Student loans are mounting for college and graduate students, with engineering majors being no exception. In fact, today, 70% of undergraduates leave school with student loans—about $37,000 on average. Nationally, Americans have $1.5 trillion in student debt combined. Given that engineering is the fourth most common major , many of those shouldering student debt are engineering students.
Since careers in engineering have some of the highest salary potential around , some students might consider taking on student loans in order to follow all the way through to a master’s degree in that area. Still, getting there isn’t cheap. In a recent study from Sallie Mae Engineering major respondents reported spending an average of $25,252 a year on graduate school, and about a third of that funded with student loans. And that doesn’t include possible balances carried over from their undergrad years. The average student debt for engineering undergrad students varies, but when you factor in graduate school and undergraduate debt, that could mean a substantial amount of student debt.
If you’re studying to be an engineer, you may assume there aren’t many loan assistance programs out there for you. But you do have options to save money on your loans, whether through student loan forgiveness, income-driven repayment plans, state programs aimed at professionals in your field, or student loan refinancing. Here, you can learn about some of the opportunities that exist.
Federal Loan Repayment Options
It’s true that many engineering majors go on to lucrative careers. But that doesn’t mean you necessarily earn a high salary right away. And you may choose to apply your skills at a government agency or nonprofit, or work in a different field altogether, earning less than expected.
The federal government offers four different repayment plans that tie your monthly payment to your income in order to make your student loans affordable. Once you make the minimum number of payments required, the balance on your loans is eligible to be forgiven. Which plans you’re eligible for, will depend on the types of federal student loans you have, and when you borrowed:
• With the Revised Pay As You Earn Repayment Plan (REPAYE Plan), your payment will typically be 10% of your discretionary income. If you make payments, the balance can be forgiven after 20 years if all the loans were for an undergraduate degree or 25 years if you also had graduate loans. Only Direct Loans are eligible, excluding Direct PLUS loans to parents.
• The Pay As You Earn Repayment Plan (PAYE Plan) also limits payments to 10% of your discretionary income, generally. The balance can be forgiven in 20 years. Again, only Direct Loans are eligible, except Direct PLUS loans to parents.
• Under the Income-Based Repayment Plan (IBR Plan), your payment will be 10% of your discretionary income if you borrowed starting July 1, 2014, or 15% if you borrowed before that date. In the former case, the debt can be forgiven after 20 years; in the latter, it can be wiped away after 25 years. Direct Loans are eligible (except Direct PLUS loans to parents), as well as most loans under the earlier Federal Family Education Loan Program.
• The Income-Contingent Repayment Plan (ICR Plan) limits payments to 20% of discretionary income in most cases, and the rest can be forgiven after 25 years. Only Direct Loans are eligible, but this is the only program that also allows Direct PLUS loans to parents to qualify, as long as they are consolidated into a Direct Consolidation Loan.
If you get confused, you can ask your loan servicer to advise on which plan is right for you. You can apply by filling out an Income-Driven Repayment Plan Request online or by asking your loan servicer for a paper form.
Taking advantage of programs that base your payment on your income can potentially make your monthly payment affordable in the long term if you don’t expect your salary to go up much.
Note: the amount forgiven under an income-driven repayment plan may be considered taxable income.
Public Service Loan Forgiveness
There’s another way to take advantage of student loan forgiveness for engineers. If you work full-time for a government agency, non-profit, or certain other employers that serve the public interest, your federal loans might qualify for Public Service Loan Forgiveness. Those organizations include the military, as well as public safety, emergency management, and public health groups.
Under this program, if you make qualifying payments for 120 months (a total of 10 years), the balance on your loans can be eligible for forgiveness. Make sure to submit an Employment Certification form annually or when you switch jobs. Note that only Direct Loans qualify for the program.
If you have older loans, you may be able to make them eligible by consolidating them through a Direct Consolidation Loan. You need to be enrolled in an income based repayment plan if you want to apply for Public Service Loan Forgiveness.
