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How Do I Deal With My Private Student Loans When in the Peace Corps? – Jami

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Question:

Dear Steve,

I was recently invited to serve in the Peace Corps, and received a private loan through JPMorgan Chase in 2007, which I found out was sold to National Collegiate Trust (NCT); it has been sold for quite sometime and I have been making on-time monthly payments for approximately 4 years.

During my 27 months of Peace Corps service, I will be in South American and unable to make monthly payments (due to my income allowance during service). I contacted American Education Services (AES; my “go-between” for NCT), and they said that National Collegiate Trust does not offer anything in regards to deferment or forbearance due to Peace Corps service.

They did offer something called a MGRS (Modified Graduated Repayment), which lowers my monthly cost by about half. While I greatly appreciate this option, and the help of the representative from AES, the price per month is still too much when I factor in my “monthly allowance” through the Peace Corps.

I am trying to make accommodations with saving as much as I can before leaving for service, so I do not hurt my credit score and I stay in good standing (I am considered to have “excellent” credit). While trying to find some options online, I read some of your articles on Huffington Post. I understand you are very busy, but any suggestions or advice that I may not have thought of would be greatly appreciated. Thank you for your time.

Jami

Answer:

Dear Jami,

I love the Peace Corps and was a Peace Corps kid and enjoyed a amazing life when my father was stationed in Africa. In fact my father was involved in the earliest days of the formation of the Peace Corps.

So congratulations on the new life to unfold in front of you. It will be an incredible and life altering experience.

For people with federal student loans there are some amazing benefits to reduce or eliminate federal student loans when in the Peace Corps. For example, your time in the Peace Corps qualifies as time towards forgiveness under the Public Service Loan Forgiveness program. After 120 months of qualifying employment and payments you could have 100 percent of your federal student loans forgiven. If you put federal loans into a qualifying payment plan before heading out your monthly payment can be as low as $0 per month while you are in the Peace Corps. For more information on federal student loans and the Peace Corps, see this.

But when it come to student loan benefits and private student loans, well, basically you are at the mercy of the private loan holder. Even the Peace Corps is less than optimistic and says, “If you have a private loan, you will need to contact your loan servicer to see if they provide any student loan relief for Peace Corps Volunteer service.” – Source That’s code for basically you a screwed.

Keep in mind that any private student loan payment program that reduces your payment or puts it on hold is going to inflate the total balance you owe on it. So just jumping at the modified plan suggested might result in a much higher balance on your private student loans when you return in a couple of years.

The Consumer Financial Protection Bureau provides a similar warning, “You may be able to avoid making payments by asking for forbearance or deferment, but interest will accrue
and you could owe much more when you finish your service.” – Source

As far as trying to manage your loan while you are in the backcountry, here is what the Peace Corps has to say.

“Chances are you will be at a site with limited internet and phone access, so assign someone in the U.S. to be your local point of contact for lenders and the Peace Corps. Many lenders will communicate only with the borrower, so you must set up a Power of Attorney (POA) with a family member or a trusted friend. Make sure this person has a copy of the POA document and copies of all your loan documents. They will need to follow up with your lender to make sure they have received everything once you leave for service and to ensure that you have sent in documentation to renew your deferment each year, if that is needed.” – Source

That is good advice and while I don’t want to scare you, I have seen these situations go horribly wrong when the friend or family member you assign just drops the ball. So make sure you can find someone you really trust. I mean, really trust! Don’t pick a party friend, artist, or someone in sales. Find a friend that loves to make budgets and is focused on the small details.

The best option would be to be able to have some sort of internet access from wherever you might be. In that case you could get mail using one of the mail services that would receive your mail and scan it and your online banking access. You would need to be vigilant about internet security from a public computer. I mean like freaky paranoid. That would be extremely risky unless your access was through a trusted site.


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