If you’ve successfully completed a Ph.D., you’ve already been through the gauntlet of years of research and graduate study. Then you hustle to find a job in the super competitive labor market of academia. Since you’ve been through so much, you might as well use Public Service Loan Forgiveness to your advantage if you happened to graduate with a bunch of student debt to show for your advanced education.
I wanted to be an economics professor in undergrad until I got my butt kicked by an Advanced Calculus math course my junior year. Before I changed my career path, I had been looking at fully funded programs, and I also had the good fortune to come out of undergrad without any debt too.
Not everyone is as fortunate. You might have needed to borrow to pay for undergrad even though your Ph.D. is covered. Perhaps your program requires that you pay tuition, so you’re stuck with loans from undergrad and grad school. If you own a five or six figure sum and have a Ph.D., this article is for you.
To examine how to use Public Service Loan Forgiveness (PSLF) as a university professor, researcher, or college administrator, we’ll look at a variety of examples. Hundreds of thousands more college faculty and staff could benefit from the PSLF program than currently take advantage.
Get Credit For Loan Forgiveness While You’re a Teaching Assistant or Graduate Assistant
Most Ph.D. programs have some extended period of training where you’re making a low income. In the pure academic fields like history, math, or chemistry, you might have a teaching assistant or graduate assistant job. In the medical world, there might be a different structure like a residency in veterinary medicine.
In many situations, you’ll have four to five years of low income without taking out new loans. Assume you earn $25,000 per year and owe $50,000 of Direct Federal Loans from undergrad. If you use the Revised Pay As You Earn program (REPAYE), you could pay $57 a month on your student debt.
If your loans had an interest rate of 7%, then you would also receive an interest subsidy. The REPAYE plan covers half of the interest that your required payment does not cover. That means your annual interest on the REPAYE plan in this example would be $2,090 a year instead of $3,500 a year if you used forbearance or deferment.
Keep in mind that the REPAYE plan has no cap on payments. You might need to use the Pay As You Earn (PAYE) plan instead so you can benefit from the max payment of the Standard 10-year plan.
Your takeaway should be that if you can consolidate your loans and get them onto the PAYE or REPAYE plans while you’re making a low income, you should absolutely do this. Many college faculty and staff fail to do this and cost themselves thousands of dollars.
Note that I’ve had some readers and clients tell me their university did not want to sign off on their federal student loan repayment program certification forms during their grad school or training years because the office manager didn’t want to put his name to them being full-time employees. If you run into this bureaucratic resistance, explain that they are not committing to anything or giving you benefits, they are just confirming you’re a full-time employee of the university, which is true.
How Postdocs Can Pay Student Loans Too
It’s not at all uncommon for a newly minted Ph.D. to spend a year or more as a postdoc somewhere to build their research skills. My college roommate is currently finishing up one, and he reminded me that postdoc pay while higher than grad school is still very low.
Federal student loans can always be paid on an income-driven program. In the example I used earlier, if a postdoc with a $40,0,00 income had $50,000 of student debt at a 7% interest rate, the REPAYE plan would allow him to pay $182 a month. That’s still very manageable.
The interest subsidy, in that case, would be around $700 a year. That’s not much, but it’s still a nice benefit to have in case you go into the private sector and need to refinance. The subsidy travels with you even if you leave academia.
You Want Years of PSLF Credit Once You Earn a Full Professor Salary
Whether you go into teaching, research, or administration, you will eventually earn wages that no longer classify as poverty level. For a history professor, you might earn only $60,000 to $80,000 starting, while engineering professors might earn significantly more than that.
In most cases, if you built up years of credit to use Public Service Loan Forgiveness while in grad school, you should be able to get a significant chunk of your student debt forgiven regardless of what your income ends up being.
To show this, pretend Rachel Chu went to an expensive liberal arts college before she went to get her Ph.D. in economics and eventually become a professor at NYU. She had $70,000 of Direct Consolidation loans when she got her bachelor’s degree.
Rachel used the PAYE program for her four years of grad school. She made $25,000 per year while she was working towards her Ph.D. Her loan servicer, FedLoan, uses the prior year tax return when determining her payment. When she becomes a full professor, her income jumps up to $150,000.
She could just refinance her debt to a 10 year fixed rate and 5% and pay it off rapidly. However, what if she pursued the PSLF program since she’s a full-time employee at a not for profit (NYU)?
