Award letters will soon appear in your mailbox. But, what’s next? Do you accept the offer? Do…
Does Peace Corps Pay for College?
Who wouldn’t love a chance to work a job that pays off student loans? The Peace Corps offers federal loan forgiveness, plus a whole world of other benefits.
Graduating with a mountain of debt has become a tradition in our country. Thanks in part to easy access to low-interest college loans over the past 25 years, we’ve become a nation of debtors. But for anyone who took out loans under the William D. Ford Federal Direct Loan (Direct Loan) Program, there’s hope for early repayment.
All you have to do is join the Peace Corps!
The Peace Corps May Qualify You for Loan Forgiveness
It’s always been hard to get college graduates to work in public service jobs. They often go for the high-paying positions with prestigious companies or enter career paths that leave no room for dallying around in the public sector.
Working for the public good, becoming a civil servant, volunteering, joining the Peace Corps… these are not traditionally known as typical career paths to riches. Even if they were, some positions in these categories are challenging, to say the least (teaching math in a low-income school and serving in a hostile zone in the military are two examples).
However, what they can be are good ways to get ahead financially, if you have federal student loan debt and work the required jobs for long enough. For some, the Peace Corps is an extremely attractive option, not just for the extraordinary experience offered by working as a Peace Corps volunteer, but also for taking care of student loans. What does it mean to have Peace Corps college money? Is it actually money?
Here’s How it All Works: The Many Ways to Deal With Loan Payments While in the Corps
Technically, people serving in the Peace Corps are still responsible for their loans while in service, but they do have options to offset or even alter their circumstances:
- Defer payment while you’re in. For the entire time you serve in the Peace Corps, you might qualify to defer your payments. That’s obviously great while you’re in, but once you enter the job market and leave the shelter of the Corps, you are still responsible for making payments (and now they’re slightly larger because of the deferment!).
- Enter into an income-driven repayment plan. The Peace Corps allows you to alter the size of your loan payments while you’re in service. “Income-driven” means the size of your income partly determines how much you’ll need to pay each month. Also taken into consideration are the size of your family and the amount of loans you have, which are eligible for the program. Other types of loans have no bearing on what your altered monthly payment will be under this plan.
- Apply for economic hardship deferment. If you apply for an economic hardship deferment, you get a lump sum (“transition payment”) after you complete your term of service with the Peace Corps. You can then use that lump sum to make a nice big lump sum payment on your federal student loans. There are a number of confusing details surrounding this plan, so be sure to check them out carefully here on the government website dedicated to this topic.
- Make your time in the Peace Corps count towards PSLF. Getting your student loans forgiven is one of the holy grails of personal finance. Freeing yourself from debt can change your life, so it’s wonderful news to many that the government offers a way to get rid of at least some of your loans through working in service. That includes, of course, joining the Peace Corps. We’ll look at this in more detail below.
Working in the Peace Corps Can Lead to Loan Forgiveness? Sign Me Up!
Whoa, not so fast, buckaroo! The Peace Corps isn’t for everyone. It’s living in an entirely foreign country, among people who need your help. A lot is required of you, and if your heart isn’t in it, then… it won’t be easy.
But if you have a mindset for exploration, experiencing new things, discovering new cultures and for sharing and giving back, then joining the Peace Corps might very well be one of the most exciting and rewarding decisions you’ll ever make.
And bonus: you might get thousands shaved off your student loans.
All About the Public Service Loan Forgiveness (PSLF)
Let’s circle back to the beginning, where we talked about how difficult it is to get smart young people to enter service jobs. This includes firefighters, civil servants (working for the government), math & science teachers in federally-designated low-income schools, and even the Peace Corps (as amazing as it is!).
To help nudge young graduates (who are typically overwhelmed by horrifically large student loans) in those directions, the government came up with the Public Service Loan Forgiveness program.
Work certain public service jobs for a certain amount of time, and they’ll wipe away part of your loans… all of them, maybe.
Before you get too excited, here are the rules:
- Loans must have been received under the William D. Ford Federal Direct Loan (Direct Loan) Program
- No private education loans qualify for forgiveness under this program
- You must work full-time to qualify
- You must work ten years to qualify
- Those ten years don’t have to be consecutive
- Peace Corps service counts towards those ten years
- To increase the likelihood that your Peace Corps time qualifies, continue making payments while in service. Make those payments under the Pay As You Earn (PAYE) program, not the income-based or income-contingent repayment plans offered by the government.
- Decline the deferment plans and continue making payments in order to increase the number of PSLF-qualifying payments and save money over using your transition payment you get from entering the deferment plan (see above, where we explain the transition payment option)
On that first rule, debtors may take heart in this: other types of loans may also be eligible, if you merge them together into a Direct Consolidation Loan.
Some Final Tips
The government makes it easy to keep track of how many PSLF-qualifying periods of employment you’ve racked up over the years.
Fill out the Department of Education’s Employment Certification for Public Service Loan Forgiveness form, which can be found here. Once you complete your Peace Corps service, fill out and submit this form for confirmation that you’ve put in your time and that it qualifies for the PSLF program. Then, once you have ten years’ worth, watch that student loan balance disappear!