State Loan Assistance Programs for Engineers
Engineering is an in-demand profession. The U.S. Bureau of Labor Statistics estimates that 140,000 new engineering jobs will be created between 2016 and 2026. The fastest growing sub-specialties are civil, mechanical, and industrial engineering.
With this in mind, a couple of states have created programs that provide student loan assistance to people in the Science, Technology, Engineering, and Math (STEM) fields as incentive for professionals to reside there and pursue jobs in these areas.
In Maine, the Harold Alfond Foundation offers up to $60,000 in student loan relief for state residents who work in a STEM field for a business based there. The program, administered by the Finance Authority of Maine, awards grants to approximately 150 people a year and will run at least through 2019.
You don’t have to already be a Maine resident—you can apply if you live anywhere in the U.S. or even abroad, as long as you become a resident after being hired by a Maine employer.
To apply, you have to submit a resume, essay, a statement saying you intend to live and work in Maine for a decade, information about your student loan debt, and an employment certification from a local employer. The program pays your debt in two $30,000 chunks, one after five years and another after 10 years of employment in a qualifying job.
In North Dakota, the STEM Occupations Student Loan Program also offers help with student loans for engineers. To qualify, you need to have studied a STEM-related field in a board-approved college and maintained a cumulative grade point average of at least 2.5. You must also have worked in a STEM-related job in North Dakota for a year after graduating and earn no more than $60,000.
The debt relief applies to federal loans, North Dakota DEAL Loans, or DEAL One Loans, as long as you are not in default. The actual amount doled out each year varies, depending on what funding the legislature approves, so it’s not guaranteed. Applications are due in May of each year.
When looking for student loan relief, steer clear of any scams promising fast, easy solutions—at a hefty cost. Many of these companies end up filling out paperwork you could’ve completed yourself for free, or providing no services. Focus on official programs administered by federal or state governments, or by legitimate foundations or employers.
Look to Your Employer
With employers looking to retain talent, some companies offer loan assistance for engineers. For example, Natixis Global Asset Management offers employees $1,000 a year toward their student loans for up to a decade.
You can receive the benefit for federal or private loans as soon as you join the firm. Almost 20% of the company’s employees are taking advantage of the program. The company often hires for roles such as network security engineer, front office engineer, data engineer, and others.
PriceWaterhouseCoopers , the professional services firm, pays $1,200 in student loans for associates and senior associates, for up to six years. Its employees include software engineers, data engineers, cloud security engineers, DevOps engineers, and more.
Abbott , a health technology company, assists with student loans in a slightly more indirect way. For full-time and part-time workers who qualify for the company’s 401(k) plan, and who are paying at least 2% of their salary toward student loans, the company will deposit its 5% match in the 401(k) plan even if the employee doesn’t contribute anything.
This way, it helps employees avoid the tradeoff between paying off loans and saving for retirement. Abbott hires for roles like engineering director, senior manufacturing process engineer, mechanical engineer, and more.
These are just a few examples of companies that offer loan repayment help to engineers. It’s worth keeping a lookout for this benefit throughout your job search.
The Benefits of Student Loan Refinancing
The above options may not be enough: Perhaps you don’t live in the right place or work for the right employer, or maybe you earn too much for an income based plan to make sense. If you don’t qualify for loan assistance, or even if you do have some benefits but not all of your loans are covered, refinancing your student loans can be a good way to potentially save money.
You can refinance federal loans or private loans with a variety of lenders and other financial institutions, often nabbing a lower interest rate or reduced monthly payment in the process. You even might be likely to get a better rate if you have a good credit score, earn a decent income, and have a solid employment history. It takes just a couple of minutes to see if you pre-qualify online.
Engineer a Better Future
Student loans represent an investment in a solid career path, but they can be a burden even for people in thriving professions. If you’re an engineer, check out what options are available to reduce your student loans, whether that’s loan forgiveness, assistance from your state or employer, or student loan refinancing.
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Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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