Student Loan Debt Forgiveness | For Ministers & Non-Profit Workers

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The following is a guest post by Cary McCall.  While reading a post at One In Jesus I saw Cary made a comment about debt forgiveness for ministers.  I asked him to explain more and he sent me this post.  I read it and even got permission from the website owner, Jay Guin to use this post that he also has on his website.  If you have any questions either Cary or I could try and answer them in the comments.

One of the most burdensome financial obligations faced by many young ministers is an increasing student debt load. The rising cost of higher education is forcing many to rely heavily on financial aid, both for undergraduate and graduate educations. This is compounded for ministers who have sought education at private Christian universities, some of which have tuitions surpassing $700 (or more) per credit hour. The Master of Divinity, the most common ministry degree for preachers, is 84 hours. Although some schools help with scholarships and grants, most students end up with significant amounts of debt.

Most churches try to offer reasonable living wages to their ministers, but with heavy debt obligations, many ministers still struggle to keep things under control financially. Many ministers have no choice but to take on second jobs or rely on spouses to make up the difference in needed family income.

However, as of July 2009, many ministers now have a way to substantially reduce, and in some cases eliminate, the burden of their student loan debt. This is made possible by taking advantage of two programs now offered by the Federal Government: Income-Based Repayment and Public Service Debt Forgiveness.

About Public Service Student Loan Debt Forgiveness and Income-Based Repayment

Public Service Debt Forgiveness is part of the federal College Cost Reduction and Access Act of 2007. This program discharges the remaining principal and interest after 10 years of monthly payments on loans serviced through the Direct Loans program of the Department of Education and applies to those who work in any number of public service fields. By law, this includes employees of all non-profit 501(c)(3) organizations, which includes the vast majority of ministers. However, Public Service Debt Forgiveness is only of limited value by itself because standard repayment plans have debts completely paid off in ten years. The only option for reducing actual payment amounts before the end of ten years was the Income Contingent Repayment plan.

Income-Based Repayment is a new payment plan made available on July 1, 2009. This plan, combined with Public Service Debt Forgiveness, is what produces the most value for most ministers. Income-Based Repayment introduces an entirely new formula for calculating monthly payments based largely on Adjusted Gross Income (taxable income), marital status, and family size. Ministers gain a distinct advantage in these calculations in that significant portions of income are not included in most ministers’ Adjusted Gross Income. A married minister (filing separately) with two children, a $50,000 per year income with $17,000 in housing and other allowances, and a balance of $35,000 will most likely have his monthly payment reduced to zero under Income-Based Repayment. Assuming ten more years of work in ministry, his entire balance will have been covered by the federal government.

Qualifying for Student Loan Debt Forgiveness and Income-Based Repayment

Loans qualifying for both Public Service Debt Forgiveness and Income-Based Repayment must be serviced by the William D. Ford Direct Loans program through the Department of Education. However, loans serviced through other providers may be consolidated into the Direct Loans program for free at any time so long as they are Federal Family Education Loans (usually subsidized and unsubsidized Stafford, Perkins, SLS, or Grad PLUS loans).

Once loans are consolidated into and serviced by the Direct Loans program, the borrower may enter the application process for Income-Based Repayment. After 120 monthly payments under the Direct Loans program while employed in a qualifying public service position, the borrower may apply for Public Service Debt Forgiveness.

How Do I Have My Student Loan Debt Forgiven?

The consolidation and payment plan enrollment process is relatively simple, although it can take up to several months to complete.

Step 1: If you are a minister employed by a church that is officially registered as a 501(c)(3) non-profit organization? If yes, ask yourself if you truly believe that you will work in ministry for the next ten years. If yes, continue.

Step 2: Determine if your current loans are eligible for consolidation into the Direct Loans program. Any kind of Stafford, Perkins, SLS, or Grad PLUS loan counts.

Step 3: Determine if Income-Based Repayment plan will benefit you. Use this calculator at to determine if it will lower your current monthly payment.

Step 4: Consolidate loans into the Direct Loans Servicing Center by initiating the process at www.loanconsolidation.ed.gov . This can take several weeks, and up to two months in some cases.

Step 5: Enroll in the Income-Based Repayment Plan through the Direct Loans Servicing Center.

Step 6: Make 120 of your new monthly payments.

Step 7: Apply for Public Service Debt Forgiveness.

Additional Information Regarding Non-Profit Workers Student Loan Debt Forgiveness

  • For married ministers, the IBR formula is most advantageous for those filing taxes separately from their spouses. However, as of July 1, 2010, the law allows couples filing jointly to include the loan balances of both individuals in the formula. Forgiveness will not extend to spouses, however, unless they work in qualifying employment and apply the same processes to their own balances.
  • Before the Public Service Debt Forgiveness provision, all loans amounts that were forgiven were considered taxable income. Under the new law, the amounts forgiven under Public Service Debt Forgiveness will not be taxable.

Personal Experience

I work as a campus minister with a student debt load of approximately $32,000, the vast majority of that amount coming from two years of graduate seminary. Under the standard repayment plan I was enrolled in with Sallie Mae (a popular loan servicer), I was paying almost $400 per month. The IBR plan with my current Adjusted Gross Income – even as a single minister with no family – has produced a new monthly payment of zero. It looks likely that this payment amount will continue into the future, and will be all but guaranteed if I become married and start a family.

