Written By Lauryn Williams, CFP®, CSLP®, AFC®
Years ago, when you first thought of pursuing a career in academia, I'm guessing you didn't think about the cost of getting there. You're not alone; most people don't.
It's much more fun to think of a career that both helps and educates others through teaching and research. The thought of a decent income doesn't hurt either. But it doesn't take long for future professors to realize the cost of the degrees they need to obtain their desired positions is going to stick with them for a while — even if they do get their sought-after salary.
So, now that you have the degrees, the titles, and the career, what do you do with your student loans?
Professor Salary and Student Loans Today
Remember that high salary you thought you'd have as soon as you graduated and were hired as a professor? It might not be what you expected.
According to the Bureau of Labor Statistics (BLS), the median pay is actually around $76,000. While BLS expects the profession to see growth over the next ten years, it also projects the majority of job opportunities to be only part time.
If you obtain a Ph.D. and go the private sector route instead of choosing a career in academia, you can earn a significantly higher salary. But this comes with its own drawbacks when it comes to paying back your student loans.
The average graduate student has at least $50,000 in student debt, but professors have even more than that. The average professor we’ve worked with at Student Loan Planner® has around $182,000 in student loans. That’s a big number, but the good news is with the right student loan plan, professors can save tens of thousands of dollars while paying back their loans.
Options for Loan Repayment
Chances are you’ve heard of student loan forgiveness. You may have also heard there are a lot of hoops to jump through to qualify. Don’t worry— professors have some solid options for paying back their student loans.
We’ve found professors have two main approaches to paying off their student loans:
- Aggressive with refinancing: Make large payments to be out of debt in 10 years or less.
- Passive with loan forgiveness: Do everything you can to keep your payments low and maximize forgiveness.
One of the main factors in deciding which option is right for you is your employer. You may qualify for Public Service Loan Forgiveness (PSLF) if you’re employed by a 501(c)(3) or a state school. This won’t be the case if you work for a for-profit university. However, as salaries tend to be higher when working for the private sector, loan forgiveness might not always be the best option.
As a professor, it’s important to compare both options. You could go the aggressive route and refinance to find the best interest rate. Or you could go for loan forgiveness, whether it’s taxable on an income-driven plan or nontaxable through public service loan forgiveness.
Remember, your situation is unique. What's right for a professor friend may not be right for you. Surprisingly enough, having your student loans forgiven isn’t always the best plan. Do your research and run the numbers.
What is PSLF?
PSLF is a loan repayment and forgiveness option many — but not all — professors qualify for. Here are the requirements to know if you qualify:
- Work for a government organization of a 501(c)(3) nonprofit
- Can make at least 120 payments on your loans (10 years of payments)
- Have Direct loans
- Work full time (at least 30 hours per week)
If you’re a professor focused on the academia route, there's a good chance you’ll meet these requirements. Upon qualifying, the balance of your student loans will be forgiven after 10 years of payments.
However, if you’re still working towards your Ph.D. — but are no longer using student loans — or were only able to secure a part-time position, PSLF may still be an option.
You don't need to fulfill all 30 hours with one employer. If you got another part-time job at a non-profit, you could still qualify so long as your hours add up to at least 30 per week and so long as each employer qualifies for PSLF.
The Best Loan Repayment Plans for PSLF
If you decide to work towards PSLF, you want to keep your loan payments as low as possible. Part of this means selecting the right repayment plan.
If your loans are set up for the Standard Repayment Plan, Graduated Repayment Plan, Extended Repayment Plan, Income-Based Repayment (IBR), or Income-Contingent Repayment (ICR), then you’re likely not on the right track to optimize your forgiveness opportunity. You might be spending more money paying back your loans than is necessary. Or you might be on a repayment plan that isn’t eligible for PSLF. Make sure you’re on an income-driven plan that will keep your payments low to take full advantage of PSLF.
Should Professors Consider Student Loan Forgiveness?
The answer to this is both yes and no. It all depends on your situation. Professors often feel beholden to a job just to get PSLF. But sometimes the extra compensation from a private job might be enough to consider giving PSLF up and paying off the loan aggressively instead.
Here are a few scenarios to get you thinking:
1. Let’s say you’re making the average $76,000, and your loan balance is $150,000. All of your loans are Direct, and you’re making payments under the Revised Pay As You Earn (REPAYE) plan or Pay As You Earn (PAYE) plan. Your monthly payments are around $428. Assuming you get the standard 3 percent raise every year, you’ll have about $157,000 of loans being forgiven. A few years after paying on your own, you get married. Luckily your new spouse has no student loan debt. But his or her income will still be considered for your student loans. Now you need to consider filing your taxes separately or jointly.
2. Let’s say you’re in a great environment making $100,000 with loan balance of $75,000. You love your work and are making a good living. Maybe the aggressive approach would be the better option for you over PSLF. Sure, a significant amount of the first few years of salary will go towards debt repayment, but those loans allowed you to get the education you needed to land your dream job. Buckling down, being frugal, and getting aggressive about paying the debt off is a better strategy than trying to lower your payments to go after debt forgiveness.
How to make your decision
Student loan debt can weigh heavily on you. But working a job you hate for the wrong reasons will as well.
If you're trying to decide what job to take based on how it will impact your student loans, you may want to think twice. There are plenty of ways you can pay off your student loans. You can take a high-paying job or take a low-paying job and start a side hustle. You could work toward student loan forgiveness or make payments until every last penny is paid off.
The most important thing after spending years in college is to pursue a job that you want. Then talk to a professional student loan expert to find the best plan for loan repayment for your specific situation.
Here at Student Loan Planner®, we’ve completed over 1,700 student loan consults, advising on over $400,000,000 of student loans. We can help you find the best way to pay back your loans while taking your financial situation and career goals into consideration.
