Forgiving Debt, and Your Checkbook

In light of graduating season, there’s a buzz in the air among many recent grads about repaying student loans. Those heading straight to graduate school may have a few more years of deferment, but those leaving academia begin repaying loans right away. Among my circle of friends who attended both public and private schools, payments seem to be around $70-$200 per month. With a common student debt loan upwards of $10,000 (and that’s being conservative), repayment periods tend to span at least a decades. A decade after college, I’d like to own a home and have a family. Surely, I don’t want to still be making monthly payments for classes I took while still a teenager.

Fortunately, it may not have to be that way. Several new developments have been sprouting up across the country geared toward forgiving student debt, exchanging volunteer hours for loan repayment and other like-minded initiatives. Some require long-term commitment, such as the Public Service Loan Forgiveness Program which only forgives your debt after you’ve already made payments for a decade. Yeesh.

But… Other, newer developments are tackling the country’s growing student debt with more innovative solutions. A recent BusinessWeek article titled Kill Those Student Loans Goodbye gives the example of SponsorChange, which partners college graduates with sponsors in a give-and-take program that exchanges volunteer service for student loan repayment funds. While at first glance, it may seem silly to volunteer for a little money to pay off your loans when you could just get a regular job, but SponsorChange seems to be aware that many recent grads can’t get jobs. Plus, with the fuzzy feeling one gets from being a do-gooding citizen, I approve.

The article lists other ways to forgive (or at least partially forgive) student debt, some of which I’ll summarize in minute detail here:

AmeriCorps — Volunteer full-time for a year in exchange for a small living stipend and $4,825 toward student loan or future tuition.

Peace Corps — Volunteer in a foreign country for two years minimum in exchange for up to 70% federal Perkins student loan forgiveness (depending on length of service) and a $6,000 readjustment stipend when you move back home.

Teach Grant — Teach for four years in a low-income area to receive up to $4,000 in loan repayment grants per year. (Warning: Teachers who don’t complete the four years lose the grants, which get piled on top of their existing loan!)

Teach for America — Teach for a minimum of two years in exchange for a salary, benefits and $4,725 in loan repayment or future tuition funds. (This one sounds like the best bet for educators, in my humble opinion…)

These are just some of the premier programs, most of them government-sponsored, offering student debt help in exchange for some type of service. It will be interesting to see if more non-profits like SponsorChange begin to emerge as more college graduates look for alternative ways to transition out of university life. Perhaps this trend is not only a response to our weakened economy but will actually affect it such that more non-profit organizations operate at the core of our society. Perhaps volunteering will become the norm and full-time employment the exception. Perhaps education will find a way to become service-oriented rather than financially-oriented.

Just a thought.