Myth: I can't serve if I have student loans

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By Ashley Lenihan
April 15, 2015

The great financial burden of student loans is no secret. 

The amount of debt attached to college degrees now causes many young professionals to delay other large financial costs such as marriage, home purchases and children.

One opportunity student loans shouldn’t delay is your dream of serving as a Peace Corps Volunteer. While it might seem impossible at first glance, careful planning could see you well on your way abroad with your student loans in good order. The key is researching all of your options with your lender.

Depending on what kind of federal student loans you have, your lender could offer the following opportunities while you are a Peace Corps Volunteer: income-driven repayments, partial Perkins loan cancellation, Public Service Loan Forgiveness or deferment. Each of these benefits is variable, so be sure to verify all information directly with your lender or loan administrator. For private student loans, check with your lender to see if they offer deferment or forbearance options.

One of the real hidden gems of Peace Corps service is that it qualifies as “employment” for the Public Service Loan Forgiveness (PSLF) Program. If you’re planning for a career in public service, your Volunteer service may go towards 27 payments of the 120 qualifying payments needed to have the remainder of certain federal loans forgiven. Under qualifying repayment plans, your payments could very likely be $0 during each month of Peace Corps service. The key is signing up at the beginning of your service instead of after. Signing up for a qualifying repayment plan at the beginning of your service is more advantageous since it allows you to make the greatest number of qualifying payments towards loan forgiveness. Signing up for PSLF under a qualifying repayment plan after your service ends may also result in qualifying repayments that are higher in cost. You also only have six months from the end of your service to qualify your Volunteer time. To find out if your loans would qualify, what’s the best income-driven repayment loan for you, what your repayment amount would be and which types of employment qualify, call Fed Loan Servicing at 855-265-4038 and visit the Department of Education’s Public Service Loan Forgiveness FAQ for Peace Corps Volunteers. (Careers in any federal, state or local government agency, entity or organization or a designated tax-exempt 501(c)(3) non-profit may qualify under the PSLF program.)

If you have a Perkins Loan, then you’re in luck! Peace Corps Volunteers qualify for a 15 percent loan cancellation for each of the first two years of their service, and 20 percent during a third and fourth year extended service. Up to 70 percent of your Perkins Loan may be cancelled, and all interest and principal payments are deferred during service. Be careful not to consolidate your Perkins loans since it will then no longer be eligible for partial cancellation. Contact your lender for the paperwork needed to partially cancel your Perkins loan each year.

Peace Corps trainees and Volunteers may defer principal payments of certain federal student loans for up to three years of Peace Corps service. Some subsidized loans might also have interest payments deferred. During your Peace Corps service, you would not need to make payments on deferred loan amounts, but interest may accrue depending on the type of loan. Deferring a loan and being on an income-driven repayment plan are different. Contact your lender and see the last page of this FAQ to figure out what is the best option for you.

If you need to make payments during service, Peace Corps offers a modest financial benefit. All trainees and Volunteers accrue a readjustment allowance during their service. You may use up to 75 percent (at this time it is $243.75) each month to make direct payments to your lender after three months of training time. This benefit is independent of the living allowance you receive in country which supports your everyday needs during service. Even using this maximum amount, you would still have more than $2,000 (pre-tax) of your readjustment allowance available at the end your 27 months of service. Please check out the Student Loan Information section on the Peace Corps website for more information about addressing different types of loans in Peace Corps service.

Whether you’re a recent college grad or you’ve been out of school for several years, don’t let dread over student loans keep you from pursuing your passion for service. Reach out to your lender today to determine for which programs Peace Corps service might qualify you!

Ready to start your Peace Corps journey? Connect with a recruiter today.

Ashley Lenihan

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