If you are working for a non-profit organization, you have access to excellent programs to reduce your debt obligations. We focus on three distinguished non-profit debt forgiveness programs in this guide- Public Service Loan Forgiveness, Teacher Loan Forgiveness, and Health Care Loan Repayment. However, our debt specialists can offer more options customized to your needs in a free consultation.
Each program has its requirements, application process, and benefit amount. Before choosing one of them, make sure you get familiar with the details.
1. Public Service Loan Forgiveness
Non-profit debt forgiveness is usually achieved through the Public Service Loan Forgiveness program. This program benefits employees in governmental organizations but also in non-profit organizations. If the borrowers make 120 qualifying payments while working in a non-profit organization, they can achieve 100% debt forgiveness. However, before applying, you need to get familiar with an extensive list of requirements, such as:
- Full-time work in a non-profit organization
- Having only qualifying loans
- Enrolling in Income-driven repayment plans
- Making qualifying payments, etc.
These requirements might sound simple, but they need a special section for a detailed explanation.
Employment Conditions for PSLF
This non-profit debt forgiveness program is flexible when it comes to employment type. Your position does not matter for the program as long as your employer is a non-profit organization that is tax-exempt and regulated through the 501-C-3 Section of the Internal Revenue code. However, if you are not working in such a not-for-profit organization, you can still qualify for forgiveness. In this case, your position will matter. For example, employees in the military, health services, or legal services have a higher chance to get forgiveness even if they do not work in a directly qualifying establishment.
If you are confused by this information, you can contact your employer and ask if the workplace qualifies for this non-profit debt forgiveness program.
Full-time or Part-time Work?
Another flexibility that Public Service Loan Forgiveness brings is about the work type. You can work full-time or part-time, but there is a working hours threshold to be satisfied. Generally, your full-time work cannot be less than 30 hours per week. Of course, you can work more than this amount based on your employer’s request, but you cannot work less even if your employer asks for it.
Besides, if your position is part-time, you can still qualify for non-profit debt forgiveness. However, make sure that you have more than one half-time position so that the total number of working hours makes 30 per week. Keep in mind that some hours, such as worshiping or religious instruction, might not be counted.
Even if you satisfy all work-related requirements for this non-profit debt forgiveness program, your loan type will still matter—only Direct loans matter for this program. Borrowers of Perkins, FFEL, or private loans, you will not qualify for forgiveness. However, you can become eligible with other loans if you consolidate them into a Direct loan.
Keep in mind that your payments before consolidation will not be counted. For example, if you made 100 payments before consolidation, you would start from 0 after consolidating your loans.
Till now, we have discussed conditions for working hours, employment and loans. Besides these, you are required to make 120 qualifying payments. Then, you can apply for non-profit debt forgiveness and enjoy debt-free days.
The term ‘qualifying’ matters considerably. There exist several conditions that make your payment qualifying. First, you need to pay in full the amount shown on the bill till 15 days after the due date. Additionally, these payments should be made through Income-driven repayment plans, which we will discuss in the next section. During the whole repayment period, which takes a minimum of 10 years, you have to be working for qualifying employers. You can change employers, but your payments will not be counted if you start working for a for-profit organization.
Moreover, you are not obliged to repay the debt during some periods- while studying or six months after graduation. Currently, borrowers are in loan forbearance status because of the COVID-19 pandemic. Although they do not make a payment, each month is considered a payment month. Hence, borrowers progress toward 120 payment requirements.
Consecutive or Non-Consecutive Payments?
120 payments take a minimum of 10 years. It is possible that you would like to change employers during this period. If so, do not worry about losing your ‘credits’ for 120 payment requirements. 120 payments do not need to be consecutive. Even if you leave a non-profit organization and start working in a for-profit establishment, your payment count will resume once you find another eligible position.
