I’ve been an avid consumer of all things personal finance for a few years now, but there’s one specific topic I haven’t seen covered in PF blogs: the Public Service Loan Forgiveness program.
For those of you not familiar with the program, it was established just over 10 years ago as a way to entice recent graduates with student debt to work in the not-for-profit sector. You work for a 501©(3) organization, make (relatively low) monthly payments toward your student debt based on an income-based repayment formula, and after 120 payments (10 years) you are forgiven your remaining debt. At least that’s how it is planned to work.
The reason for my personal interest in this topic- my wife is about half way through this program. She finished graduate school with more $150,000 in student debt. She was able to get a great job within a large University/Hospital system that qualifies as a 501©(3). We opted to try the PSLF program, instead of tackling the debt.
I know most debt-oriented blogs normally focus on attacking the debt, making extra payments, the snowball effect etc… So for us, if feels strange to have this large quantity of money hanging over us, and not proactively paying it down. We are diligent savers and investors, with a savings rate in the 60-70% range.
If the program works as expected, my wife will be forgiven well in excess of $50,000, including accrued interest. By contrast, even if she paid off the debt aggressively over a 10 year period, it would cost us much more overall.
Looking forward to others’ thoughts on this topic. Thanks!