The average college undergraduate comes out of college roughly $30,000 in debt. Business professionals and other higher education students who borrowed money had a median debt load of $41,000.
This does not include the averages for law school or medical school graduates whose debt averages are much higher. Should you pay those student loans early, refinance your student loans, or bet on student loan forgiveness under the Trump Administration?
About Public Service Loan Forgiveness (PSLF)
The Public Service Loan Forgiveness program (PSLF) is a very well-known pathway for college graduates struggling with hefty student loan debt. PSLF was created in 2007 in order to encourage graduates to pursue full-time work in public sectors including nonprofits and government organizations. Public sector positions typically offer lower salaries than their private counterparts. The plan requires all graduates to make 120 on-time payments for 10 years while working with a federal “income driven” repayment plans such as PAYE, REPAYE, IBR and ICR.
Since the earliest PSLF will go into effect in 2017 we are on the cusps of seeing the economic impact of PSLF. That impact will have further influence the continuation of PSLF for younger Millennials who graduated later. PSLF is a completely new program. There has yet been anything that has set any figure or data points on the consequences of this government loan forgiveness program.
Now, this may be cynical of but does anyone else see the danger here?
Government programs are always shifting. These programs change constantly every year when congressmen and lawmakers make their revisits and revisions. There is a lot of fine print in the PSLF paperwork that essentially translates, in layman’s terms, “if everything goes to plan.” 10 years is a very long time to hope for “if everything goes to plan.” One simple proposal can alter the entire contract – the entire program!
In fact, it’s already happening. A lawsuit from the American Bar Association against the Department of Education accuses the DOE of misleading public sector lawyers on the contents of PSLF.
“It’s clear that the Department of Education changed the rules in midstream,” Rives wrote. “That action forces public service employees to gamble with their financial futures and run the risk of being saddled with crushing, interest-enhanced debt.”
How to Pay Off $30,000 of Student Loan Debt in 4 Years
Meet the Millennial Who Paid Off 43K in Student Loans in 8 Months
Six-Figure Salary with Six-Figure Debt
Don’t Let Student Debt Keep You From Fulfilling Your Dreams
How to Use Side Hustles to Pay Off Debt
If the Public Service Loan Forgiveness program is cut or you suffered a job loss and can’t make those on-time payments, the interest that accrues during will make your total repayment balance even higher. There are a lot of ‘what ifs’ in a 10-year long program. What if you’re unable to find public sector work? What if you were injured and unable to work? Can a categorization change in your employer excludes itself from the definition of public service? Is your job really guaranteed for 10 years? Are all of your payments being submitted on-time? What if you become disqualified from PAYE/REPAYE/IBR or ICR? In addition, be cautious that the current geopolitical landscape in America with a Republican house and senate will burden the future of PSLF program as well.
There is no official “grandfathering” in PSLF like you would on your cable bill rates. No surprise here – cable companies want to keep you as a paying customer. Public loan service forgiveness programs have no interest in keeping you as a customer. The bottom line here is that those loans are yours; at the end of the day, that is your signature on the dotted line. If you have no interest in working in the public sector for at least 10 years do not treat PSLF as a pliable program. If you are able to be debt free within 10 years on a manageable payment plan then it is much safer for you to tackle your student debt head-on in order to avoid the crushing consequences of a shaky program.
Millennials: enroll in PSLF only as a last resort. Do not put all your eggs in one basket. PSLF is not the only solution to your student loan debt. Financial literacy is the better solution. Check out all the free resources My Millennial Guide has to offer for how to combat student loans head on. It’s possible to pay off your student loans. You can hear real stories from millennials that have done on this site!
Contributor’s Bio Lily at TheFrugalGene
Hi guys! It’s Lily, I’m a millennial money blogger at The Frugal Gene. My husband and I are the ultimate millennial super savers – pouring $65,000 into retirement accounts a year and saving another $50,000 on top of that in the pursuit of financial freedom. We live car-free and we have been student debt free since 2013. It’s a total dance party @ thefrugalgene.com