Kiss Those Student Loans Goodbye

Shawn Agyeman was down on his luck last fall, having just lost his job as a research assistant at the University of Pittsburgh, his alma mater. With looming monthly student loan payments of around $200 a month hanging over his head, the recent college graduate was starting to worry about how he’d meet his debt obligations, fearful that creditors would harass his parents?who co-signed his loans?if he couldn’t come up with the money. Then he got a phone call from the director of a new grass-roots nonprofit that he says changed his life. Raymar Hampshire, co-founder of a volunteer group called SponsorChange.Org, presented Agyeman with a tempting offer: volunteer in the local Pittsburgh community several hours a week and receive a stipend that would help to cover his looming student loan payments.

“When I heard about it, I said: ‘I’d almost be a fool not to do this,’” says Agyeman, 25, who signed up for the pilot program in the spring of 2009 and will be doing it again this fall, with plans to earn $1,000 for his efforts. “I jumped all over it.”

Agyeman is one of thousands of people saddled with student loan debt looking for innovative ways to meet their monthly payments. Their plight has become even more severe as unemployed recent college graduates lose their jobs or continue to have trouble landing one, running the risk of not being able to pay back their student loans or, in the worst-case scenario, defaulting. Fortunately, there is a raft of programs that have emerged in the past year or two that can either help students and recent graduates make their student loan debt more manageable or, in some cases, get the loans either partially or completely forgiven. Some of these programs are oriented towards specific careers?such as teaching or nursing?while others are open to recent graduates who meet certain income and eligibility requirements. Still others are open to just about anyone. Some programs, such as SponsorChange, help graduates repay a portion of their student debt. Other programs help students, graduate or undergraduate, avoid student loan debt entirely.

RAISING AWARENESS

Learning about these options and mapping out a plan to take advantage of them is not always as easy as one might think. Many students simply aren’t even aware that some of these programs exist, and, as a result, may take out hefty private loans that they could have avoided with a little strategic planning, says Edie Irons, a spokeswoman for the Project on Student Debt, a nonprofit that raises awareness about financial aid. She recommends that students mapping out their education paths learn as much as they can about the different type of loan forgiveness programs available to students before taking out any new loans or additional ones. One point to keep in mind: Most of these loan programs apply only to federal student loans, with very few private loans qualifying.

“People should definitely plan ahead and learn about the loan-forgiveness programs that are out there,” she says. “Be sure that you are in a position yourself to qualify for them and then, if you can make it work, go for it.”

Here’s a roundup of debt-reduction strategies for recent graduates, current students, or those thinking about going back to school:

VOLUNTEER: There are a number of volunteer programs that help people pay off their student loans, though most require a long-term commitment. Such programs could be a good short-term option for college graduates who have been unable to find a job, says Mark Kantrowitz, a student loan expert who runs FinAid, an online provider of student aid information. “If you’re unemployed right now, you might as well volunteer and get a little bit of money to pay back your students loans,” he says.

One of the best-known volunteer options is AmeriCorps, a national network of service programs, which requires students to volunteer for a year full-time. In exchange, they get a small living stipend and, when the year is up, an education award of $4,725 that can be applied to student loan debt or future education programs. The AmeriCorps program has seen a surge in popularity this year, receiving 177,099 online applications between November 2008 and July 2009, a 203% increase over the same period a year ago, says Siobhan Dugan, a spokeswoman for AmeriCorps. “We have seen the interest increase phenomenally,” Dugan says, who says the spike is likely due to a combination of factors, including the economy and President Obama’s call-to-service campaign.

Another popular program is the Peace Corps, which requires volunteers to make a two-year commitment to serve in a foreign country. Unlike AmeriCorps, the Peace Corps does not provide a student loan payment award. However, it does allow participants under several federal loan programs to defer their loan payments during their service. Those with federal Perkins loans are eligible for a partial cancellation benefit of 15% for one year of service up to 70% for four years. Another perk? The program provides participants with a $6,000 readjustment allowance after the two-year term of service is completed, a portion of which can be used to repay student loan debt, according to the Peace Corps Web site.

If you don’t have the time or resources to devote to a year or two of full-time volunteer work, look for programs locally that can help you pay off your student loan programs while volunteering. For example, the SponsorChange.Org program in Pittsburgh allows working young professionals to volunteer during their free time, in exchange for student loan stipends paid for by donors. To be eligible, students have to have a bachelor’s degree and proof of student loan debt (participants have, on average, $20,000 of debt), and they must fill out an online profile. The program puts the program’s “volunteer fellows” in touch with local nonprofits?who pay a fee for the service?pairing them up with one that meets their interests and providing them with leadership training. This fall, 10 fellows will volunteer for 50 hours over a four-month period, earning $1,000 each. “It’s sort of a win-win situation for both the nonprofit and the young professional,” says Hampshire, the program’s CEO and founder.

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