Joining the Peace Corps after college or grad school is a noble way to start your career. Volunteers in the government program deploy to more than 60 countries around the world for two-year stints of public service.
That can mean anything from teaching secondary school, to working with farmers, to promoting health awareness. If you’re considering following this path, you’d be joining more than 230,000 American adults who have served since the program was founded almost sixty years ago.
But if you’re like most students these days, you might be graduating with a significant amount of educational debt. Today, 70% of undergraduates finish school with debt, with the average borrower owing more than $37,000, and that’s before interest adds up over the years.
Committing to the Peace Corps, which pays only a local living allowance while you’re enrolled, can be daunting when you’re facing that burden. You may be wondering whether the Peace Corps will even allow you to join with a heavy debt load.
The answer is yes—he Peace Corps and student loans can go together. You’re still responsible for your loans if you become a volunteer, but you could be eligible for additional benefits as a result of your service that can make paying them off easier. If you’re seriously thinking about the Peace Corps, here’s what you need to know about managing your debt during and after your time abroad.
Options for Reducing Loan Payments During Your Service
If you join the Peace Corps right after school, you may not have to start repaying your loans immediately. That’s because anyone who has certain federal loans (Direct Loans and Stafford Loans) gets a six-month grace period before payments are due, although interest will might start accruing.
You don’t qualify for a grace period if you have a PLUS Loan, and with Federal Perkins Loan, you’ll have to check with the school that issued it. If you were enlisted in active duty military service, the grace period can be extended for up to three years. However, that doesn’t apply to the Peace Corps.
Still, like the military, the Peace Corps is considered a form of government service. As a result, if you have federal loans, you may be eligible for certain options to pause or reduce your payments while you’re a volunteer.
First, as a Peace Corps member you may qualify for deferment . This allows you to stop making payments, or reduce the amount you pay, during the time you’re in the field, for up to three years.
During deferment, you are not responsible for paying interest that builds up if you have certain kinds of loans, including Direct Subsidized Loans, Subsidized Federal Stafford Loans, or Perkins Loans. You are responsible for interest, however, if you have unsubsidized federal loans or Direct PLUS loans.
Note that your deferment will not automatically kick in when you join the Peace Corps—you’ll need to submit an application and documentation to your loan servicer.
Your loan servicer may also have you re-apply for deferment after a year, so make sure you turn in the necessary paperwork. If you’re still in the six-month grace period for any of your loans, ask your lender about the right time to apply for deferment.
Another way to reduce your monthly payment on federal loans is to apply for an income-based repayment plan . The government offers four repayment plans designed to make payments affordable if you’re on a limited income. These plans tie how much you pay every month to how much you make, limiting your outlays to between 10% and 20% of your discretionary income.
The specific plan you qualify for depends on the types of loans you have and when you borrowed. If you stick with the plan when you get back, your balance may be forgiven if you continue making minimum payments for 20 or 25 years, depending on the plan.
If you have private loans, there’s no guarantee that you’ll be able to pause or reduce those payments. But some private lenders do offer flexibility during periods of economic hardship, so approach yours to ask whether they can offer you any options while you’re a volunteer.
How You Can Get Your Loan Partially Cancelled
If you have a federal Perkins Loan, you may qualify for another perk thanks to your Peace Corps service: partial cancellation .
You can get 15% of your loan canceled after your first year of service and another 15% after your second year, then 20% after your third and fourth years, respectively. That adds up to having 70% of your loan canceled after four years!
This also includes the interest that accumulated during that time. All borrowers who have Perkins Loans are eligible, regardless of when you took the loan out, but only service completed after Oct. 7, 1998, qualifies. This benefit can make it easier to sign up for the Peace Corps with student loans, but keep in mind that other types of loans aren’t eligible.
The Peace Corps and Public Service Loan Forgiveness
Since the Peace Corps is clearly a way of doing good in the world, it shouldn’t be too surprising that as a volunteer you may be eligible for Public Service Loan Forgiveness.
Under the program, if you make payments for 10 years on your loans under a qualifying income-based repayment plan, you may be able to have the balance on your loans forgiven.
Because you have to make 120 monthly payments to qualify, you would only be eligible if you continue in a public service job full-time at some point after leaving the Peace Corps. Other qualifying fields include government organizations, 501(c)(3) nonprofits, public service agencies such as libraries and police departments, and more.
The payments don’t have to be consecutive, meaning you may qualify if you go back to public service after a few years doing something else. Note that this program applies only to Federal Direct Loans, but not Perkins Loans or loans under the Federal Family Education Loan (FFEL) Program. If you’re hoping to qualify for this, complete an Employment Certification form every year, starting with your time in the Peace Corps, or when you switch jobs.
When you look into options for student loan forgiveness, beware of the scams out there, some of which target young graduates like you. One prominent example is the Obama Student Loan Forgiveness Plan, which doesn’t exist but sometimes lures borrowers to pay fees for paperwork they could’ve completed themselves or for nothing at all. Stick with the forgiveness options offered directly through the Department of Education .
How Student Loan Refinancing Can Help
If you’re looking for other ways to make payments more affordable while you’re in the Peace Corps, or after you leave, consider refinancing your student loans. You can refinance federal loans, private loans, or both.
When you do so, you take out a new loan from a private lender to pay off your existing loans, which might make sense if you qualify for a better interest rate or lower monthly payments than you previously had. A loan refinancer will take a look at your personal information, income, credit history, and other factors when deciding what terms and interest rates to offer you.
Fixed rates will stay the same for the term of your loan, while variable rates will shift over time. Keep in mind that refinancing federal loans will mean you have to give up government benefits like deferment, partial cancellation, income-based repayment, and Public Service Loan Forgiveness. But for some people, refinancing can be a great way to make student debt manageable while you’re a volunteer and for the ensuing years.
Don’t Let Student Loans Stop You from Following Your Dreams
If your goal after college or grad school is to join the Peace Corps, or engage in any public service for that matter, your student debt doesn’t have to be an obstacle . With federal loans, there are options for delaying or reducing payments or getting part of your debt canceled or forgiven.
And regardless of what kinds of loans you have, refinancing can be a way to make payments more affordable. Plus, when your two years of service are complete, you’ll get $8,000 from the Peace Corps that you can put toward your loans if you want to. Coming up with a plan to pay your loans is important, but that doesn’t have to come at the expense of making a difference.
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