If you are looking to be a real-life hero and change the world through the Peace Corps program, or if you already served in the Peace Corps, you should know that your time served would qualify for loan forgiveness. While there is no actual Peace Corps Loan Forgiveness program, there are other federal programs that are available to Peace Corps volunteers which include complete loan forgiveness as well as reduced monthly student loan payments.
The most beneficial program available towards Peace corp volunteers for loan forgiveness is called the Public Service Loan Forgiveness(PSLF) program. This program offers complete student loan forgiveness for borrowers after 120 qualifying payments. To qualify for PSLF you must meet a few criteria
- Must have federal direct loans
- If you do not, your existing loans may be eligible to be consolidated and converted into direct loans
- Must work for a government entity, or a non-profit 501(c)(3), or any non-profit for qualifying positions
- The Peace Corps is run by the US Government and as such would qualify
- Must make any of the following income-driven repayments
Once all the above criteria are met, your payments on your student loans would be qualifying payments under the PSLF program.
Federal Direct Loans for Public Service Loan Forgiveness
Only federal direct loans are eligible for PSLF. If your loans are not direct loans, the US Government offers a free consolidation program which would take all of your existing federal student loans, and consolidate them into one new loan. Your new loan would then be a direct loan and thus qualify for the PSLF program. Within the direct consolidation program, you are able to choose which federal repayment plan you would like. For PSLF qualification purposes, it must be any one of the four listed above. If you are not sure what type of loans you have, you can check at studentloans.gov. You would still retain your subsidized benefits when going through a consolidation.
Repayment Plans Eligible for Public Service Loan Forgiveness
For peace corps volunteers looking to apply for public service loan forgiveness, you must choose one of the four income-driven repayment plans. These repayment plans use your discretionary income when calculating your monthly student loan payment instead of using your balance and interest rate like a normal loan. In the income-driven repayment plans, borrowers can qualify for a $0.00 monthly payment depending on their income and family size. For peace corps volunteers, this often means a $0.00 monthly payment. Even though the payment may be $0.00 per month, it is an actual payment that counts towards loan forgiveness. It is not a deferment, forbearance or grace period.
|Repayment Plan||% Of Discretionary Income||Qualifies for PSLF?||Interest Forgiveness?|
Recertifying Your Income Annually
In all of the income-driven repayment plans, it is required that you recertify your income annually. Since your payment is based upon your income, its assumed that over time your income will change, and your payment will change along with it. It’s critical to recertify your income annually, or you will be changed from an income-driven plan into a standard repayment plan. This change may greatly increase your payment and will cause your payment to become ineligible for the PSLF program. This is something borrowers must remember to do, and should not count on being reminded by anyone.
Remaining A Public Sector or Non-Profit Employee
For Peace Corp volunteers to qualify for this public service loan forgiveness, it would require that you continue to work in the public sector or for a qualifying non-profit. If you serve in the Peace Corps for 2 years and then get a job in the private sector when you return home, only your time in the Peace Corps would be eligible. The 120 payment to qualify for PSLF do not need to be consecutive, so if you work in the private sector for some time that’s ok. When you decide to go back to the public sector those payments would qualify and be combined with your previous time in the Peace Corps. Remember that if you have two separate qualifying periods, you will need to submit two PSLF forgiveness forms, each certified by both places of employment or volunteering.
Perkins Loan Cancellation For Peace Corps Volunteers
Serving in the Peace Corps would make you eligible for up to 70% of your loan to be canceled through volunteer service cancellation available for Perkins student loan borrowers. The way the program works is that for each year served in the Peace Corps (or AmeriCorps VISTA) you can have a certain percentage of your Perkins loans canceled. To apply for the cancellation an authorized official for the Peace Corps or Americorps Vista program must certify the borrowers cancellation form.
|Years of Service||% of Loan Cancelled|
If you plan to apply for the Perkins Loan Cancellation, you must not consolidate your loans. As we mentioned above, consolidating your loans will change all your loan types into direct loans, which would then be ineligible for the Perkins Loan Cancellation program.
Peace Corp Loan Forgiveness Options for Private Student Loans
There are currently no options for loan forgiveness for private student loan borrowers at this time. Private student loans are not treated the same way federal student loans are. Federal loans often have very many programs available to assist borrowers in repayment and loan forgiveness. These programs are generally not available by private lenders.
Volunteering in the Peace Corps offers student loan borrowers some benefits to really help with their loans. Both the PSLF and the Perkins Cancellation program are a great way to either get the loans forgiven completely or reduced by up to 70%. Besides those two programs, being able to take advantage of a $0.00 monthly payment in the income-driven repayment plans while on your mission helps reduce the stress of having to make student loan payments.