Thursday, May 23, 2013

Public Service Loan Forgiveness Program

Graham McCaulley, Extension Associate, MU Personal Financial Planning Extension

For many students this time of year marks graduation, and for some, graduation prompts thinking about student loans. Those graduating high school may be anticipating the disbursements of their first student loans in a few months to cover new tuition expenses. Alternatively, those graduating college may be expecting the end of student loan deferment and the beginning of repayment in the coming months. No matter where one is on the continuum of student loan debt, it is always important to think about the long term realities of student loans, including repayment options. This tip will outline one possible option for students who may go into careers in public service jobs.

What’s a public service job?

The definition of what is considered a public service job is fairly broad. Any employment with a federal, state, or local government agency, entity, or organization or a non-profit organization that has been designated as tax-exempt by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC). The type or nature of employment with the organization does not matter for PSLF purposes. Additionally, the type of services that these public service organizations provide does not matter for PSLF purposes. Some private, non-profit employers that are not tax exempt (i.e., 501(c)(3) status) can even be considered qualifying employment for the PSLF program, provided the employer provides certain public services (e.g., public health, safety, etc).

What types of loans are eligible?

Loans are either:

·         Federal- Made and/or regulated by the government, including Direct Loans, Federal Family Education Loans (FFEL), and Federal Perkins Loans; or

·         Private- Made by a bank/private lender and generally carry higher fees and interest rates than federal loans. For more information about avoiding deceptive private loans, visit

Private loans are not eligible for loan forgiveness programs, and not all federal loans are either. For a list of debt cancellation/forgiveness programs and which types of federal loan types are eligible for each program, visit Regarding the Public Service Loan Forgiveness Program (PSLF), only direct loans are eligible (i.e., loans you received under the William D. Ford Federal Direct Loan Program). Federal Family Education loans and Perkins loans are not eligible, however, they do become eligible if you consolidate them into a direct consolidation loan (more on this at

What do I have to do to get my debt forgiven?

·         Work full-time: At least an annual average of 30 hours per week. For purposes of the full-time requirement, your qualifying employment at a not-for-profit organization does not include time spent participating in religious instruction, worship services, or any form of proselytizing. If you are a teacher, or other employee of a public service organization, under contract for at least eight out of 12 months, you meet the full-time standard if you work an average of at least 30 hours per week during the contractual period and receive credit by your employer for a full year's worth of employment. If you have multiple eligible jobs, you must work a combined average of at least 30 hours per week.


·         Make 120 on time, full, monthly loan payments: Basically, you have to put in 10 years of full, on time payments before you can be eligible for the remainder of your loans to be forgiven. On-time payments are those that are received by your Direct Loan servicer no later than 15 days after the scheduled payment due date. Full payments are payments on your Direct Loan in an amount that equals or exceeds the amount you are required to pay each month under your Direct Loan repayment schedule.


·         Be paying back your loan through a qualifying repayment plan. You cannot necessarily choose a repayment plan that will greatly lengthen your repayment period so that you are eligible for most of your loans to be forgiven. For example, 30-year extended repayment plans are not eligible for the PSLF program. However, the income-based repayment (IBR) plan ( and the income-contingent repayment (ICR) plan ( are eligible. The 10-year Standard Repayment Plan is also eligible, however, after meeting the PSLF requirement of 120 consecutive payments, there would be no debt left to forgive!

Deciding whether or not the PSLF program is right for you depends on many factors, mainly how much student loan debt you have and how much money you will make during the first 10 years of your public service career. The more debt you have and the less you will make, the more attractive an option the PSLF may be for you (as payments tied to your income will be less when you make less money). Alternatively, if you make a high income you may very well have paid off, or be close to paying off, your student loans by the time you get to the end of the 10 year requirement under the PSLF.

There are many repayment options for student loans. A good first step would be to visit the Federal Student Aid repayment calculator at to see what all your options may be. You can also look at past financial tips (achieved at, especially the September and October 2011 tips) or visit the Managing Student Finances and Debt area of our website: Again, whether you are just starting to take out loans or have been paying them back for years, it is always good to consider your repayment options and realities. Even though the PSLF program may help some (and does encourage public service jobs), you will still end up paying back a substantial amount of the debt you take out, so never take out more loans than you need.

Thursday, May 16, 2013

Older Family Members and Finances

by Lucy Schrader

I expect to help our kids learn about money and finances.  I know we need to guide them, but not make all of their decisions.  We need to set up situations for them to succeed to become independent.  Yet when it comes to my parents, I hold some different beliefs—they are grown adults; they should take care of their own finances; who am I to tell them how to live and spend their money?  Yet with changes in aging, I may need to shift my thinking. There are more and more elderly adults who are not able to take care of their finances anymore or who need extra help.

