Editorial Policy

4 ways to recover from crushing student loan debt

Roxanne Hawn

April 29, 2015

If you're willing to serve the public good, one way or another, there's a chance you could get some help with crushing student loan debt.

Seven out of 10 graduating seniors hold student loans, with the average debt at $28,400, according to a 2014 study from College Access and Success.

Keep in mind these figures only represent graduates with bachelor's degrees, and typically only nonprofit schools report student debt.

With costs so high and students dependent on student loans, is there any relief in sight? In fact, there are programs that help with loan repayment — and sometimes even loan forgiveness. While graduates shouldn't expect a magic stroke of a legislative pen to make student loans disappear, here are four major programs for the graduate who is drowning in debt.

1. Public Service Loan Forgiveness Program

This federal program offered through the U.S. Department of Education began in 2007. It is a true loan forgiveness program. Essentially, after 10 years of qualified public service and after making 120 loan payments on qualified student loans, whatever loan balance remains is eligible for forgiveness. The program's first participants won't qualify for forgiveness until 2017, so no loans have actually been forgiven yet.

2. National Institutes of Health Loan Repayment Program

This highly competitive loan repayment program attracts medical doctors and biomedical researchers. In exchange for accepted work in high-priority research fields, researchers can earn significant loan repayment help. How significant? Essentially 50 percent of each person's total student loan debt for the first two years of research and then 50 percent of the remaining total each year after that for those accepted to continue.

3. National Health Services Corps

This loan repayment program helps health professionals, including doctors, dentists and some nursing professionals. In exchange for a minimum of two years of work in a qualified community health setting, people can earn as much as $50,000 in tax-free student loan repayment help. The maximum allowed is six years and $150,000.

“I'm so burdened financially, and as a woman who wants to have children, a woman who has all this debt, I wasn't interested in purchasing my own practice and taking on that additional stress.”
–Dentist Elizabeth Turner, student loan debtor

Dentist Elizabeth Turner worked in private practice when she first graduated, but the combination of long hours and low pay drove her toward the National Health Service Corps.

“I'm so burdened financially [$350,000 in student loans], and as a woman who wants to have children, a woman who has all this debt, I wasn't interested in purchasing my own practice and taking on that additional stress,” Turner says. “At my last job, I was working 55-60 hours a week for barely enough, well below average for what a private practice dentist should be making.”

The Veterinary Medicine Loan Repayment Program offers similar help to veterinarians willing to work in places with designated veterinarian shortages.

4. Army National Guard Loan Repayment Program

U.S. military branches offer extensive educational benefits, including student loan repayment help, but only for those in full-time active duty.

The Army National Guard, on the other hand, offers student loan repayment help to National Guard soldiers with eligible federal loans kept in good standing. Since fiscal year 2010, more than 17,000 soldiers have benefited from this student loan repayment program.

“The contractual obligation is for six years,” says Maj. Brad Chaney, chief of the Army National Guard Incentives Branch. “What we offer to them with this incentive, over the course of that six-year period, we'll pay off 15 percent of their dispersed loan each year that they have a 'good' year of service. In other words, the soldier is required, in order to get a payment for that year, to show up to drill, do all the requirements that are asked. Once they've had a 'good' year, if you will, we can then process them for their 15 percent payment for that year.”

The current student loan payout limit is $50,000 over six years, but it really comes closer to 90 percent of that total (15 percent x 6 years = 90 percent or $45,000). These annual lump-sum payments made directly to the loan are considered taxable income.

Sgt. 1st Class Ines Ventura, who serves in the Army National Guard in Nevada, will complete her six-year contract in two more years. Other than some frustrations with getting her lender to complete the required paperwork each year, Ventura has had a good experience with the loan repayment program. She amassed $45,000 in student loans while earning her MBA in organizational leadership. “By the time I'm done,” she says, “they will probably have paid off about $35,000 of it, and I'll carry and pay off the remaining balance.”

Other options

Various student loan forgiveness and repayment programs target students based on their career fields — teachers or lawyers in many states, for example. Expect a variety of payouts, limits and regulations based on both state and national program guidelines.

Both AmeriCorps and Peace Corps offer educational awards to those who complete service programs. Those awards must be used either toward tuition for future education or toward repaying existing student loans.

Read the fine print

Student loan forgiveness and repayment programs often come with extensive eligibility rules and service requirements. Mistakes and misunderstandings can lead to loss of loan help and even harsh breach of contract penalties. Make sure you fully understand these intricacies before your commit.