How to Repay Your Student Loans by Volunteering
Volunteering can be a great way of giving back, whether in your own community or in a far-flung corner of the world. In addition to exposure to new experiences and the psychological benefits of altruism, volunteering can be a great way to build a professional network. Volunteering also offers an opportunity to earn education awards that can help repay student loan debt.
For many recent college graduates, doing work for no pay may be a luxury they can’t afford. However, several programs that allow students to volunteer while earning money that will go toward paying down their student loan debt. From government programs such as AmeriCorps and the Peace Corps to crowd-funding-style platforms such as SponsorChange, a range of options are available.
Income-Driven Repayment and Public Service Loan Forgiveness
Several of the volunteer programs that offer debt relief assistance require longer terms of service, usually at least a year. While they provide a small living stipend, students are faced with the problem of how to repay their student loan debts while participating. It is generally a bad idea to apply for a deferment or forbearance, which pauses the monthly loan payments. Student loans may still accrue interest and the full balance will lurk at the end of the deferment or forbearance period.
A better option in these cases is an income-driven repayment plan. Based on income and the amount of the debt, monthly payments may be as low as $0 a month for volunteers, who generally earn only enough money for food and housing. The Pay-As-You-Earn (PAYE) repayment plan generally offers the lowest payment options. Other options include Income-Based Repayment (IBR), Revised-Pay-As-You-Earn (REPAYE) Repayment and Income-Contingent Repayment (ICR).
Borrowers who ultimately plan to go into public service may also be eligible for Public Service Loan Forgiveness (PSLF). After making 120 payments over ten years in an income-driven repayment plan, direct loans will be forgiven for eligible borrowers. Borrowers must be working full-time in a public service position. Luckily, time spent in volunteer programs such as AmeriCorps and the Peace Corps counts. And even monthly payments of $0 are applicable toward the total number of payments.
AmeriCorps NCCC, National, and State
The AmeriCorps National Civilian Community Corps (NCCC), a full-time residential program, focuses on disaster relief, environmental programs, public safety and youth development. Volunteers may serve two terms, and then must take a ten-month break before signing up again. AmeriCorps state and national programs partner with local community and nonprofit organizations. Volunteers may serve up to five terms.
At the end of 12 months of full-time service (1,700 hours), volunteers receive the Segal AmeriCorps Education Award, which may be put toward their student loans or toward further education. Only direct federal and state loans, and those granted under Titles VII or VIII of the Public Service Health Act are eligible for relief. Volunteers may receive a maximum of two awards.
The amount of the award is equivalent to that of the maximum Federal Pell Grant for the year ($6,095 in 2019). Any interest accrued during the period of service is also paid. However, the award and the paid interest are considered taxable income to the recipient.
Volunteers should plan on applying for an income-driven repayment plan for the period during which they participate.
AmeriCorps Volunteers in Service to America (VISTA) is a program that focuses on the alleviation of poverty through partnerships with government agencies and nonprofit organizations. Participants must commit to at least one year of service and may serve for up to five years.
As with the state, national, and NCCC AmeriCorps programs, volunteers are eligible for the Segal AmeriCorps Education Award after one year of service. VISTA volunteers may also elect to take the award as a cash stipend rather than as a direct loan payment.
VISTA volunteers are eligible for 15% forgiveness of any Perkins Loans for each of the first two years of service, and 20% cancellation of Perkins Loans for the next two years of service, for a total of 70%.
As with other AmeriCorps Programs, participants should enroll in an income-driven repayment plan for their period of service.
Like AmeriCorps, the Peace Corps is a government-run program. Peace Corps volunteers, however, are sent abroad to work on projects involving education, environmental advocacy, healthcare and economic development. Terms in the Peace Corps are generally limited to five years.
For each of the first two year-long terms of service, a Peace Corps volunteer can receive 15% cancellation of their Perkins Loans. The next two years of service allow volunteers to cancel 20% of their Perkins Loans for each year.
Participants should enroll in an income-driven repayment plan to allow for lower payments during the term of service.
Shared Harvest Fund
The Shared Harvest Fund operates on a principle similar to that of SponsorChange. However, it charges a subscription fee. The first year costs $25 and a monthly rate is charged for each additional year. Though based in Los Angeles, Chicago, and New York City, there are plenty of remote opportunities.
Volunteers create a profile listing their interests and are then matched with appropriate organizations. Once a project is completed, the organization pays anywhere from $250 to $1,000 directly to the volunteer’s loan servicer. They also offer $50 in student loan relief for each organization referred.
To Volunteer or Not
For borrowers who are not planning to go into public service full-time, obtaining full-time, paid employment may be the most efficient track for paying down student loans, as they will not be eligible for PSLF. Though they will be eligible for income-driven repayment plans for periods during which they are volunteering, they may end up accruing more interest.
However, while attempting to find employment, volunteering with an organization such as SponsorChange or the Shared Harvest Fund may be an effective way of gaining valuable experience while obtaining at least some small amount of debt relief. Sometimes, volunteer work can turn into full-time employment.
Students who do plan on going into public service for at least a decade may, however, be well-served by longer terms with AmeriCorps or the Peace Corps. Those terms count toward the 120 months of public service necessary to obtain debt forgiveness through PSLF. And the low income-driven payments made during this period mean that more debt will be forgiven in the long run.