Income-Driven Repayment Plans
Your payments for this debt forgiveness program should be made through Income-driven repayment plans. Income-driven repayment plans are based on the borrower’s income level and family size. It usually requires a percentage of discretionary income to be paid for the student loans. The remaining debt is forgiven once the payback period ends, which can take up to 25 years. However, coupled with Public Service Loan Forgiveness, you can get forgiveness in at least ten years.
Income-driven Repayment Plans have different categories. Depending on your needs, you can enroll in Pay as You Earn, Revised Pay as You Earn, Income-based, or Income-contingent repayment options. Each repayment plan has its own monthly rate and payback period. Here is a quick list of conditions for each program, but you can check the official Student Aid website for more details.
1. Pay as You Earn
This program requires 10% of your discretionary income per month. Discretionary income is what is left after taxes, and other necessary spendings are deducted from your income. With this amount of payment, it takes 20 years to repay the debt. However, as mentioned, if you enroll in this program as a part of non-profit debt forgiveness, you do not need to worry about a long payback period.
Keep in mind that only Direct loan borrowers who got the first disbursement on or after October 2011 can apply for this repayment program.
2. Revised Pay as You Earn
Another repayment option that requires the lowest percentage of your income- 10%- is called Revised Pay as You Earn. Although the repayment rate is the same, the payback period can be either 20 or 25 years. The exact length depends on why you get student loans- for undergraduate or graduate loans.
3. Income-based Repayment
If you received your loan after July 2014, you could enjoy favorable conditions of the Income-based repayment plan. Such borrowers pay 10% of discretionary income for 20 years. Others, who received loans before this period, pay 15% for 25 years.
4. Income-Contingent Repayment
This repayment plan either requires a fixed rate (which allows debt repayment in 12 years) or 20% of your discretionary income. The payback period is long- 25 years. However, if you want to enroll in this plan for the sake of non-profit debt forgiveness, you do not need to worry about the repayment period.
Taxes on PSLF
One of the important considerations before getting non-profit debt forgiveness is the tax level. While borrowers enjoy getting rid of debt, they can find themselves in a worse situation if the tax requirement is high.
Fortunately, borrowers do not need to worry about taxes while applying for this forgiveness program. This is because the Public Service Loan Forgiveness is not taxable. Therefore, you do not need to pay additional income tax if you receive forgiveness.
Some borrowers think that they will qualify for this non-profit debt forgiveness program sooner than ten years if they make payments in higher amounts. However, it is not possible. The Public Service Loan Forgiveness takes a minimum of 10 years if 120 payments are consecutive. Otherwise, if you pay two months’ worth of repayment at once, you will not be required to make a payment next month.
Non-Profit Organization and Income Level
Keep in mind that your income level does not matter for this forgiveness program. Your income only has a role in determining what your monthly payment amount will be. Under Income-driven repayment plans, if you earn more, you pay more.
Alternatively, if you earn less, you can even qualify for $0 payments. However, some repayment plans require you to have less income than the outstanding debt amount. Otherwise, your income level cannot be a barrier to this program.
Borrowers should fill the PSLF application form and submit it to the loan servicer to apply for this non-profit debt forgiveness program. The loan servicer for PSLF is FedLoan Servicing. As a part of the application, providing an employment certificate is necessary. In addition, an employment certificate for each employer during the repayment period is required.
It is advisable to fill the PSLF form and submit it from time to time to check your progress. 120 payments require at least ten years which is quite a long period. Sometimes, loan servicers make mistakes while counting your payments. By submitting this form, you allow the loan servicer to check your progress and inform you. In this way, you can detect any problems in the early stages.
There also exists a variation of Public Service Loan Forgiveness which is called a Temporarily Expanded PSLF. If you previously applied for PSLF and got rejected, you can use this option to get forgiveness. However, your rejection reason should be that some or all payments were made throughout unqualifying repayment plan. In other words, if you used another program other than Income-driven repayment, you can still qualify for forgiveness.
Yet, your last payment and 12 months prior payment should be at least the same amount as you would have paid under Income-driven repayment.