Resources For Further Research on Debt Forgiveness

Editor’s Note: In some follow-up discussion with Jay and Cary it seems like your church should have 501(c)(3) status for you to be eligible.  If you plan to follow this strategy it is recommended that you check the 501(c)(3) status of your church.  If they do not have 501(c)(3) status then they can apply for it for the cost of $850 plus legal fees.

Comments

  1. says

    Wow, very interesting, Craig! Good find. I didn’t know about this at all. It’s a great benefit for ministers.

    Does this apply only to full-time ministers, or could it apply to part-time ministers as well?

    I know this wouldn’t work in our church though. We’re not a 501(c)(3) org and I doubt we ever will be. Mennonites tend to be pretty big on that whole separation of church and state thing. ;)

    This did get me to look at my repayment options on my own student loans. I went to the graduated plan a while back, but maybe I should try the IBR if it is an option. At 4% interest, I’m in no hurry to pay off my loans.

    • says

      @Paul
      As far as the part time question I’m really not sure. A good of fashion studying of legal documents would be in order for someone who was seriously considering it as a part-time person.
      @Financial Bondage
      As for repaying, I think that if one qualifies for debt forgiveness then there is nothing wrong with that. Christians should understand the concept of forgiveness. If someone wants to forgive a loan then it is not wrong to accept that. The Bible has a lot to say about not collecting the debt from people who cannot afford it. The concept is very biblical.
      Unfortunately, like any government program or incentive it can be abused. However, for those who legitimately quality this could be an option.

  2. says

    Some great tips there Craig. Student debt held me up for a number of years, to an extent where it made sense to leave the country… not ideal on the ethical front but it was a real burden.

    Thanks for the tips though. James.

  3. says

    According to what I’ve learned about what the bible says, Christians must repay what they borrow. So even if the world says we no longer owe a debt, God says we do. I’m sure that people with tons of student loans don’t want to hear this. I know I would not want to hear it. Even if someone files for and gets a chapter 7 bankruptcy, God says we still owe the money.

    To anyone that borrowed money for education– you knew that someday you would have to repay it right? Or were you hoping that in the back of your mind you could get out of repaying some or all of it? So is this post in some way trying to offer those with student debt a way out of paying what they agreed to repay? Just wondering. :)

    If you don’t repay the loans, then I guess I do, Mr. Taxpayer…. since you mentioned Federal programs… that means my tax money. Someone has to repay the money that the borrower does not repay correct?

    Here is a tidbit from the late Larry Burkett-

    Many Americans accept some form of government subsidy (entitlement, transfer) on a regular basis. (student loans, home loans, welfare, business loans)… Think about it. A student loan or home loan or business loan by the government is no more than government welfare or redistribution of our tax dollars.

    • Sheila says

      Some places have paying a student’s loan (in part or in full) as part of JOB INCENTIVE for anyone to take the job at all.

      That’s NOT taxpayer – that’s up to the entity HIRING the person with student loans.

      GOD does NOT have a problem with us being charitable or generous to each other except to throw pearls to the swine. The fruits of the HOLY SPIRIT are love, joy, peace, patience, kindness [emphasis on this one for this whole student loan subject], goodness, gentleness, faithfulness, and self-control; against such things there is no law.

      I’m NOT understanding your problem with this.

      There’s those who get stuck paying back all their student loans; and those who don’t. I CAN understand view of the taxpayer not paying for students’ loans (barring disaster such as death or incapacitated so as unable to work – that ought to be a small enough percentage that as a nation we’d be able to handle being that charitable thanking GOD for the opportunity to show such compassion). But, why care if the entity hiring the person pays it back?

  4. says

    Just wondering, Financial Bondage…would you have criticized the Sabbatical Year and the Year of Jubilee as well? You could use the same points to argue against people using those options.

    If someone is truly in a position where it’s difficult for them to repay (which is a requirement for the IBR payment plan the author of the post mentions), then it seems that Biblical principles would actually support a sort of welfare or redistribution to ease their burden.

    Personally, I won’t be using this option. And when I said I’m in no hurry to repay I mean that my money is better off invested (even just in bonds). But I don’t think you should be so quick to condemn those who might consider such an option without knowing their situation.

  5. says

    I’m not condemning anyone or criticizing anyone. sorry you took it that way. And I’m not even saying that I am right. Just posting what I believe the bible says. Christians must repay what they owe. As far as being in difficult positions to repay, that could be most anyone In America these days… most people are in over their heads with debt.

  6. says

    I’m not excusing personal responsibility, Financial Bondage. I agree we ought to repay what we owe. But I think rejecting the federal program because others will be paying for it is a sticky trap to fall in to. Do you pay your fair share for every government-run or subsidized program that you take advantage of? I doubt it.

    I didn’t feel like you were condemning or criticizing me because I won’t be using this program and I do try to repay whatever I owe. But I also think there are legitimate reasons someone may need to use this option, and I felt that your comment may have put undue guilt on those people.

    I’m not against condemnation where it is clear and deserved, but I don’t think that’s the case here. And I think we must be very careful about our words if we want our conversation to be full of grace and seasoned with salt.

