By Liz Weston
LOS ANGELES Dec 30 When P.K. Drago graduated
from George Washington University in 2009 at the peak of the
Great Recession with $40,000 in student loan debt, she decided
to do volunteer work.
"It was not a good time" to get a job, the 26-year-old now
says, and so she joined AmeriCorps, a volunteer organization
that is essentially the domestic analog of the Peace Corps.
While working for AmeriCorps, she stocked shelves at a Los
Angeles food bank, mucked out stalls at a therapeutic
horse-riding camp near Sacramento and helped remediate mold in
She picked up experience that eventually helped her qualify
for her current job as a paid, full-time volunteer coordinator
for Habitat for Humanity in Washington, D.C.
And she earned an extra "bonus" benefit: AmeriCorps gave her
about $10,000 in education awards that she could use to pay off
her college loans.
For graduates and others saddled with student loan debt,
AmeriCorps is one of many programs that offer grants,
cancellation or forgiveness that can reduce the burden. Many
are particularly helpful for graduates who work in low-paying
fields or do volunteer work.
One such program, Income-Based Repayment (IBR), recently
received a big publicity push from the U.S. Department of
Education after complaints that too few borrowers knew about it
and that applying was difficult.
Under IBR, approved by Congress in 2007, payments of federal
student loans are capped at 15 percent of "discretionary
income," defined as the amount over 150 percent of poverty
levels for a borrower's household size.
In practice, payments are usually less than 10 percent of
gross income, said Mark Kantrowitz of Edvisors Network. Any
remaining balances are forgiven after 10 years of payments if a
debtor has a public service job, or after 25 years otherwise.
A more recent variation of IBR is known as "Pay as You
Earn." This program limits payments to 10 percent of
discretionary income and offers forgiveness after 20 years of
payments. Pay as You Earn is available for loans made under the
federal Direct Loan program after Oct. 1, 2011.
After President Barack Obama released a memorandum last year
fretting that "too few borrowers are aware of the options
available to them," the Education Department streamlined the
application process and sent emails to more than 3 million
borrowers to publicize the existence of these programs.
RELATIVELY EASY, READERS SAY
Several readers wrote on my Facebook page that they found
qualifying for IBR to be relatively easy.
"I had no trouble," wrote Clint Lyle of Nashville,
Tennessee. "Downloaded the form, filled it out, attached a
couple recent pay stubs, and voila! In three weeks I had a very
affordable payment. It's a truly wonderful program."
Yet many overburdened borrowers are still in the dark about
the program, said Persis Yu, staff attorney for the National
Center for Consumer Law, which runs the Student Loan Borrower
"I'm still working with people who don't know that it
exists," Yu said.
Other programs tie reductions in student loan debt to
volunteer or military service or to jobs teaching, practicing
law or providing healthcare in high-need areas.
Those who teach in a low-income elementary or secondary
school for five consecutive years, for example, may be eligible
to have up to $17,500 in federal student loan forgiveness. Loan
repayment assistance programs, available from schools,
employers, states and the federal government, help lawyers make
their payments. The Equal Justice Works site ()offers
Doctors and nurses can get loan forgiveness if they work in
areas that lack adequate medical care through the National
Health Service Corps and the Nursing Education Loan Repayment
Program. The National Institutes of Health's NIH Loan Repayment
Programs, meanwhile, repay up to $35,000 per year of student
loan debt for people pursuing careers in biomedical, behavioral,
social and clinical research.
The federal government allows its agencies to use student
loan repayment as a recruiting tool. Not all do, but the
Department of Defense is one agency that has embraced the
federal student loan repayment program, which pays $10,000 a
year in student loan debt for employees who commit to a
Those who may not want to commit for three years can still
get benefits by volunteering. AmeriCorps' education awards, for
example, are given after volunteers complete their 10- to
12-month stints. The amount is equal to the size of Pell Grants
for the award year, which currently is $5,550, and volunteers
can earn a maximum of two awards. Volunteers also can qualify
for loan deferral and the National Service Trust will pay
accumulated interest, a benefit that in Drago's case amounted to
more than $2,000.
Drago used one of her awards to pay down her Stafford
student loans and plans to use the other for further education.
"I'm hoping to go to graduate school in the next five years,
and some schools will match the value" of AmeriCorps grants,
Drago said. "It's a great program."