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, 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.”

Posted Oct. 28, 2009

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