  7. says

    I’m not trying to make anyone feel guilty. When you can’t pay your bills it’s a bad place to be. I was there before myself. I know how it feels. I hope Craig is right on his last comment… I was just stating it’s not what I was taught. From crown.org. Crown says Christians must repay what they owe (as soon as they are able). They did not put an “unless” into that teaching. Was not trying to turn this into a big debate or argument…. just tossing out some ideas and viewpoints… If I am wrong then fine. Would not be the first time.

  8. says

    I wasn’t trying to make it a big debate or argument either, Financial Bondage. I’m sorry if you took it that way. Words can come across with the wrong emotions/meanings so easily. I had no anger or malice in what I was saying to you. I just thought it was an interesting discussion worth talking about.

    Also, I’d be careful about relying on what you’re taught and try to focus more on examining things for yourself. Much of Crown’s material is good, but Crown is not infallible. Do not take their word (or anyone else’s) as the pure truth. Study God’s Word for yourself to see what it says. (And don’t use their Bible studies to do so…find another source or just look at everything in the Bible about the topic you’re studying. Nave’s Topical Bible Index is a good help for this.)

  9. says

    @Paul Williams – We’ve always admired the Mennonites and the Amish who’ve shied away from 501(c)(3) status and who’ve shied away from participating in government subsidies and welfare schemes that tend to promote dependency upon government (the Nanny State) while often diminishing our sense of personal responsibility and gratitude toward our Creator. Increasingly, the Nanny State is becoming a surrogate god for the true God in the minds of many, in the religious world, who’ve become seduced with this ‘free lunch’ nonsense. The Mennonites and Amish who stay true to their traditional principles of being beholden to no one except to ‘love one another’ will not suffer the pain of the whiplash effect when such ‘free lunch’ programs come to an abrupt halt as all such silliness eventually does. The reason it comes to an end is rather obvious. When something is “free” everyone wants one and if everyone wants one there is, eventually, no one left to pay for it.

    You raised the issue of debt forgiveness as it relates to the old covenant Sabbatical Year and the Year of Jubilee. How do you justify mentioning the Sabbatical Year and the Year of Jubilee as an argument for debt forgiveness, in our current age, while maintaining your well known position that old covenant tithing is a relic of a bygone era?

    @2 Credit Card Researcher – You provided an honest assessment and clarity to the discussion when, in regards to enjoying the privilege of subsisting off the backs of others, you said, “not ideal on the ethical front but it was a real burden.” If more people understood this on the front end of the student loan process, there would be far fewer people who would consider enslaving themselves, or their neighbors, to such debt. Debt, traditionally, has been a lobster trap for those seduced by the bait, but this student loan forgiveness scheme has ripped a huge hole in the trap allowing the irresponsible to escape the consequences of their decisions while throwing an additional heavy burden on their neighbors who Christ said we are to love as ourselves.

    We ask the following of the group because it is clear you already understand this concept: Do we love our neighbors, as ourselves, when we enter the lobster trap of debt and then seek to shirk its consequences by placing those burdens on others? And, if we resent others throwing their burdens on our backs, without our consent, how can we justify doing the same? Isn’t charity, just like forgiveness, something we choose to do voluntarily versus it being extracted from us by the barrel of a gun?

    Before we debate the morality of such “free lunch” schemes we should probably call a spade a spade. The concept of a “free lunch” is really just theft and slavery repackaged to be more palatable bait to those entering the lobster trap. To call it anything other than theft is being less than honest.

    Again, we thank you for your honesty in portraying such schemes as being, “not ideal on the ethical front…”

    • says

      @Steven and Debra
      I’ll put a face on this program.
      I have a friend who went to college. During her four years in college she accumulated student loan debt. She is now a missionary who is supposed to earn $24,000 per year. Unfortunately, some churches are no longer sending their checks and she is trying to make it on $18,000 per year.
      If a government program is available to help her – why would it be unethical for her to use a government mandated program to ease that burden?
      One might not agree with government programs, but is it unethical to take benefits that we quality for?
      As a Canadian I am eligible to receive health care (yes, I know Americans hate the US health care system). It is unethical for me to visit a doctor within the Canadian system?
      When Credit Card Researcher said what he did was not ethical I understood him as saying he left the country to avoid paying a debt. I don’t think he participated in this program. That seems to be very different than taking advantage of a government program. Are you saying the two are the same?
      I understand that there are reasons why people might not like the program, I’m just not sure that those who quality and take advantage of the program somehow lack the moral character of other citizens.

  10. says

    @Steven & Debra: I appreciate your comments (both on my site and elsewhere). I see what you are saying, and in some cases I would agree that it is better to not take advantage of certain government programs. However, Mennonites do not have a strict stance on this issue of government subsidies and programs and many Amish are taking advantage of such programs as well.

    Also, I only raised the issues of the Sabbatical Year and the Year of Jubilee to show that debt forgiveness for the poor and needy is a theme – I did not use it to support strict adherence to a law, as many do with tithing. If someone wants to use tithing as an example to support the theme of giving in the Bible, that is clearly acceptable. What I do not support is using a few tithing verses to set up a guilt system to get people to do something they should be doing out of love.

  11. says

    Regarding your friend who accumulated student loan debt…the danger of debt, so clearly borne out in this example, is that we can’t predict the future. When we go into excessive debt, we show our arrogance about how we perceive the future. Many people today are learning the hard way that they betted (gambled) much too heavily on their ability to predict the future. They are now being brought low (humbled) by their ill formed beliefs, decisions, and actions. Are you suggesting that your friend should be spared such important life lessons? How can people ever grow up and become responsible adults when they are bailed out of such folly?

