The Loan-Saddled Woman's Guide to Choosing Between Debt Forgiveness and a High-Paying Job

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Travis Hornsby12
I'm the founder of Student Loan Planner

Do you currently have student loan debt? Maybe you are a recent graduate, or someone still working to pay off old debt. Have you considered pursuing loan forgiveness through Public Service Loan Forgiveness (PSLF)? It’s a topic that has been in the news often this past year. PSLF is a dream scenario for many graduates, because of its promise of forgiving student loans, no matter how much debt you have. The real question you need to ask yourself is this: is PSLF right for me, or should I work my debt out in other ways? 

What is PSLF?

PSLF is a federal program where your student loan debt is forgiven after 10 years of qualifying student loan payments. PSLF also requires that you work in the public sector during the time of those student loan payments. It was designed to attract people to jobs in areas of need around the country. 

Working in the public sector means working for a qualifying government or non-profit organization. The specific career within those organizations isn’t as important as the organization itself. But, there is some fine print involved with the PSLF. 

PSLF Specifics:

  • Your loans must be federal direct loans (or consolidated to direct loans)

  • You can’t apply until after making 120 qualifying payments

  • You need to move your payments to an income-driven repayment plan

  • You must work at least 30 hours a week at a qualifying organization

Why are people pursuing PSLF?

PSLF is an attractive program for people with student loan debt. Work in an area of need for a specific amount of time and get your loan debt wiped away? Sounds like a great deal! Not only is your student loan debt forgiven, but you also don’t have to pay income tax on the amount forgiven, unlike some other forgiveness programs. 

In October 2018, the Department of Education announced that the first qualifying borrowers had over $5 million forgiven. If you graduated with massive student loan debt, PSLF could be a lifesaver.

Why PSLF might be right for you

PSLF might be good to pursue for a couple specific reasons:

1. You were planning to work for the government or non-profit organization anyway. If this is the case, why not take advantage of a program like PSLF?

2. You have a high Debt-to-Income (DTI) ratio. DTI compares a borrower’s monthly debt payments with their monthly income. The goal is to have a lower number. If you have significant student loan debt, much more than your income, consider pursuing PSLF. Not only can you get your debt forgiven, but you can also lower your loan payments through an income-driven repayment plan and save money along the way to use to reach other financial goals. 

Why PSLF might not work for you

While PSLF is a great program, it’s not for everyone. What could make PSLF the wrong choice for some people?

  • You’ll have limited salary: Serving in areas of need is a noble concept, but it also pays much less than the private sector. Depending on your career path, you could land a high-paying career trajectory in the private sector instead that makes student loan debt easier to pay off. If this is the case, 
  • You’re almost done repaying your loans: Maybe you are already halfway through paying off your loans. The savings you could create through PSLF may not be worth it at this point. It might be a better option to work to lower your interest rate and pay off your debt quicker.
  • It’s a long time commitment: 10 years is a long time. It’s easy to start pursuing PSLF, but who knows what can happen in a decade. Your whole life could change. Marriage. Kids. House.  Is it worth committing to work at a non-profit for a lower-paying salary if you might not make it all the way through the process?

Another Repayment Option

If PSLF doesn’t fit in your plans, there is another way to pay off your student loans while working in the private sector that may make it worth it — high salary or not. You could be better off refinancing your student loans. 

Depending on your credit, refinancing your student loans could significantly reduce your interest rate. Doing so has the potential to knock tens of thousands of dollars off of your student loans and lower your monthly payment, too.

If you need help determining the best repayment option for you, try using Student Loan Planner’s Student Loan Calculator

What is the right choice for you? 

In the end, each person needs to look at their own situation to see if pursuing PSLF makes sense. Significant student loan debt could play a major role in your decision. However, for many people, it’s more of a lifestyle decision. Do you see PSLF as something worth pursuing, or will it hold you back from achieving the career and lifestyle you’ve always wanted? If it’s the latter, you may be better off creating another plan for paying off your student loans.

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Travis Hornsby founded Student Loan Planner after helping his physician wife navigate ridiculously complex student loan repayment decisions.