project in South Africa But public service doesn't pay much and her year two-year program at Columbia costs about a year with living expenses She has a scholarship from Columbia that covers just year and has taken out subsidized and unsubsidized federal Stafford Loans and a graduate PLUS loan to pay for the rest All three loans are federally insured is not realistic for someone coming out making or a year year she said while waiting for a latte at a local cafe She worries that she will spend years paying back her student loans and not have money left over to put away in an IRA or 40 lk k You spend your whole life paying back thousands of dollars she said Wheeler is wondering what she can do to ease the pain of being in debt Would she qualify for a public service loan forgiveness program I I Is there anything else she can do to handle the debt The good news is that in 2007 Congress recognized that there were so many students in Wheelers Wheeler's position that it passed the College Cost Reduction and Access Act There were two programs established by this act that Wheeler should look into two advisers I contacted said The first is the income- income based repayment plan which allows lower-income lower graduates with a lot of debt to reduce their monthly payments Depending on a graduates graduate's income and level of debt the program which goes into effect July 1 could limit his or her annual educational loan debt repayment to 15 percent of discretionary income said Peter vice chairman of the College Savings Foundation a Washington-based Washington advocacy association The second is the public service loan forgiveness plan in which the federal government will forgive the remaining debt o of f borrowers who make loan payments while working full time in public- public service jobs The graduate must have a Federal Direct t Stafford PLUS graduate e PLUS or Federal Direct t Consolidation loan Depending on the level o of f debt Wheeler ends up with wit h and how much she repays s over 10 years s said she could end up with wit h about of her debt deb t forgiven Typically it is projected d borrower that a performs public servi service e under this program will repay only only about about one-fourth one to one-half one as much money as a borrower who does not he said He also pointed out that public service is broadly defined and includes any government and nonprofit organization job A p public health job would qualify he and other advisers said But there is one caveat The amount forgiven will probably be treated as taxable income which could lead to a whopping federal income tax bill after 10 years Presumably though the savings will outweigh the tax liability Congress could end up excluding such loan forgiveness from taxable income by the time it becomes an issue the advisers said Scott Prince a student loan expert who runs Boston-based Boston Prince Consulting Services also advised Wheeler and other students in her position to look beyond these two programs Some states such as Massachusetts offer loan forgiveness programs so sobe sobe sobe be sure to contact your state higher education organization Also check checkwith checkwith with your school and employer about programs they have available he said In addition graduates in In certain professions such as teaching and child childcare childcare care could qualify for other federal student loan forgiveness Prince said |