    Legalized theft is still theft. So, the question really is: Is theft ethical? I’ll let you answer that one for yourself.

    The same test can be applied to murder. Legalized murder is still murder. So, the question could be asked: Is murder ethical?

    How did the oppressive and haughty Jewish high priests deal with their desire to retain their power base when they perceived Christ to be a threat to their personal ambitions for money, power, and special favors from Rome? These so-called spiritual leaders (Jewish high priests), who were really wolves dressed in sheep skins, let their true loyalties slip (John 19:15) when answering Pilates question, “Shall I crucify your King?” These religious scoundrels disavowed Christ as being their King and declared Caesar to hold that sacred honor. These antichrists (II John 7) desired to have Christ murdered, but they could not do it themselves without breaking their own laws (John 18:31). So, they did an end run around the higher law (God’s law) and co-opted with the Romans to kill Christ by proxy. Craig, was it ethical for these high priests to kill Christ, by proxy, since they were qualified to do so under Roman law? Is there a higher law than man’s law?

    Galatians 5:13-14 describes this higher law. It was the higher law Christ exemplified in all his actions and that we should strive for. Will we always be successful in carrying out this higher law? No, we won’t, but the first step toward striving toward such a worthy goal is recognizing it exists. If we learn to excuse theft and murder because we somehow qualified to do so under the perversity of man’s law, we, by default, ignore the higher law and become slaves to the flesh.

    A more recent example of the higher law concept was vividly demonstrated during the Nuremberg war crimes trials. The Nazis attempted to excuse themselves from the atrocities they were accused of, by stating, “We were just following orders.” These Nazis were convicted of these atrocities based on the recognition of there being a higher law than man’s law. Sadly, the higher law concept is vanishing quicker than a Popsicle on a hot summer’s day. We are not convinced our own U.S. military would fare any better than the Nazis did if their actions were likewise judged to the same “higher law” standard.

    So, the question remains, is there a higher law than man’s law and what are we to do about it?

  12. says

    While student loan become an astonishing devise on striving for educational attainment, these on the other hand seems to create a modified problem that deals with the high repayment rates. With this new program of Student Loan Debt Forgiveness and Income-Based Repayment, the burden is eases with just appropriate terms and considerable agreement.

  13. says

    As a pastor’s wife whose husband has student loan debt I was very excited to read your article, but the more I looked into it, the more discouraged I became. You see the studentaid.ed site says that “A private organization that is not a for-profit business, a labor union, a partisan political organization, or an organization engaged in religious activities (unless the qualifying activities are unrelated to religious instruction, worship
    services, or any form of proselytizing) and that provides the following public services…”
    You only qualify if you work for a company that is NOT an organization engaged in religious activities. :(
    Go to http://studentaid.ed.gov/students/attachments/siteresources/LoanForgivenessv4.pdf for the full article

  14. Jacob says

    @Jaqueline

    You are misreading the qualifications. Normally private organizations would not be considered ‘public service’ organizations, but this clause allows for groups and organizations that are unincorporated to be considered on the same level as incorporated entities assuming that they serve public works and also don’t qualify for being a non-profit.

    In your specific concern, if you worked for a group that should incorporate as a 501(c)(3) – as many churches do – but have not and the only services they offer revolve around drawing people to their own cause, they are not considered to be operating in the interest of public works – rather, they are working for private interests (like any for-profit company does).

    If you work for a church that is a 501(c)(3) organization – and therefore accountable to the state for the social and charitable operations that it provides to the public – you would qualify for assistance from the state.

    If you work for a church that does not wish to be held accountable to the state in terms of its interests, applications of funds, etc., then the state assumes the church is self-interested and not engaging the public, does not wish to utilize the state entitlements towards their philanthropic purposes, and are therefore do not qualify for state assistance.

    The downside for 501(c)(3) is that as anti-discrimination laws expand into new politically correct territory, participating churches will have less and less say in who they choose to help, who they determine needs help, etc. In other words, the state dictates what the public needs, and only institutions that serve those needs are entitled to state funding.

    In terms of whether loan forgiveness is ethical – consider the simple rationale behind why this legislation was developed and enacted in the first place – to increase the quality of available public defenders. With six figure debtloads, many lawyers found themselves being forced to give up their dreams of fighting for the little guys because they could not pay off their loans (or pay them month to month) while working on public defender salaries. So to curb the brain drain and prevent private firms from forcibly drawing in defenders who were desperate, this legislation provided a way for people with exorbitant yet necessary debts to work for causes they believed in within the public sector, honor their commitments to underserved areas and populations, etc.

    Another way of looking at it. Having left seminary with $60k in student loan debt, I would not be able to work for the church if I wished to pay those loans back without ICR. Now that IBR is available, I am able to serve the church and not become a wasted vessel in the private sector just because I cannot afford to work for the church that I went to seminary for 4 years to serve!

    Granted, school should not be as expensive as it is – many palms have been greased at schools and the proliferation of student loans have inflated education prices – schools have been quick to invest and incorporate these funds into building projects, dormitory expansion projects, etc. to increase student volume and loan revenue. Thus began the moral downward spiral of higher education into a profiteering venture.

