Student loans are the bane of almost every recent graduate. Not only do they put a damper on such dreams as buying a home or spending a year abroad, they also force the graduate to immediately hunt for work- any work- so as to start paying off the huge debt that has accumulated. For the student attaining a baccalaureate degree in one of the 50 states in the USA in 2007, average debt amounted to $20,000. The situation is even worse for graduate or medical school graduates, who may easily have tacked on over $100,000 in debt.

Students loans, and the inevitable job rush that they cause, are unfortunate for a number of reasons. The biggest one may be that, instead of the graduate honing his/her skills in an internship or some other apprenticeship program, he/she is forced to take the most available (and usually lowest paying) job so as to start paying off student loan debt.

The only silver lining to this cloud of debt used to be loan deferment if one went to graduate school, could not find employment, or experienced some kind of economic hardship. Luckily, and due in large part to today’s challenging economy, the government has instituted two new student loan repayment programs, starting July 1, 2009:

1. Income-Based Repayment

2. Public Service Loan Forgiveness

Income-Based Repayment (IBR) is a payment option available for federal student loan recipients. The program places a repayment cap on the student loan usually at 10-15% of gross earnings. The cap is determined by actual earnings and by family size. Furthermore, if, by the end of 25 years of qualifying repayment, the debt still exists, it is forgiven.

The nice thing about IBR is that it really helps out those graduates who are not earning a lot of money, or who may be earning at or below poverty level (which, for 2009, is defined as $10,830/year in the contiguous United States and the District of Columbia. Hawaii and Alaska have slightly higher amounts).  For graduates not earning at least 150% of poverty level, they are not obligated to make repayments. For those graduates who  earn at least 150% of poverty level, but not much more, there is a knd of "sliding scale" regarding repayment as a percentage of earnings. This percentage also decreases as a function of family size. Thus, the more members in a family, the less money has to be paid back for student loans.

Public Services Loan Forgiveness (PSLF) is a "add-on" plan to the IBR and applies to graduates working in public service jobs, including government and non-profit 501(c)(3) jobs. Basically, after 10 years of making qualifying payments on a federal student loan, such as under the IBR program, any remaining debt is forgiven. Graduates must work in the government or non-profit sector during the entire time they are making the qualifying payments. The payments need not fall under the IBR program, but the IBR program does help make the payments more affordable.

The nice thing about the PSLF is that it includes a wide range of employment areas. Aside from working for the government or a non-profit agency, one also qualifies for a PSLF if one works for local or tribal government, including a military or public school/college, or if one serves full-time in the Peace Corps or AmeriCorps. Even if a graduate does not fall under these employment areas, the Department of Education extends the following additional qualifications for a PSLF:

(1) your employer is not  "a business organized for profit, a labor union, a partisan political organization, or an organization engaged in religious activities, unless the qualifying activities are unrelated to religious instruction, worship services, or any form of proselytizing;"

and,

(2) your employer provides any of the following public services: emergency management; military service; public safety; law enforcement; public interest law services; early childhood education; public service for individuals with disabilities and the elderly; public health; public education; public library services; and school library or other school-based services.

With such broad employment categories, it stands that many graduates will have the promise of freedom from student loan hell after 10 years of service to the public good. For additional information, click here.