Even though Rachel makes twice as much money as she owes as an Economics professor, she still receives a substantial college professor loan forgiveness benefit. Her payment caps out on the PAYE plan at $813 a month.
The difference between refinancing and loan forgiveness is $43,702. That’s a lot of money, even though she’s probably not hurting since she flies first class on Singapore Air Lines (Crazy Rich Asians joke).
Professor Loan Forgiveness if You Borrowed to Cover Your Ph.D.
Some programs ask you to pay tuition during your Ph.D. I’ve had several clients owe more than $200,000 in student loans even though they completed advanced education and hold professor positions.
I would think long and hard about attending a Ph.D. program that wouldn’t fund your position, but if you’re already in the debt, you need a plan as there is no use crying over spilled milk.
Pretend Phillipe owes $250,000 at a 7% interest rate. We’ll assume he went to some professional type school program before he obtained all the credentials necessary to become a professor.
If you borrow while you are in school, you won’t be able to claim any of that time towards the PSLF program. Let’s assume Phillipe graduated and went straight into a $100,000 a year job as a professor to see if loan forgiveness could help him.
Phillipe could save almost $250,000 by using loan forgiveness as a college professor instead of paying his loans back. Since this savings is over 10 years, that’s equal to about $25,000 more per year of take-home pay that he would need to receive in a private sector job. After adjusting for taxes, this would probably amount to roughly $40,000 per year of salary.
Hence, if Phillipe could get a private sector job at $140,000 or an academic job at $100,000, he would be indifferent between the two from a financial perspective. If he has a strong desire to have an academic career, that would make the decision easy.
Researchers and College Administrators Can Also Utilize Student Loan Forgiveness Programs
What if you’re not tenured faculty but you still hold an advanced Ph.D. level education with a lot of debt? Good news: you can qualify for public service loan forgiveness and benefit from the program.
The only requirement for PSLF is that you work full time for a not for profit 501c3 entity for 10 years while paying on an income-driven repayment plan like REPAYE or PAYE.
If you work in a lab doing experiments on mice as a university researcher, you qualify for Public Service Loan Forgiveness too. If you’re an Assistant VP of Student Affairs, you qualify as well. You just need to make sure that you’re directly employed by a qualifying organization.
That said, if you have non-qualifying loans and already make six figures, you won’t be able to benefit from loan forgiveness. For example, if you have FFEL student loans from before 2010 and you already make six figures and owe less than $100,000, you should probably just refinance.
The key to loan forgiveness is having a low income initially that turns into a large income later, or you can just have a steady high income that’s still lower than your debt.
Adjunct faculty would only be able to qualify for PSLF if they could be considered full-time. The one loophole that exists for part-time university employees is that you can piece together multiple part-time jobs to reach 30 hours a week at non-profit employers to qualify too. Some adjunct professors might need to try to qualify through this back door.
Is a Ph.D. Worth it Financially with Student Debt?
You should not do a Ph.D. if your goal is to increase your income. There are plenty of better ways to make money than publish original research and spending half a decade after college furthering your education.
However, when you finish up your advanced education, you might have debt that’s getting in the way of your life and career goals. With the PSLF program, you can obtain loan forgiveness as a college professor, researcher, or administrator.
As I’ve shown, way more people could benefit from this than currently do. The default is to sign up for forbearance or deferment during low-income years, but that’s the worst thing you can do. Furthermore, it could cost you many thousands of dollars.
Some final tips if you have more than a new car’s worth of student debt after entering a Ph.D. or professional program on the path to academia:
- Consolidate everything as soon as you can (as long as you haven’t made any income driven payments)
- Send your loans to FedLoan and certify your loan forgiveness credit annually with this form
- Sign up for the REPAYE program if you owe a large amount of debt and the PAYE program if you owe a relatively small amount compared to future salary
- Don’t panic or jump ship to refinancing or full repayment until you know you won’t receive loan forgiveness (ie tune out the noise)
There are dozens more tips I could write use Public Service Loan Forgiveness to rid yourself of student debt, but these are the main strategies you could use to pay less on your Ph.D. student loans as a university employee.
If you had further questions, we’d love to make a custom plan for you so you could save as much money as possible on your student loans.
Any advice or good/bad experiences paying back student loans while in grad school or after? Let us know in the comments!