    For those who despise the thought of students being forgiven loan debt at all, I hope that you have no investment portfolios that include income generated from investments in the banking and loan sector of the economy. It would be rather hypocritical of anyone with personal savings (or investments) in banks earning interest to assume that your accounts and share dividends did not benefit from the excessive loan practices. Now that student loan pools are contracting, higher education is forced to recede and what we see is an overleveraged monster that saw students as dollar signs and gave no reasonable thought as to whether the costs of education should continue to rise while inflation adjusted salaries across the board plateaued or sank.

    So now, as a church employee, working for a company that produces social capital that is necessary, yes difficult if not impossible to monetize, often operating solely on donations and offerings – well if it is bad for the public sector workers to get a break for the thankless chores that are part of their job description then there will be no public services. People who have achieved the education required to perform those services will not be able to afford to work in those positions.

    Whether we need a University educated clergy or not is another issue.

    • says

      @Jacob
      Thanks for your comprehensive response. I actually emailed a very similar response, but I should have also posted it here. I’m glad you more than made up for my failure to respond on the blog.

  15. says

    @Jacob

    My husband has a Stafford Federal Student Loan and he actually called to find out about the IBR plan. They flat out told him that Ministers DO NOT QUALIFY and they quoted the same statement that I had previously written in my earlier post: “A private organization that is not a for-profit business, a labor union, a partisan political organization, or an organization engaged in religious activities (unless the qualifying activities are unrelated to religious instruction, worship services, or any form of proselytizing) and that provides the following public services…”

    They said that because he is being paid by a church that he could not qualify.

    I would like to believe that student loan forgiveness for ministers/pastors is avaliable, but we are talking about the government here! :)

    If anyone has success with forgiveness as a minister/pastor, please let me know.

    • says

      @Jaqueline
      I’m working on some other things with the US government right now and it seems like I get five answers for every question I ask. If you are really interested in the program it might be worth having a lawyer review your situation.

  16. Robert says

    Is it possible to “donate” debt to a non-profit organization?
    1) If the ministry has a debt absolution fund
    2) If the debt is fully paid and account is closed so the individual has no further use of it.
    There is no money going to the individual, but to their creditor only.
    Hopefully, the individual at some later time contributes to the debt absolution fund.
    Is this a way to get God’s people freed up from some serious demonic bondage to debt?

    If one is paying 30-40 % to IRS to generate income to pay down debt for which they are paying 20 plus percent interest, wow, what a debt trap.
    How else do you get out?
    Can the pastor of the NPO use this mechanism for his own debt?

  17. Laura says

    This seems to me more like a way for PRIVATE CHRISTIAN UNIVERSITIES to scam the government out of roughly $60,000 per student.
    I alerted FFRF, but I don’t know if it will get very far.

  18. Chris P says

    So Christians were telling me this morning how their God makes them moral and that atheists aren’t.

    This atheist believes in paying loans back IN FULL.

    This is advocating theft from the government couched in euphemisms. Priests provide no useful work output except to advocate people wasting their time reading a bible that is wrong.

  19. Robert says

    A local Tulsa lawyer that is a local 501c3 expert thinks it is possible.
    There is some debate about whether or not the forgiven party has a tax liability on the forgiven amount.
    But an npo can set up a debt absolution fund which can be donated into, even by “subscribers” of a newsletter at say $50 per month.
    Then a selected candidate can have a cc absolved if the account is paid in full, and closed to bar further debt, or “persona gain” from the transaction.
    I assume this can also work for student loans.
    We have to work together as a body, or sink individually, it seems.
    Always be very careful about incurring debt, it seems to open the mouth of the lion.

  20. Lola says

    This is a blatant violation of the Establishment Clause. It is wrong to use public money to have theological education debt forgiven. I thought Christians were supposed to be good at charity. If ministers are struggling to repay student loans, they should be receiving aid from private Christian charities, not forcing the public to cover the cost. I do not want my tax dollars to be spent on your religion.

    • says

      @Lola
      This is a government policy that you disagree with but you seem to be focusing your attention on Christians. Christians did not make these laws. There is not requirement that it must be a theological education in order for it to be forgiven.

  21. Robert says

    The purpose of all this is NOT to scam the government, or anyone else, but to provide a vehicle for helping those in need. We need to know if this is His way.
    There are many who want to pounce on Christians who want to serve God, and their fellow man, so watchout, and DO NOT use debt of any kind frivolously. Always plan to pay what you owe.

    • says

      @ Robert
      I agree you. It is important to point out that it is wrong to use this as a strategy from the start. However, if someone legitimately is finding it difficult to repay then this program is available.

  22. Robert says

    Christian pastors should, and do provide much value to the culture if they stick with the Word of God, and discipleship. Where do the character values that make a nation valuable come from, like honesty, integrity, social morality (loving and helping others), etc.

  23. Maureen says

    According to IBRinfo page, the Department of Education’s final regulations for PSLF state that your job is eligible if you:

    1. are employed by any nonprofit, tax-exempt 501(c)(3) organization. (This includes religious organizations!)
    2. are employed by the federal government, a state government, local government, or tribal government (this includes employment by the military, public schools and colleges, public health centers, etc.); or
    3. serve in a full-time AmeriCorps or Peace Corps position.

