Helping Social Workers Manage Student Loan Debt
By Peter Wylie
Social workers who have recently graduated from college or graduate school face a challenge – repaying rapidly rising student loan bills while wages have remained flat. The average MSW leaves their graduate program with more than $30,000 in student debt, and graduates from undergraduate programs are leaving their schools with an average of $29,000 in debt – meaning most starting social workers are attempting to repay upward of $60,000 in debt on the average starting salary of $41,000.
Thankfully, there are many helpful options social workers can leverage to keep their student loan repayment reasonable as they pursue their career. Many social workers, however, do not take full advantage of benefits because the programs do not have clear qualification guidelines, are poorly marketed, and are hard to find in many cases.
If you're looking for programs to help with your student loan debt, read on to understand the variety of options available to you. Once you understand your options, take the time to apply for any programs for which you qualify – you could save hundreds per month, and thousands over the life of your loan.
Income Driven Repayment Plans
If you're a social worker repaying your loans (which starts following your 6-month grace period from leaving your institution) and you have federally issued loans, you should evaluate if you qualify for an Income Driven Repayment plan. The first step is to identify if you have a Partial Financial Hardship, which is determined by your salary and the amount of your standard 10-year repayment plan payment. If so, you can qualify to have your loan payment modified to match your income through the government's Income Driven Repaymentplans. A list of all these programs is available at Federal Student Aid's website.
Income Driven Repayment Plans come in three varieties, depending on when you took your loans out and what type(s) of loans you used to finance your education. Income Driven Repayment plans help lower your monthly payment in the short term, but it's important to note that these modifications usually result in a higher total bill over time.
Income Contingent Repayment– This calibrates your payment at 20% of your disposable income, which is calculated using a slightly complex formula the government determines.
Income Based Repayment – This calibrates your payment at 15% of your disposable income.
Pay As You Earn– This calibrates your payment at 10% of your disposable income, but it is only available for those borrowers who took out their first student loan after 2007 and took out Direct Loans, which are a specific type of loan issued directly by the US Department of Education, and the only form of federal student loan issued after 2010.
Public Service Loan Forgiveness
Once you determine if you are eligible for one of the preceding three plans, you should next explore Public Service Loan Forgiveness (PSLF). This program, authorized through the College Cost Reduction and Access Act of 2007, allows employees of non-profits and government agencies to have your remaining loan balance forgiven tax-free after 10 years of making on-time "qualified payments".
If you're employed as a social worker, your employer likely falls into an eligible category, but feel free to reach us directly if you are unsure, or enter your employer's name into the IRS's lookup tool for 501(c)3 organizations.
The PSLF program requires an initial certification, available here, and then requires you to make 120 "qualified payments" through your servicer, who should track these payments and determine your eligibility. Qualified payments are payments made after October 2007 on a Direct Loan. Because the program only applies to Direct Loans, if you have other types of federal loans, such as FFEL or Stafford loans, you should explore the option of consolidating these loans to gain eligibility for this program. The first PSLF benefits will be dispersed in October 2017, and they are completely tax free. The full application for these benefits has not yet been released, but as soon as it is, we will be announcing it to our members and building it into our website. Parent PLUS Loans and private loans are not eligible for this program, unfortunately.
State Level Forgiveness Programs
In addition to your Public Service Loan Forgiveness benefit, there are several state level programs that provide an incentive for those social workers who are employed in a needy area. Most of these programs provide $5,000 to $7,500 in annual loan repayment for work in a qualifying area and/or profession.
Private Student Loan Holders & Parent PLUS Loans Holders
Private loans are not eligible for Public Student Loan Forgiveness, unfortunately, and Parent Plus loans also don't qualify. If you have either of these loan types, in addition to Direct Loans, it's best to try to reduce your Direct Loan payment as much as possible, so as to maximize your forgiveness benefits on the qualifying loans.
As you can see from the range of programs and specific qualifications, student loan repayment can be a complicated and confusing exercise. Additionally, www.studentloans.gov has good overview materials, or you can contact your student loan servicer for guidance on repayment.
—Peter Wylie is co-CEO of Gradible which offers free online loan evaluation, and Gradible.com.