wfn.org | [LCMSNews] Programs can reduce school debt

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>10.30.2009		
>	LCMS News	 	
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>THE LUTHERAN CHURCH Missouri Synod  	 	
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	October 30, 2009 .................... LCMSNews -- No. 91

Government offers two programs to reduce student debt

>By Paula Schlueter Ross

If you're a pastor, teacher, or other professional church worker who is
paying off federal student loans, you might benefit from two
debt-reduction programs now offered by the U.S. Department of Education.

For those who qualify, the programs can drastically lower monthly
payments on student loans, and forgive the unpaid remainder after 10
years of service to a nonprofit 501(c)(3) organization, which may
include churches, church-sponsored schools, or other entities.

	

*	"Income-Based Repayment," or IBR, which became available July 1,
is designed to help borrowers keep their loan payments affordable with
payment caps based on their income and family size.  Generally, the
lower your income -- and the higher your debt -- the more you stand to
benefit.

IBR uses a kind of sliding scale to determine how much borrowers
can afford to pay on their loans.  Those who earn below 150 percent of
the poverty level for their family size would pay nothing.  For those
who earn more, their loan payments are capped at 15 percent of whatever
they earn above that amount.  Typically, the IBR formula for loan
repayment works out to less than 10 percent of the borrower's income.

For example, say a married pastor with two children earns an
adjusted gross income of $50,000 annually.  His education debt is
$60,000, and he is paying $690 a month to repay the loan over 10 years.
With IBR, the pastor's monthly loan payment would drop to $210, a
savings of $480 per month.

Here's another scenario: A single teacher earning $35,000
annually, with school debt of $80,000, is paying $522 per month over 30
years.  The IBR program would lower his or her monthly loan payment to
$230, a savings of $292.

After 25 years in the program, any remaining loan balance is
forgiven.

	

*	"Public Service Loan Forgiveness" (PSLF), which became available
Oct. 1, 2007, is available only to those working full time in "public
service," i.e., a 501(c)(3) organization, which includes all LCMS
churches and church-sponsored schools, according to Randy Behm,
president of the Cleveland Lutheran High School Association and a
full-time banker who has been involved in financing student loans since
1989.

After 10 years of such public service, the PSLF program forgives
any remaining loan balance -- wiping out the borrower's remaining school
debt.

Eligible LCMS church workers can take part in both debt-reduction
programs simultaneously, Behm says, which can prove to be "a huge
benefit for them."

Dr. Glen Thomas, executive director of the Synod's Board for Pastoral
Education, says the programs "have the potential to attack what usually
is the largest frustration for our church workers, and that is the
carrying of a large debt and, at the same time, being paid a modest
salary and trying to make ends meet."

For today's church workers who are burdened by excessive education debt
load, "these programs could offer significant reduction in their monthly
payments and eventually allow, after 10 years, those payments to be
completely wiped out," Thomas said.

Dr. Kurt Krueger, executive director of the LCMS Board for University
Education, says the PSLF program is the government's way of encouraging
"talented people to continue to work for the good of society, rather
than going to a more lucrative for-profit position somewhere."

And, he adds, if the two debt-reduction programs persuade just 10
students a year to pursue church-work careers, "then these programs, I
think, would have served their purpose."

But both Krueger and Thomas caution current students not to take on more
debt than they should, thinking "these programs will simply take care of
it once I'm out."

"That's a very precarious situation to put yourself in financially,"
says Thomas, especially if the programs are discontinued in the future.

"We do not want to share these programs with our students with the
intent that they are going to incur more and more debt, beyond what they
can handle," echoes Krueger.

Both programs are available to those with Stafford (subsidized or
unsubsidized) loans, Graduate PLUS loans, and consolidation loans issued
by the U.S. Department of Education.  For information, visit
http://www.ibrinfo.org, which features an online calculator that can be
used to determine eligibility.

An informational "webinar," or Web-based seminar, is being planned to
share details of the Income-Based Repayment and Public Service Loan
Forgiveness programs with LCMS district representatives and financial
aid advisers at all 10 Concordia University System schools and the
Synod's two seminaries.

Thomas offered one final caveat: "It is essential that everyone
contemplating these programs examine their own financial circumstances
and seek financial counsel, if needed, to determine whether
participation in these programs is a wise choice for them," he said.
"It would be a mistake to assume that an article in Reporter constitutes
blanket endorsement of these programs for all ordained and commissioned
ministers in our Synod."

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If you have questions or comments about this LCMSNews release, contact
Joe Isenhower Jr. at joe.isenhower@lcms.org
<mailto:joe.isenhower@lcms.org>  or (314) 996-1231, or Paula Schlueter
Ross at paula.ross@lcms.org <mailto:paula.ross@lcms.org>  or (314)
996-1230.

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