    If you don’t meet these criteria, the Department of Education’s regulations create a two-part test of other circumstances under which you may still be eligible:

    (1) your employer is not “a business organized for profit, a labor union, a partisan political organization, or an organization engaged in religious activities, unless the qualifying activities are unrelated to religious instruction, worship services, or any form of proselytizing;” AND,

    (2) your employer provides any of the following public services: emergency management; military service; public safety; law enforcement; public interest law services; early childhood education; public service for individuals with disabilities and the elderly; public health; public education; public library services; and school library or other school-based services.

    This means that if you are a pastor in a church or an employee of a Christian religious organization that is under 501(c)(3) tax status, you do not have to worry about the 2 additional criteria. Those criteria are ONLY if you do not meet the qualifications listed at the top.

    • Chris says

      @Maureen – I found your post beneficial to the discussion. I don’t know when this was posted, so perhaps I entered the conversation way too late, but I have been searching for some info on this. I am finishing off Seminary studies, and my wife finished college studying to become a teacher. You can imagine what are income will look like when we are both employed. This is not just a minister thing. This is primarily focusing on people going into service work. I’m less worried about my own debt than my wife’s. Teachers just don’t make money. How many people stay away from professions like teacher because it offers a poor income while costing close to $80,000-100,000. This law was made to encourage people into service professions which don’t make enough to provide livable conditions for the family.

      That being said, when I crunched the numbers for my wife, we’d pay roughly 15,000 of the 24,000 she took in loans. As for running the numbers on myself, I’d probably be responsible for the full amount plus the 20-30 thousand in interest that would accrue over that time. I have no problem paying that and even paying it off early, but at the same time, if it comes between food for children and making a loan payment, I’ll choose my children every time.

  24. Kristin says

    I am in the process of consolidating my loans for IBR and looking into the public service forgiveness information. What I understand from the federal government is that even while many churches are 501 (c) 3 organizations – it clearly states, “In addition, the employer must not be a labor union, a partisan political organization, or an organization that is engaged in religious activities (unless the qualifying public services it provides are unrelated to religious instruction, worship services, or proselytizing).” That would mean that ministers do not qualify for the public service forgiveness although we do qualify for IBR and ICR programs.

    • christiancounselor says

      I disagree. I think you are misquoting it.

      Hate to keep the ball bouncing around on this, so I’ll quote from the latest (Feb 3, 2010) federal handout (which I checked against the .gov sources as well, but this is more concise). Please read your information carefully. These are two different questions posed, and it reads that if you meet the first criteria (501c3 status for your employer) you meet criteria. The second question asks if anyone working for a company that is NOT 501c3 can qualify, and is where you have the clause that many are quoting here. If you go to the sources and read it as it is presented, the information is clear.

      Q23 What private non-profit employers qualify as eligible employers for the PSLF Program?
      A23 Eligible non-profit employers include those that have received a 501(c)(3) designation from the IRS. These include most private schools, colleges, and universities, as well as thousands of other organizations, agencies, and charities. Your employer will easily be able to tell you if it has the required IRS designation. The IRS has a searchable database of 501(c)(3) organizations at http://www.irs.gov/app/pub-78/. (February 3, 2010)

      Q24 Can a private employer that has not received a 501(c)(3) designation qualify as a public service organization for the PSLF Program?
      A24 Yes, if the employer is a non-profit organization that meets certain requirements (see below) and provides one or more of the following public services:
      •Emergency management,
      •Military service,
      •Public safety,
      •Law enforcement,
      •Public interest law services,
      •Early childhood education (including licensed or regulated childcare, Head Start, and state-funded pre-kindergarten),
      •Public service for individuals with disabilities and the elderly,
      •Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations),
      •Public education,
      •Public library services, and
      •School library or other school-based services.
      In addition, the employer must not be a labor union, a partisan political organization, or an organization that is engaged in religious activities (unless the qualifying public services it provides are unrelated to religious instruction, worship services, or proselytizing). (February 3, 2010)

  25. bart says

    So…Craig, are you going to update your blog? Seems like debt forgiveness is only for long haired peace loving tree hugging hippies, and not pastors. Obviously these peace core employees provide a greater service to humanity.

    • Nicholas Blonde says

      Sorry bart…I don’t think it has anything to do with the length of one’s hair, or whether or not they are a tree hugger. It’s this pesky document called “The Constitution.”

      Think this through–if a Christian preacher were able to use this, ANY preacher/cleric/prosetylizer would also be able to use it. Do you want your tax dollars paying off the education loans of a Wahabbi cleric? A scientologist? The leader of a wiccan colony?

      Separation of church and state has created a vibrant, diverse, and flourishing religious community in the US. Blogs like this might not even exist had the founding fathers restricted and funded one specific brand of religion over all others.

      • Bart says

        …seems better if everybody just paid their bills…including the long haired tree hugging hippies. I’d rather pay Wican taxes than peace cores. At least you know what a Wican stands for.

  26. anonymous says

    What if you are working tull-time at a non-profit for no pay? For example, what if you are serving with OM USA (a registered non-profit)?

  27. ryan says

    So now that 501c3 organizations focused on religious activities were ruled ineligible…will the church fight back? Is there a lawsuit on the way?

