Ask The Get Out of Debt Experts Public Service Loan Forgiveness Program

I’m a Dentist and Would Like to Get My Student Loans Forgiven – Josh

Written by Steve Rhode

Question:

Dear Steve,

Took about 150k student loans 1998-2002 for dental school.

Paid them back for a few years while working in the USA.

I moved to to another country with wife and 4 kids in 2007.

Income here significantly lower and taxes much much higher

I currently pay over 50% tax, that’s just how it works here.

I have deferred, and done all I can to delay payment, but now nelnet will not postpone any longer. I tried applying for payment based on income, but my taxes show my income but not my true expenses and net income, just the gross. Basically with 4 kids and a wife, there is no money left to pay student loans (or maybe $100 i can do a month, but not the 700$ they want)

The only option they gave me was to consolidate with direct loans (i consolidated in 2003 originally) and now have 2 loans i think one was subsidized and one unsubsidized federal loans. If I consolidate then what? I still cannot afford $700 a month and there seems no one I can talk to.

I do work for a non profit, if there is some loan forgiveness program i can qualify for, but still, i need to be able to make payments i can afford.

Do you have any suggestions of how to resolve this?

Do you know of anyone who can help?”

Do you know if i can lower payments to something significantly lower than what they are asking?

Can i get loan forgiveness for working for a non profit?

thanks

Josh

Answer:

Dear Josh,

The lowest payment you can get is based on your “Discretionary Income.” That is defined by the Department of Education as “For Income-Based Repayment, Pay As You Earn, and loan rehabilitation, discretionary income is the difference between your income and 150 percent of the poverty guideline for your family size and state of residence. The poverty guidelines are maintained by the U.S. Department of Health and Human Services and are available at www.aspe.hhs.gov/poverty.”

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When they label that as “discretionary” it creates an unrealistic expectation that it is somehow based on actual free income.

In your particular situation I can see how it would create a problem when your taxes are significantly higher than being the the U.S.

However, the income driven programs are going to be the best way to reduce your payment, if able. Other options like a graduated repayment program will not give you a consistent payment reduction.

I am a bit puzzled by the statement of your loan balance and the low payment of $700 per month. If you were just in a straight consolidated Direct Loan your payment would be based on the straight 10-year repayment plan. That’s the same amount of time you would need to work for a qualifying non-profit to be eligible for total loan forgiveness under the Public Service Loan Forgiveness program.

As the Department of Education says, “Even though the 10-year Standard Repayment Plan is a qualifying repayment plan for PSLF, you will not receive PSLF unless you make the majority of your 120 qualifying monthly payments under an income-driven repayment plan. If you are in repayment on the 10-year Standard Repayment Plan during the entire time you are working toward PSLF, you will have no remaining balance left to forgive after you have made 120 qualifying PSLF payments. Therefore, if you are seeking PSLF and are not already repaying under an income-driven repayment plan, you should change to an income-driven repayment plan as soon as possible.”

While you are working for a non-profit and you are out of the country, only service to a U.S. IRS approved 501(c)(3) non-profit counts towards forgiveness.

If you are pursuing forgiveness under this option you should complete the Employment Certification for Public Service Loan Forgiveness form to make sure you are eligible.

Regarding who you should contact, it should be your servicer. You should communicate with them regarding getting into an income driven repayment program.

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Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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