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Student loan forgiveness by public service

Corey Nelson, 27, graduated from Michigan State University’s law school in 2012 with a plan to work his way out of six figures in student loan debt.

His goal was to work in public service by getting a job as an attorney for the government, maybe on the state or local level, and qualify for a federal student loan forgiveness program to tackle that debt.

First challenge: getting hired in a government job. It’s not all that easy.

Many students would like to see their student loans just go away. But getting rid of student loans can take real talent, discipline and some creative solutions.

Many students and parents aren’t even aware that some loan forgiveness programs exist, though. A federal consumer watchdog agency is trying to bring more light to the federal Public Service Loan Forgiveness program created by Congress in 2007.

A student loan forgiveness program typically rewards graduates for taking careers in public service, such as police officers, teachers, social workers and firefighters. The college graduate still makes regular monthly payments on a student loan but can look forward to having a good chunk of debt forgiven in the long run, if he or she follows specific requirements.

Some individual states have specific student loan breaks for specific career choices, too.

As for Nelson? He has a job. But Nelson has been working for a year at a small general practice law firm in Shawano, Wis. If he kept working there, he wouldn’t qualify for public service loan forgiveness.

But finally he found a government job, and he just accepted a job offer from the city of Madison, Wis.

For the debt forgiveness program to work, he’s going to need to keep making payments for 10 years and continue working in public service.

“The hope obviously is that the program will still be there,” said Nelson, who pays about $400 a month in student loans and expects to save five figures with loan forgiveness.

Tyler Shelton, 23, who just started graduate school for urban planning at Wayne State University, said he had never even heard of loan forgiveness programs. But if it works, he might consider it as an option to deal with what could end up as much as $50,000 in student loan debt.

Students need to follow specific rules to make this work, too.

Many borrowers would need to sign up for an income-based repayment plan to ensure maximum savings and make this work. You’d need to keep track of the necessary paperwork. An increase in income would lead to an increase in your monthly payment under an income-based repayment plan.

As it takes 10 years of on-time qualifying payments before debt is forgiven, it will be at least 2017 before the first round of federal student loans are forgiven.

“No one knows quite how this program will work yet, or if Congress may decide it costs more than they counted on and change it once they start the loan forgiveness in 2017,” said Val Meyers, associate director for the office of financial aid at Michigan State University.

But is a public service job really right for you? Such as working in public library services or public interest law services?

Katelyn Lietz, 25, a senior majoring in mathematics at Wayne State University, said she might be able to get a break with the federal public service loan forgiveness program on about $40,000 in student debt – if she found a job as a teacher.

But Lietz says that is a big if.

She works as a substitute teacher and said finding a teaching job in Michigan is tough. She might have to move to Virginia or Arizona.

Her plan to get out of debt involves getting a job as an actuary at an insurance company or elsewhere in Michigan. She expects starting salaries to be around $70,000.

“Employees can still earn more money in the private sector,” said Mark Kantrowitz of

Kantrowitz said graduates have to take care with their career choices to qualify. He noted that some nurses could qualify if they work in certain areas, such as social work, public health or at a not-for-profit hospital. But nursing itself isn’t necessarily a public service occupation.

Some other points to consider: Federal loan forgiveness for public service would only apply to federal Direct Loans, not private student loans. Borrowers could consolidate their federal loans into the Direct Loan program to qualify, Kantrowitz said.

If you have a Perkins federal student loan, you might be able to tap into other benefits.

How much money could college grads save in forgiven debt?

Travis Comstock, 39, an attorney who works in state government in Lansing, Mich., said he is projecting that about 70 to 75 percent of his student debt could be forgiven in 2019 when he’d first qualify for debt forgiveness.

Comstock, who graduated from law school at Michigan State University in 2008 with six figures of debt, said federal loan forgiveness program allows him to work in a public service job. He has lower monthly payments with an income-based repayment plan that is based on his salary and family size.

How much could be forgiven does depend on income.