  28. says

    This is a little confusing to me. My husband and I have been in ministry (he is a pastor) for 14 years. We are currently pastoring two churches (each part time) but also raising funds to go to south sudan next year as missionaries through world harvest mission (whm.org) a non-profit organization. We still owe student loans, even though we have been out of college for 15 years because for the first 5 years we made so little in ministry we were living with his parents. So now we have been paying faithfully but it will be decades before they are paid off. If we qualify for this, that would be a great burden relieved. But since we are in the process of things between here and south sudan, how would that work? Thank you

  29. S.A.C says

    I have pursuing paperwork for this option and think somewhat of a final answer from the government on this subject. I received and filled out a form that allowed my to have the government (or the direct loan) agency check my job status to see if I would qualify. I guess during the 10 year process, it is helpful to know if your currently employer meets the criteria for loan forgiveness. The form stated that my status was “under further review,” The form also reviewed eligible employment situations in which their could be loan forgiveness. On the bottom of the list it says; Note; Your employment at a non-profit organization does not qualify if your job duties are related to religious instruction, worship services, or proselytizing.
    So, after numerous phone calls with the agency, in which no one put any red flags up when I said I worked for a church that was a 501(c) status, and after going through another consolidation of my loans with the direct loan people (wonder how much that added to my loans) I am guessing that my student loans aren’t going to qualify for forgiveness after 10 years. Just thought I would let you know,

  30. IndebtedDuo says

    My pastor-husband and I took advantage of the Income Based Repayment Plan. When my husband initially entered repayment of his student loans, we were paying over $1100 a month. When we were both working full time plus extra part time jobs anywhere we could find them, we paid extra and the monthly payment came down to just over $700 a month. When I began seminary, I tried to work as long as I could to maintain health benefits and salary, but I just couldn’t do it. Health benefits through our denominational plan were $1200 a month for me and the kids, with the church paying my husband’s portion (over $500 a month). The church saw this as a financial burden to us, and allowed us to seek out an individual plan, which we did even though we incurred pre-existing condition exclusions on health care. We felt torn about this because we wanted to uphold his promise to abide by decisions of Presbytery, which included participation in the denominational health plan. When we applied for IBR, our monthly payment went down to under $300. This has given us some temporary breathing room. We do not plan to pay this amount forever (which is how long it would take to pay off the loan if we did!) When I begin working, we will put nearly all of my income to the loan, since we are living on my husband’s income alone right now. Following God’s call is difficult, to say the least, but the difficulty is compounded when you try to provide the things “everybody else” provides for their families (I’m not talking BMWs or DS’s for the kids, but access to quality health care, eating out occasionally, etc.). Personally, I was able to take advantage of service loans, whereby I must serve the church full time for the number of years I went to school. Although there are some kinks in the details of this kind of plan, I prefer it because it shows the people of the Church value my education as a necessary part of my service to the Church. They are willing to shoulder that burden on my behalf because they recognize God’s call on my life. I prefer this to taxpayers I do not know paying my debt (if we had been eligible for the forgiveness part), but as a taxpayer, I do not mind aiding the forgiveness of debt for those with sharp minds and big hearts who choose to enter public service rather than follow the “American Dream” of more money, more money, more money. We all benefit as a society when that happens.

  31. Andy Bowers says

    Sorry to rain on the parade, but I looked into this also. There is a line in the loan forgiveness section under the acceptable work or jobs, that says that work including proselytizing or conducting worship services is excluded. I really don’t think a minister can get this loan forgiveness, but would like to see if there is a way.

  32. married2thepreacher says

    According to the studentaid.ed.gov FAQ site I believe that pastors can qualify. I am including their Q&A here. I believe it is all in the wording.

    Here is the first Q:

    Q54 I am employed full-time by a qualifying not-for-profit organization that engages in religious activities. Does my employment qualify for PSLF?
    A54 It depends on how much of your job is related to religious activities. When determining full-time public service employment you may not include time spent participating in religious instruction, worship services, or any form of proselytizing. (March 14, 2012)

    Next if you look on the PSLF paperwork they define full-time employment as at least an annual average of 30 hours per week. So if a pastor is putting in a 40 hour week I highly doubt that more than 10 hours a week are actually spent in religious instruction (preaching/teaching), worship services, or any form of proselytizing. Lots of prep work and counseling yes but not so much time actually in front of a congregation or class doing these activities. So as long as a pastor can account for 30 hours a week that do not involve these activities I believe they are eligible. The PSLF paperwork is available now to find out if your job does qualify.

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  34. esquared says

    For those who feel that taking advantage of this program goes against the Biblical principal of paying debt, please consider that with this debt forgiveness program, your debt is still being paid off… it’s just that the government is paying the outstanding debt for you. Therefore, taking advantage of this program is no different than taking advantage of a tax credit offered by the government for installing a solar panel or Energy Star appliance in your home, or even a tax deduction for donating to your local church. We must be consistent in looking at these things.

  35. married2thepreacher says

    For those of you who are interested. We were on the IBR and looked into the PSLF. The first letter we received said we did not qualify because we did not have the correct type of loans. Our next step was to consolidate the loans into Direct loans. Once consolidated, we filled out the PSLF form again and a few months ago we received a letter stating that we do in fact qualify for PSLF. We are still on the IBR as well. The only word of caution that I have for you is the PSLF takes 10 years from the start of repayment. For us, we had been on the IBR for 3 years prior to filling paperwork to see if we qualified for PSLF. Our 3 years of IBR payments do not count simply because we had the wrong loans to begin with. If we would have had the correct loans all 3 years of IBR payments would have counted and we would only have 7 years left. So be sure to do the math to see if it is worth it. I think this is a great program for anyone that qualifies! My husband has his M. Div and pastors a smaller church that can’t afford to pay him well. We don’t live extravagent lives. We haven’t had a raise in 6 years simply because the church can’t afford it. We could go somewhere else that pays better but this is were we feel called to minister. I like esquared’s comment above. It is all in the way you look at it.

