The centerpiece of the College Cost Reduction and Access Act of 2007 is the Public Service Loan Forgiveness option that allows individuals employed in certain public service areas to have any remaining loan debt discharged after 10 years of repayment. It also allows participants to utilize the Income Based Repayment schedule during those 10 years to inspire people to go into under-served and low earning, not-for-profit or community sustaining fields. Farming, with it’s aging participants, low on-farm income earning capacity and importance to local communities, regions and the country at large, is a perfect employment area to be added to the list of professions eligible for forgiveness.
Income Based Repayment (IBR) prevents payments on federal student loans from exceeding 15% of a borrower’s disposable income above 150% of the poverty level. This plan also allows for the government to subsidize 3 years of interest payments and to have any remaining debt erased after 25 years. It is the combination of IBR with Public Service Loan forgiveness that might allow more young people to look at farming as a viable career.
For example, under the most common farm financial circumstances (based on USDA statistics):
A farm family of four, with on-farm income of $10,000 and student loans totaling $45,000 at an interest rate of 6.8%:
- under Standard 10-year repayment they would pay $517 a month, totaling $62,143.00
- under IBR they would pay $0 a month, leaving a debt that would accrue interest over 25 years to well over a $100,000.00, greatly impairing their ability to borrow money in the future
- under IBR, with Public Service Loan Forgiveness, they would pay $0 a month, but with the government subsidizing the first 3 years of interest, they would only accrue 7 years of interest before forgiveness – greatly reducing their debt load and allowing for borrowing that could help grow their business or help their own children go to college
Under IBR with Public Service Loan Forgiveness, the same family:
- with an income of $20,000, would pay $0 a month
- with an income of $40000.00, would pay $87 a month, with total repayment equaling $10,400.00
- with an income of $70000.00, would pay $460 a month, with total prepayment equaling $55,200.00
This repayment schedule, Income Based Repayment coupled with Public Service Loan Forgiveness, is the best option for young, beginning, and new entry farmers. We need to reach out to our elected officials and help them recognize how beneficial Student Loan Forgiveness could be to the profession of farming and the future of agriculture.
I recently contacted my elected officials to propose that farming become one of the areas of employment eligible for Public Service Loan Forgiveness. The following are the nuts and bolts of the request but you can find a sample letter that can be tailored to your own personal circumstances here.
If you are in need of assistance with repaying or dispatching your student loan, or simply care about the future of agriculture in this country, please take the time to contact your representatives and let them know that they can help build financial security for a new generation of farmers, and by extension their communities, by adding farming to the Public Service Loan Forgiveness plan.