College loan forgiveness

Reduce your loans through public service.

Picture it: It's a few years down the road. You've graduated from your dream college, and life is good. No more essays, no more finals, no more tricky FAFSA forms, and most importantly, no more worries about how you're going to pay for it all. But wait a second...Aren't you forgetting something? Oh yeah--loans.

Once you graduate from college, many of you will be faced with the fact that you owe money to banks, the federal government, or both! But before you start working eight different jobs or defaulting on those loans, you should know that there are ways to ease your burden of debt without resorting to drastic measures.

Loan forgiveness programs may be the answer to your loan worries. Here's how they work: You provide a public service that helps those in need--teaching underprivileged children, building homes for low-income families, giving health care or legal services to the disadvantaged--and, in return, the program cancels all or part of your educational loan debt.

Sound good? Well, it is, but it isn't necessarily for everyone. Most loan forgiveness programs are highly competitive and have very rigorous selection processes consisting of lengthy applications and personal interviews. And the work is definitely not for the fainthearted. Conditions may be tough and pay is low, but the long-term rewards--both financial and emotional--can be great.

Here's a look at four loan forgiveness programs and the opportunities and benefits of each.

1. AmeriCorps

This national service program has tutored 4 million children, built 10,000 homes, and provided food and clothing for more than 5 million homeless people.

All AmeriCorps programs require that members be at least 18 years old. Volunteer terms can range anywhere from 10 to 12 months. Members receive a stipend of $8,700, health care, accommodations, and a $4,725 grant that can be used to pay off student loans or to finance higher education.

One of the advantages of AmeriCorps is that you can join it right after high school. That's what Kathryn Kosowicz did. She had a strong desire to volunteer and wanted to ease her future college loan debt. So shortly after graduating from high school in Concord, New Hampshire, she joined the AmeriCorps National Civilian Community Corps (NCCC), and was stationed in Charleston, South Carolina. For 10 months, she helped with flood relief efforts, tutored children, and restored parks in low-income areas, across five states.

"One project that really moved me was helping to renovate a dilapidated, old African-American cemetery that was overrun with weeds," she says.

Kosowicz, now 21, used her grant to reduce her loan obligation for her freshman year at Hunter College in New York City. "The grant was key to my being able to go to college out-of-state. It also bought me some time, so I could find a job to help me pay for my sophomore year, she says.

Besides the financial rewards, Kosowicz also gained valuable working experience that later helped her in college.

"AmeriCorps is as much about helping people as it is about being able to work and live with different people. That's one important skill you need for college," she says.

2. Peace Corps

If you like to travel and think you would enjoy the challenges of working and living in a different culture, then you may want to drop an application off with the Peace Corps. Volunteers have worked in more than 130 countries in areas such as education, health care, business, the environment, and agriculture.

Joining the Peace Corps requires a 27-month commitment (three months of training and 24 months in the field). Peace Corps volunteers receive a monthly living stipend (which allows them to live at the level of people in their community), health benefits, vacation days, and the opportunity to earn a master's degree while overseas.

Volunteers can cancel 15 percent of their Perkins Loans for each of their first two years of service, plus 20 percent more for each additional year served. Up to 70 percent total of a Perkins Loan may be canceled. At the completion of their service, volunteers receive a $6,075 readjustment allowance, which is intended to help them with their expenses while they search for a job, but which could go toward their loan debt as well.

Dana Topousis, 29, a former Peace Corps volunteer and now a public affairs specialist for the organization, joined the Corps shortly after graduating with a business and communications degree from the College of St. Scholastica in Duluth, Minnesota.

"I graduated from college, and I was bored," she says. "My job at a weekly magazine didn't meet my expectations. Every day was predictable and there was just too much monotony." So Topousis quit her job, joined the Peace Corps, went to Kenya, and used her business knowledge to help small business owners get loans. "I feel I got so much more than I gave. And the loan cancellation and readjustment money were really nice perks," she says.

3. Teach For America

Teach For America (TFA) wants candidates who believe in giving every child in America an excellent education. TFA members come from a variety of college majors. The only requirement to apply is a bachelor's degree. In 1998, more than 3,000 college seniors and graduates applied for 800 open spots in the 13 urban and rural areas that are serviced by TFA.

TFA volunteers earn the salary of any first-year teacher (between $20,000 and $40,000). For each year of their service, members also receive a $4,725 education award that can be applied to qualified student loans or future education costs.

Through TFA, members can defer their student loans and the payment of interest on those loans during their service period. But loan forgiveness was not the main reason psychology major Allison Ohle joined the organization after graduating from the University of California, Santa Cruz.

"I joined [TFA] because it's this amazing grassroots movement," explains Ohle, 24, who teaches bilingual language arts in New York City. "Teaching immigrant children has shown me what life is like for different kinds of Americans--it's what most of us miss out on."

4. National Health Service Corps

For more than 25 years, the National Health Service Corps (NHSC) has assisted in placing doctors, nurse practitioners, physician assistants, and dentists in regions of the United States, Puerto Rico, and the Virgin Islands, that lack adequate medical care. Nearly 2,500 NHSC members provide health care to 4.5 million people.

The NHSC's main requirement for loan repayment eligibility is that you are a U.S. citizen who is either a fully-trained physician in one of the designated fields, a primary care nurse practitioner, primary care physician assistant, a certified nurse-midwife, dentist, dental hygienist, or a mental health professional.

Each year of service equals a year of loan repayment with a minimum of two years of service. The maximum loan repayment per year is. $25,000, and each additional year's maximum is $35,000. Members also earn a competitive salary while the NHSC provides money for applicable taxes on the loan repayment funds.

NHSC is continually looking for people like Betty Pletcher, a nurse practitioner at the Hoxie Medical Clinic in Hoxie, Kansas.

"The NHSC loan repayment program sort of fell into my lap after I got my master's degree in nursing. It's great because I have about $35,000 in loans to repay," says Pletcher, 29. "I get hands-on experience by working here. I really doubt that I would get that if I were working in a richer area."

Ruwan Jayatilleke is a freelance writer who is currently paying off his college loans.