How to Manage your Student Loans Now

 

While farmers are not eligible for federal loan forgiveness yet, there are still some steps you can take right now to get help with your student loan payments. Any federal student loan holder can take advantage of an alternative repayment plan that will lower the monthly payments. In addition, if you are willing to postpone starting your own farm, there are some forgiveness programs that might help with your loans while working in an agriculture-related field.

 

Remember: Decisions regarding student loans are complex and they vary person-to-person. Use the information below to get some ideas, but be sure to talk to your lender and employer before making any decisions.

 

Income-driven Repayment and Extended Repayment

 

All federal student loan borrowers are put on a 10-year, fixed monthly payment plan by default when they enter repayment. This plan is simple and minimizes interest accrual over the life of the loan. However, there are a variety of other repayment plans offered for people that struggle to make their monthly payments.

 

Not all of the repayment options listed below are available to all borrowers. The student loan system has changed over time and the repayment options available depend on when you took out the loans. Check your loan documentation or talk with your loan servicer to confirm which plans are offered for your loans. If you have private loans, you should check directly with your lender about your options – the choices listed below are only for federal student loans.

 

Income-Based Repayment

 

Income-Based Repayment allows you to tie your monthly student loan payments to your income. Under this repayment, payments are set at 15% of your discretionary income (defined as 150% of the poverty line for your family size and state). Payments increase and decrease as your income does and, if your income is low enough, can be $0. Payments are never more than what they would be under the Standard repayment plan. Income-Based Repayment also offers some loan forgiveness – after 25 years on this program, the balance of your student loans are forgiven. This plan is only available for federal student loans made to students, not parents.

 

Pay-As-You-Earn

 

Pay-As-You-Earn is a more generous version of income-based repayment. Payments are set at only 10% of your discretionary income and loans will be forgiven after 20 years. Fewer borrowers, however, are eligible for this plan. In order to qualify, you must have received your first loan after October 1, 2007 and received your most recent loan after October 1, 2011. The plan is available only for federal student loans made to students, not parents.

 

Income-Contingent Repayment

 

This plan is similar to the other income-driven plans above. Like the previous two plans, payments are tied to your income and any balance that remains after 25 years is forgiven. However, there are a few key differences. For this plan, payments are fixed at the lower value of either 20% of your income or the equivalent of what a standard payment would be over a 12-year period. Unlike the other plans, PLUS loans made to parents of undergraduate students also qualify if you consolidate your loans together. In addition, this repayment plan does not require you to demonstrate financial hardship when you begin the repayment plan. This plan is available for all federal student loan holders.

 

Income-Sensitive Repayment

 

This is the only income-driven repayment program for borrowers of unconsolidated Family Federal Education Loans (FFEL) PLUS loans. Other guaranteed loans, including Stafford loans, also qualify for this program. These loans are held by a private lender and “guaranteed” by the federal government so that the federal government holds the risk of default. Most of these loans were made prior to 2010, though Stafford loans continue to be available. The exact formula for payment varies depending on the lender.

 

Graduated Repayment

 

Unlike the plans above, graduated repayment alters your monthly payments without taking your income into account. Under this plan, payments are lowest at the beginning of the repayment period and gradually increase every two years. If you are sure that your income will be higher in the future than it is now, this plan could allow you to pay low monthly payments initially without the reporting requirements of income-driven plans. This plan is available for all federal student loans.

 

Extended Repayment

 

For borrowers with more than $30,000 of debt in one loan program, the extended repayment plan allows repayment to be extended for up to 25 years. Payments can either be fixed over the life of the loan or graduated, as explained above. This plan is available for all federal student loan holders who began borrowing after October 1998. Like all the repayment programs mentioned about, extended repayment will increase the total interest you pay over the life of the loan.

 

More info on all student loan repayment options can be found on the Department of Education’s Federal Student Aid website. For more information on which loans you hold and your specific options, contact your student loan servicer.

