Debt forgiveness loan student

Loan forgiveness and the physical therapist

fiscal therapy

Tips and resources for physical therapy students and recent graduates.

The concept of loan forgiveness is simple: In exchange for volunteer work, military service, or teaching or practicing a medical/health specialty in an underserved community, a government agency or private concern will cancel or repay all or part of your education loan. The reality, however, is a bit more complicated.

The complications begin with the issue of availability. While there are many published loan-forgiveness opportunities in general, relatively few are designed specifically to assist physical therapists (PTs). Research on state-based loan-forgiveness programs, for example, identifies only two states-Nebraska and New Mexico-that specifically list PTs as being among those eligible for their program. Availability also is limited by the fact that programs often are funded via a private or government appropriations process that is affected from year to year by various economic pressures. This means that there is no guarantee that the loan repayment program you are considering now will exist at a later date.

There's another twist that's important to consider as well: Depending on the circumstances, the Internal Revenue Service may consider the forgiven amount of an education loan to be taxable income. In other words, if you don't plan carefully, your savings could be negated by a sizable tax bill.

So, although loan-forgiveness programs have the potential to reduce education debt and can result in significant savings for borrowers, current physical therapy students and new graduates are well advised not to count on loan forgiveness as the sole or even primary means of managing prospective or existing education debt.

Strategies

A better strategy for dealing with education financing demands is to "optimize loan indebtedness." This involves constructing a personal budget that minimizes overall borrowing and maximizes your ability to manage your level of debt over the entire repayment period. Optimizing loan indebtedness also requires that you become knowledgeable about scholarship, grant, work, and loan sources, so that you:

* Maximize use of the best money sources-scholarships, grants, and current income.

* Maximize use of the next-best sources, such as lower-- interest subsidized loans and work opportunities.

* Minimize use of such last-resort sources as higher-- interest-rate and/or unsubsidized-interest-rate loans.

If you are getting ready to take on education debt or are in school now, you can establish and maintain control over your debt by applying the following financial planning skills:

* Start by getting a handle on your income and expenses, and creating a budget for spending.

* Next, learn the language of the financial aid system. (See the "Helpful Terms" box on the facing page.)

* As stated previously, identify the best sources of financial aid that you can tap into-scholarships, grants, and current income. If you still need assistance to cover your education debt after exhausting these sources, then identify the next-best sources of financial aid that are available to you. Remember to take on last-- resort financial aid only after you have exhausted your options in the first two categories. Just as you would not treat a patient/client without first conducting an examination and evaluation, you should not take on education debt (or any other debt, for that matter) without first asking questions and considering how that choice will affect your larger financial situation.

* When you are applying for any financial aid, be sure to meet all application deadlines and to always make loan repayments promptly and in accordance with all of the terms of each loan.

* Always keep meticulous personal records of loans and lenders. Thorough documentation will prove invaluable should a question or dispute arise.

If you are out of school and faced with existing debt, you still can take steps to establish and maintain control over your education debt:

* Get a handle on your income and expenses, and create a spending budget that will help you minimize the addition of new debt, pay off existing debts, enjoy the present, and save money toward your dreams for the future.

* Gather together and organize the paperwork for each of your existing student loans.

* Review the terms of your existing student loans to be sure you are in compliance. Address immediately any questions or concerns that arise from this review.

* Maintain a schedule of on-time payments. If you find yourself unable to stay on schedule with your payments, be proactive. Contact the holder/servicer of your loan and explain your circumstances. Most holders/servicers will be eager to work with you to prevent default and help make repayment manageable. Don't wait until you are behind or close to default to take action.

* Take the time to understand the language of the financial aid system and explore various tools for managing your education debt to see if any may be right for you. Just as you take advantage of equipment in the delivery of care to your patients/clients, you also should use the many resources that can help you understand and take control of your finances. Helpful Web sites include www.finaid.org, www.smart money.com, and wwwledwise.org.

Tools

There also are education debt-management tools that can help you. One that can prove to be very advantageous for borrowers is loan consolidation. This is a process whereby several student or parent loans are combined into one bigger loan from a single lender, which is then used to pay off the balances on the other loans. Consolidation loans are available for most federal loans, including Stafford, PLUS (Parent Loans for Undergraduate Students), SLS (Supplemental Loans for Students), FISL (Federally Insured Student Loans), Perkins, HPSL (Health Professions Student Loans), NSL (Nursing Student Loans), HEAL (Health Education Assistance Loans), guaranteed student loans, and direct loans. Some lenders offer consolidation loans for private loans as well. Consolidating your existing student loans can pave the way for significant reductions in your monthly payments, but the benefits of consolidation will differ for each borrower.

Another tool that PTs, PT students, physical therapist assistants (PTAs), and PTA students may not be aware of is loan assistance from employers. Often, employers have loan assistance programs in place or will consider providing some measure of loan assistance when they are negotiating a new employment benefits package or at your review time. Clearly, in order to be successful, you will need to make a strong case for how your employer's support of your education will improve your contribution to the organization. You may be surprised, however, at what your employer is willing to do.

It's Your Call

So now you know. Education financing has been laid out for you and, as you can see, you have control over the outcome. The question is, will your current needs and your dreams for the future be foiled by unmanaged education debt? Or will you engineer a happy ending by taking your finances in hand now? The choice is yours.

For leads on sources of student loans and other financial aid, check out APTA's Financial Assistance Resource Guide, just updated for 2002, which lists available scholarships, awards, fellowships, and grants. Included is a section specifically listing minority financial aid information. For more information or to order, contact the APTA Service Center and inquire about order No P-62. Member price is $10; non-- member price is $17.

Leon Johnson, Jr, DEd, is President of EAS Group, LLC (www.easnetwork.com), administrator of the APTA-endorsed student loan program. He can be reached at 727/785-8886 or ljohnson@easnetwork.com.