So how can a person assist when parents or relatives need more help with their finances? This process takes time and for many families, this is not an easy thing to talk about.  Finances often have many emotions attached, including fear and anger.  And when someone loses control over financial decisions, they often loose independence (in where they live, how they live and what they can do or buy).

As you start discussions, be sure to:

·         Acknowledge feelings

·         Find a low-stress time to talk

·         Find natural times to talk about the issues or to ask questions (for example, use a news feature or an article to start the conversation)

·         Be aware of possible reactions (from relief to anger) from everyone involved, including yourself

·         Respect the person

Having financial conversations can be very hard to do.  Let the person know you want to help them in the way she wants to be helped and that you have her best interest at heart.  You might ask some questions, to encourage the person to put her wishes together and to have a place for all of these items (safe deposit box, fire-water proof file box, etc) so that if you need them in a medical emergency, then you can get to them. 


These questions (from can be useful as you help your relative plan for the future.  The person many not want to give you answers to all of these for privacy or other reasons.  Again, you can share the information and continue the conversation another time.

1.      Do they have a durable power of attorney?

The durable power of attorney (DPOA) is considered one of the most important personal legal documents for any older adult to have. Along with a healthcare proxy, it will give whomever your parent designates—whether it be you, one of your siblings, or someone else –the power to make financial and legal decisions (or, in the case of a healthcare proxy, to make medical decisions) if your parent is incapacitated. Without a durable power of attorney in place, you'll have to go to court to get appointed as your parent's guardian.

2.      Where do they keep their financial records?

3.      What are their monthly expenses?

4.      How can I pay their bills if necessary?

5.      Do they have any kind of medical insurance?

6.      What's their income and where does it come from?

7.      Have your parents done any estate planning?

8.      If they can no longer live on their own, what can they afford in terms of housing?

9.      What financial planning have they done?

10.  Do they have an advance health directive?

Helping someone with finances may not be an all or nothing approach. If you feel the person does need help, when at all possible, choose the least intrusive financial tool to keep your relative as financially independent as possible (Helping Older Family Members Make Financial Decisions guide).  For example, maybe your mother gets behind in paying her utility bills, so you set up automatic bill payments for her. She can, however, still manage some cash for grocery shopping, so you set up a system for her to get a cash amount every week to give her some independence.

Also in the guide Helping Older Family Members Make Financial Decisions, the authors look at different tools based on if the relative is or is not able to make financial decisions. (Please note, the following explanations are very brief.  You will need to seek legal and professional help in setting up several of these options.)


When the relative can make sound financial decisions, these tools can help:

·         Automatic bill payments

·         Joint bank accounts

·         Power of attorney
The person designates someone to make financial and legal decisions for him when he is not able (when he is incapacitated).

·         Living trusts

A trust is a three-party arrangement, where assets are transferred from one person (the grantor) to another (the trustee).  The trustee holds and manages these assets for the benefit of a third person (the beneficiary).


When your relative can’t make sound financial decisions, these strategies can help:

·         Representative payee

If a person cannot manage his checks from Social Security, veteran’s pension, railroad retirement or public benefit programs, a representative payee can be appointed.  Checks are written to the payee on behalf of the beneficiary.  The representative payee cannot get access to the person’s savings accounts or other assets.


·         Conservatorship (or guardianship of the estate or guardianship of the property)

Only a court can create a conservatorship.  A person asks the court for the right to manage another person’s financial affairs after that person cannot do so (and if a durable power of attorney or a living trust is not in operation).


Families should be aware of their motives for seeking a conservatorship (or any of these tools)—do they have inheritance concerns or concerns about protecting an older person’s money for his or her own needs and wants.  Also, are there differences in values?  Sometimes the older person spends money on different wants and needs, but he is not endangering himself.


On an emotional level, none of these may be easy to do.  Role reversals, change of care and change of life habits can be difficult to come to terms with. Be aware of your family member’s and your reactions and reasons and reassess the situation regularly. The goal is to help the person stay as financially independent as possible.


References and Resources

5 Most Important Financial Questions to Ask Your Parent. Retrieved May 9, 2013

10 Things You Should Know About Your Parents' Finances. Retrieved May 9, 2013

Parker, K. & Patter, E. (2013.) The Sandwich Generation: Rising financial burdens for middle-aged Americans. Pew Research Center.

Schmall, V., Nay, T., & Bowman, S. (2005.) Helping older family members handle finances. Oregon State University. Retrieved May 9, 2013



Lucy Schrader
HES Associate State Specialist and
Building Strong Families Program Coordinator
University of Missouri Extension
162 Stanley Hall
Columbia, MO  65211
573-882-4071 or


Strong Families for Strong Communities