    • MARRIED2THEPREACHER says

      YJ,
      This article is not outdated and if you read my post above yours you will see that just this year (2013) my husband received his letter sayinh he qualifies as a pastor of a church (501c).

  36. Ross says

    I have been reading this whole article and all the comments. I have a couple questions:
    1. Does this apply to any job in the church? I’m a worship pastor
    2. I’m still confused on this whole concept, my loans are consolidated. I owe over 45k in student loans, I could really use some help. My wife and I are both on staff as worship pastors in the church. Somebody help me, this is hard for me to really understand.
    3. IF you are ordained, you only show the taxable income right?
    Thanks

  37. Derek says

    The post about having 30 hours if work that do not involve religious activities is correct. Ministers qualify but the hours spent on religious education/activities do not.

  38. Jared says

    I just contacted my loan provider and they said ministers don’t qualify for loan forgiveness if they preach or hold a worship service. I think that pretty much leaves every minister out.

    Where did you get your info? What do you recommend I do from here?

    I have already consolidated my loans.

    • married2thepreacher says

      Jared,

      First of all make sure that your loans are consolidated into “Direct Loans” having them consolidated does not mean that they are necessarily in the right form. We had ours consolidated but not in the correct form so we had to file paper work with Direct Loans in order to get them to qualify.

      AFTER your loans are in the correct form then file the PSLF form. It will ask you about your hours. I put 30 down. My husband works a lot more than that but it is fair to say that he spends 30 hours that do not include worship services, or any form of proselytizing.

      I have at least two informative post above that list how we researched and applied for PSLF. I have the letter saying that my husband is approved so it can be done! Good luck!

  39. jack says

    Married2thepreacher: Your posts give me a little hope! Does that verification guarantee approval for forgiveness once you get ito 120 payments in a qualifying repayment plan? I am already consolidated to direct loans repaying under ibr. I work in a church denomination that all churches in it are 501c. I guess I just find it hard to believe or that it sounds too good to be true at least… Almost afraid to try and trust in it only to find out after ten years of payments that they wont honor the approvals because I worked in a church lol.

    • married2thepreacher says

      jack,

      You just need to fill out your PSLF and submit it now. The form will ask you your employment dates at the church. They should count every IBR payment that you have made (even if it is zero dollars) for the time period that both your loans were consolidated as direct loans and the time that you have worked at the church. If for some reason you don’t qualify the letter you receive will tell you why and you have the opportunity to correct what ever may need to be corrected and then resubmit the form. I encourage you to file the form right away. I was in no hurry, thinking we were three years in and had seven more to go so what is the rush? Well, as it turns out we did not have direct loans so our three years didn’t count. It really is easy to do. Don’t stress out over what someone may tell you on the phone not everyone is up to speed on the rules.

  40. Ross says

    I have a few questions:
    I owe over 45k in student loans. They are direct loans, my wife and I filed jointly last year. Does that make a difference? We are both on staff at our church, I currently pay $300 a month and $75 of that goes to the principle. We need serious help. I have been seeing success stories of people not having to pay anything monthly and I guess it looks to good to be true so I haven’t moved forward with it at all. Please help me if you can. I think I’m just confused on the basics and who really does qualify to make it “zero out” each month to where you don’t owe anything? Thanks so much!

    • married2thepreacher says

      Ross,

      I would start by using the links above to use an IBR calculator to find out what your payment would be. Your payment is based on your adjusted gross income from your most recent tax form, your loan amount, family size, etc. That will immediately tell you whether or not IBR is worth pursing. IBR is something you have to submit paperwork for annually to prove your income. So your payment may change if say you get a raise or you have a kid leave for college. PSLF can work with IBR but you do not have to qualify for one in order to qualify for the other. Personally, I would hit the IBR first and then file a PSLF form. Since you already have direct loans and are already on staff at a church the time frame that both of those were in place simultaneously should count as payments regardless of when you fill out the PSLF. When you file the PSLF form and get a letter back they should tell you exactly how much of your time counted. There is no harm in trying! FYI we file taxes jointly as well and I calculated it both ways. We would take a bigger tax hit if we filed separately so for us married filing jointly was the way to go and from what I have read that seems to be the case for most people.

  41. Ross says

    Yea I did the calculator thing and its was more than what I pay now. I tried it for fun filing separately and it was way better but I’m sure that won’t help us at tax time. My wife and I are currently in the process of getting ordained and licensed as ministers. That will obviously help us with our housing and stuff. So i’m guessing we should be putting in that amount instead of our adjusted gross, before the housing allowance. Is this what you guys did?

    • married2thepreacher says

      It has a been awhile since I have filled out the IBR paperwork, I am set to renew it soon. From what I can remember there are optional ways to file instead of using AGI. You will need to make sure that when you get paid you are receiving separate checks for salary and allowances. Then yes, I would just copy pay stubs of your salary to send in as documentation for your pay.

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