Forbearance and Forgiveness
The Public Service Loan Forgiveness (PSLF) program offers a potential benefit for those who serve in AmeriCorps or Peace Corps.
Ordinarily, to fulfill the program's requirements and make progress toward the 10 years it takes to have your loans forgiven, you need to make steady loan payments while working full-time at a nonprofit or government agency. If your loans are in forbearance while you serve in AmeriCorps, you are not making steady loan payments.
Here's what you need to do to make your AmeriCorps service time count toward your ten years if your loans are in forbearance. When you complete service and receive your Education Award, you need to use your award to make a lump sum payment on your loan equaling one payment for each month you served.
For example, if you served a 12-month terms with VISTA, and your standard payments would have been $300 per month, you need to make a lump payment on your loan in the amount of $3,600.
If you served a 10-month, AmeriCorps term, your lump sum would be $3,000.
If your monthly payments are so substantial (usually more than $500 per month), that your award won't cover the amount of 12 payments, then you must use your full award.
You have six months from the time you receive your award to make your lump sum to qualify.
IMPORTANT: Before you have funds send to your lender, make sure the loan company knows that you are making a lump sum to cover several past payments!
The reward to you is that you will be closer to your goal of having your loans forgiven!
If you opt out of national service forbearance and/or enroll in a program like Income-Based Repayment (IBR), then you will NOT need to make a lump sum payment with your Education Award.