A detailed guide on how to use loan forgiveness to your advantage
By Nate Matherson, Co-founder of LendEDU, a website that helps consumers learn about personal finance.
Being a nurse can be a challenge because people’s lives are depending upon your actions. The good news is that you can work in any state and nearly any town or city you want because nurses are needed everywhere.
How much you earn will vary, though, depending upon whether you work at a doctor’s office or a hospital, what unit you work in, and what shift you take. While nurses earn a good income, they sometimes must take on a fair amount of debt to get their degrees. Paying off all that debt is no easy feat. That’s why it pays to know about possible sources of student loan forgiveness for nurses and other ways they can pay that debt down as quickly as possible. Here are some methods nurses can use to retire their student loan debt.
Public Service Loan Forgiveness for Nurses
When you’re a nurse, one of the first places you want to look for student loan forgiveness is the Public Service Loan Forgiveness program, commonly called the PSLF. To get this forgiveness for your federal unsubsidized or subsidized loans, you have to be working full-time for a qualifying employer, and you must send in 120 qualifying monthly payments to your student loan account.
To stay on track with those qualifying payments, make sure they aren’t late. While there is some leeway on that rule, up to 15 days, you don’t want to get in the habit of pushing it to close to that deadline in case there are unexpected issues with the payments reaching the student loan servicer on time. You’d hate to derail your eligibility over something as trivial as a late payment.
Who is a qualifying employee? It can be the government at any level, whether that’s local, federal, state, or tribal. It can also mean working for a select nonprofit organization. That organization has to be tax-exempt under Section 501(c)
You’ll also need to sign up for the income-driven repayment plan to qualify for public service loan forgiveness.
If you qualify by working for an acceptable employer and making your 120 payments, the remaining balance can be forgiven.
Federal Perkins Loans Forgiveness for Nurses
You can have your federal Perkins Loan forgiven if you’re a nurse and you meet all the requirements. Nurses qualify if they are working in a job that is considered eligible employment or if they volunteer in an eligible service position for long enough. The date of the issuance of the loan can also factor into whether you are awarded forgiveness as a nurse. Even if you don’t qualify for full forgiveness, you might be granted partial forgiveness.
Full-time nurses can have up to 100 percent of their owed balance forgiven after five years of eligible service. If you think you qualify, talk to the school that gave you the loan or your student loan servicer. They’ll give you instructions to follow to start the process and any forms you’ll need to fill out.
Even if you’re not sure if you qualify, it doesn’t hurt to apply or check into the process. The worst that can happen is that you’ll be denied.
Income-Driven Repayment Plan Forgiveness
Getting a nursing degree isn’t cheap, and if you’re wondering how you’ll make your hefty federal student loan payments each month on your salary, you may want to check out an income-driven repayment plan. With these plans, your monthly loan payment is based on your earnings and family size (see calculator here).
There are four income-driven plans for you to consider:
- The PAYE plan: The Pay As You Earn repayment plan will usually run you 10 percent of your discretionary income, but it won’t go above the 10-year Standard Repayment Plan amount.
- The REPAYE plan: The Revised Pay As You Earn repayment plan usually has payments that total around 10 percent of your discretionary income.
- The IBR plan: The Income-Based Repayment plan will require monthly payments that are typically 10 percent of your discretionary income for new borrowers after July 1, 2014. It won’t require payments bigger than the 10-year Standard Repayment Plan amount. For borrowers before that date, it will typically be 15 percent of your discretionary income, but it won’t exceed the 10-year Standard Repayment Plan amount.
- The ICR plan: With the Income-Contingent Repayment Plan, you’ll pay each month whichever is less: how much you’d pay over a 12-year repayment period with a fixed repayment plan or 20 percent of your discretionary income.
You’ll pay longer with income-driven plans than you would with other repayment options – as long as 20 to 25 years. But at the end of that timeframe, if you’ve made your full payments on time, you can have your remaining balance forgiven.
Other Options for Repaying Student Loan Debt Faster
Student loan forgiveness isn’t an option for every nurse – you might not have qualifying federal loans or you might not be eligible. That doesn’t mean you have to be content to slowly chip away at your student loan debt year after year for decades. There are ways to speed up that process.
You can opt for student loan refinancing through a private bank or financial services company (see list of companies here). With a refinancing, the new lender pays off the loans to the original lender. Then you’ll owe the new lender, according to their terms and interest rate. If you have excellent credit, a decent income, or a qualified cosigner, you might be able to land a lower interest rate, which will save you money and help you pay off your debt faster if you concentrate on making bigger payments.
>> Related Article: Ballin’ On A Budget
Before refinancing your federal student loans, though, make sure you have completely exhausted your student loan forgiveness options. Once you refinance through a private lender, that option will no longer be possible.
You should also check out more than one private lender because you’ll want to compare their rates and terms so you can find the best deal.
Once you start making payments through your new lender, don’t forget to send extra payments when you can to quickly whittle away at that balance.
Prefer audio books like I do? Click here
Disclaimer: Vintage Traveling Nurse is a participant in the Amazon Services, LLC Associates Program, an affiliate advertising program. It is designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com and its partners. All recommendations of products and services listed in each blog post are my own.