DFA reader Dana asked:
I have been called to missions for a few years now, and have gone back and forth with God’s timing. I was on my way to Haiti for two years just a few months ago, until God turned the plan around. I am now serving in 2, going on 3, ministries within my church, all while working full time in an entry-level job that I hate. I am unable to fully immerse myself into my calling within these ministries because of my job. I have eliminated every bill (car paid off, moved home, and all of my extras… cable, phone, etc) but I am stuck with Student Loans for what seems like the rest of my life. Because I am not called to serve over seas in a 3rd world country, I am unable to be sponsored for the service I do here in my home town. I believe whole-heartedly that the Lord will provide. I am wondering if there is a way to have one’s student loans sponsored for ministry service? I am willing to live as minimal, and as dedicated to my service as possible….I just need to pay my student loans. Do you have any advice?
Great questions Dana, let’s take a look.
As I see it, there are currently four options for ministry-focused borrowers:
- Public Service Loan Forgiveness
- Consolidation with lowered interest rates
- Income-Based Repayment Plan (IBR)
- Income Contingent Repayment Plan (ICR)
Public Service Loan Forgiveness
PSLF is for people who work in a wide range of “public service” jobs, including government and nonprofit 501(c)(3) organizations. It will forgive remaining debt after 10 years of eligible employment and qualifying loan payments. Use it in conjunction with IBR (discussed below) to keep payments affordable during repayment.
Dana, since you are not a full-time minister and have no immediate plans to enter into full-time ministry, we can eliminate the option of Public Service Loan Forgiveness.
The options you’re left with are loan consolidation and either IBR or ICR, whichever best fits your situation.
Student Loan Consolidation
If you have consolidated once before it’s typical you won’t be eligible to (or have any need to) consolidate again.
If you have never consolidated, do so with care. Make sure the consolidation will deliver a single servicer and lower rates on all loans.
For consolidation information visit LoanConsolidation.edu.gov and read their several pages on “Borrower Info.” They will help you better understand (and make decisions about) topics such as:
- whether you should consolidate
- how you benefit
- if you’re eligible, and more.
Dana, in the limited information we have about your situation it appears you’ll be eligible – and benefit from – consolidation.
In addition to consolidation, it appears entering into either IBR or ICR could be a huge blessing.
Income-Based Repayment (IBR)
In summary, IBR (made available to borrowers on July 1st, 2009) is best for borrowers who are experiencing financial difficulty, have low income compared with their debt, or are pursuing a career in public service.
IBR makes repayment easier by capping monthly payments at a percentage of your discretionary income. Your monthly payment will adjust annually in reaction to changes in both income and family size.
Use this IBR calculator to see if you’re eligible.
Most eligible borrowers secure monthly payments that are less than 10% of their gross income.
Another option is ICR.
Income Contingent Repayment (ICR)
Like IBR, ICR caps monthly payments for low income borrowers, but the payment calculation is based on a third factor (in addition to income and family size): total amount borrowed.
This repayment option is currently available only from the U.S. Department of Education, not from banks or private servicers. The Federal Family Education Loan (FFEL) lenders offer Income Sensitive Repayment as an alternative, but your best bet is probably IBR.
Use this ICR calculator to see if you’re eligible.
Find higher paying work you enjoy
A final recommendation is to find a job you enjoy (that pays better if possible) or , or start a side business.
I started DebtFreeAdventure.com and diyNatural.com as side businesses. After two years I was able to leave my former career, which I did not enjoy, to run the sites and write books full-time.
Determine which gifts God has blessed you with and consider using them to create and share helpful information by way of books, ebooks, and/or websites.
Good luck and God bless. Let us know what you decide and how it works out.
References and Resources
- Public Service Loan Forgiveness on Finaid.org
- Public Service Loan Forgiveness on Studentaid.ed.gov
- Income-Based Repayment Plan on Finaid.org
- Income Contingent Repayment Plan on Finaid.org
photo credit: DonkeyHotey