Keep in mind that there is limited funding for this program. Hence, you need to act fast to get non-profit debt forgiveness before the funds are unavailable.
3. Teacher Loan Forgiveness
If you work as a teacher in a non-profit organization, you can apply for Teacher Loan Forgiveness. This non-profit debt forgiveness program grants either $17,500 or $5,000 to borrowers who provide teaching services for five years. Keep in mind that your workplace should be a low-income school that involves students from poor families.
Borrowers of Direct Loans and FFEL loans can apply for this loan forgiveness program. You should work full time for five consecutive years. It means, if you stop working, your progress will be canceled. Besides, at least one of these working years should be after the 1997-98 academic period.
Borrowers should have high qualifications to apply for this non-profit debt forgiveness program. For example, you need to have a bachelor’s degree. Additionally, you should get a valid license to teach students. There also exist other conditions depending on whether you teach in elementary, middle, or secondary school.
Keep in mind that borrowers in default cannot apply for this forgiveness program.
Does My Workplace Qualify?
If you are not sure your workplace is eligible for the forgiveness, you can check it with your employer. Besides, there is a directory published by the Education Department which lists low-income educational institutes.
As mentioned before, this non-profit debt forgiveness can grant either $17,500 or $5,000 loan forgiveness. The exact amount depends on your teaching field. For example, you can qualify for higher benefits if you teach mathematics or science. Moreover, if you deal with children with special needs, you can get more forgiveness. Otherwise, you can also qualify for $5,000 loan forgiveness after five years of service.
Can I Get PSLF and TLF at the Same Time?
Till now, we have discussed two programs for non-profit debt forgiveness, which are Public Service and Teacher Loan Forgiveness.
Benefiting from one forgiveness program is not a barrier to receive another. However, you cannot work for both of them at the same time. PSLF requires a minimum of 10 years of service during repayment. TLF requires five years of service. Once you complete one of these programs, you can start progressing toward the other. One year of service cannot qualify for both programs.
To apply for the Teacher Loan Forgiveness program, you need to fill its application form. Then, you can submit the application form to the loan servicer. Keep in mind that it is only reasonable to submit an application after you serve for five years. During the application, your employer should certify your service.
Loan Repayment for Healthcare Professionals
Health professionals in qualifying organizations can also enjoy the benefits of non-profit debt forgiveness. There exists a program provided by the National Health Service Corps that provides loan repayment assistance.
You can work in a non-profit organization, but you should make sure that your organization is one of the facilities in shortage areas. The National Health Service Corps has a list of facilities located in areas where people do not have adequate access to healthcare. If you happen to work in one of them, you are lucky to get qualified for forgiveness.
This program grants up to $50,000 loan repayment help to borrowers working full-time for two years. Full-time work requires 40 hours per week. If you work part-time or 20 hours weekly, the forgiveness benefit is reduced to $25,000. You can also extend your contract to get more repayment assistance.
Do Private Loans Qualify?
Private loans cannot be forgiven with Public Service Loan Forgiveness or Teacher Loan Forgiveness. Luckily, this loan repayment program can be used for both federal and private student debt. You can also apply if you have consolidated or refinancing loans.
Which Program to Choose?
We discussed several programs for non-profit debt forgiveness. Unfortunately, each of them has its extensive requirements, which can be confusing.
You have to ensure that you understand the rules before applying for a forgiveness program. If you feel lost, you can also contact a debt specialist, like those in Student Loans Resolved. Our debt experts help borrowers to analyze their finances and develop the most suitable debt repayment strategy.
Keep in mind that each program takes some time; for example, PSLF requires a minimum of 10 years. You would not want to start such a long journey without the help of an experienced debt specialist.
To Sum Up…
Non-profit debt forgiveness is possible through several programs:
- Public Service Loan Forgiveness
- Teacher Loan Forgiveness
- Health Care Loan Repayment, etc.
Debt repayment options such as refinancing still exist that can be available to more people, including those working in non-profit organizations. Before you choose one of these programs, you can get more information on our blogs.