 

Existing Forgiveness Programs

 

Public Service Loan Forgiveness Program

 

We are working to extend the Public Service Loan Forgiveness Program (PSLF) to cover all career farmers. However, some young farmers may already be eligible. The PSLF program provides loan forgiveness to people after working 10 years in a qualifying profession and making income-based loan payments. The PSLF program covers a host of critical careers, including those working for:

  • Federal, state, local, and Tribal governments;
  • Public child or family service agencies;
  • Tax-exempt non-profit organizations (excluding those doing partisan political, union, or religious work);
  • Tribal colleges and universities; and
  • Private organizations that provide emergency management, military service, public safety, law enforcement, public interest law services, early childhood education (including licensed or regulated child care, Head Start, and State funded pre-kindergarten), public service for individuals with disabilities and the elderly, public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations), public education, public library services, school library or other school-based services.

 

Farmers who work at a non-profit, university, or government-run farm may already qualify for this program. In addition, farmers with full-time off-farm employment at a qualifying job can benefit from the program even if they also work on a farm.

 

In either of these cases, keep in mind that the PSLF program is a 10-year commitment. Even if you are working at a qualifying job now, think carefully about whether you plan to continue before starting the program. For example, if you are currently working at a non-profit farm but plan to start your own farm in the next five years, this might not be the right program for you. For more information, click here.

 

State-level Programs for Farmers

 

Currently, only New York State offers a loan forgiveness program for farmers. The New York State Young Farmer Loan Forgiveness Incentive Program offers up to $10,000 per year, for a total of five years, to recent college or university graduates operating a farm. Farmers must have attended college and farm in New York State to qualify. Unlike the PSLF program, this is a competitive program – only 10 farmers are offered forgiveness per year. For more information and to apply, click here.

 

In past years, Pennsylvania has offered the Agriculture Loan Forgiveness Program, which forgave $2,000 per year in student loans for farmers, up to a total of $10,000. Unfortunately, Pennsylvania is no longer funding this program.

 

The Veterinary Medicine Loan Repayment Program

 

Through USDA’s Veterinary Medicine Loan Repayment Program, veterinarians are offered competitive grants for loan repayment. To participate, individuals apply for a grant once they have started working in a qualifying position. Veterinarians must work in an area deemed to have a critical shortage of veterinarians. The program offers $25,000 of loan forgiveness per year of service, for up to a total of 3 years. Scholarship programs are also available, but they require that individuals apply before entering a relevant degree program.

 

This program is focused on placing new professionals in USDA-identified underserved areas. Not all individuals who apply to these programs are funded and funding is prioritized based on an area’s relative shortage of professionals. More information is available here.

 

AmeriCorps and Peace Corps

 

Both AmeriCorps and the Peace Corps offer student loan help in exchange for service. AmeriCorps is a domestic program where young people can apply to serve at non-profit organizations around the country, including those focused on food access and farming. For example, FoodCorps places AmeriCorps members in schools to run gardens and teach nutrition.

 

AmeriCorps members are eligible for an education award of up to $5,730 after completing their term of service, often a year in length. This award can either be used to pay off student loans or fund future education. In addition, members can put their student loans in deferment and have AmeriCorps pay the interest that accrues while serving. For more information on AmeriCorps loan forgiveness, click here.

 

The Peace Corps is a U.S. government program that places volunteers in foreign countries around the world. Many opportunities exist to use agriculture to help communities in need. The Peace Corps offers a different student loan benefit. While serving, Peace Corps volunteers can qualify for Perkins Loan cancellation. For each of their first two years of service, volunteers qualify for a 15% loan cancellation. If a volunteer extends his or her service for a third or fourth year, they qualify for an additional 20% loan cancellation per year. Volunteers can see up to 70% loan cancellation in total. In addition, volunteers can choose to put their loans in deferment during service. For more information on the Peace Corps loan cancellation, click here.

 

Both AmeriCorps members and Peace Corps volunteers can apply their service to the Public Service Loan Forgiveness Program discussed above.