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Public Service Loan Forgiveness vs. Working in the Private Sector/10 Year Repayment Plan
February 24, 2015
1:16 pm


I currently work as an analyst for my local government, and I’m salaried at about 60K. I’ve been in a public service position for about 2 years now, and I am making IBR payments on my loans (all federal).

My boyfriend/family has suggested that I make the move to the private sector so that I can increase my salary. However, if I were to do that, I’d no longer qualify for the Public Service Loan Forgiveness program. I’m thinking that with the higher salary, I would also be forced to revert back to the original 10-year repayment plan on my loans. So, while I’d be making a greater salary, I’d be spending more on loans.

It seems like I have two options: work for my local government for the next ~8 years, make IBR payments (total of 120), and receive public service loan forgiveness. Or, I could enter the private sector, get a significantly higher salary, and make the standard 10 year repayment amount. BUT, I’m also looking to put more money away for retirement…and it seems that making IBR payments would allow me to do that.

Is my thinking correct: working for the government (for the next ~8 years at a lower salary) + IBR payments (120 total) + public service loan forgiveness is the way to go?


February 24, 2015
6:58 pm
Forum Posts: 373
Member Since:
May 3, 2014
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Hi GG,

You are asking all the right questions. The subject of targeting student loan forgiveness is actually a topic that we covered a couple weeks ago here: https://studentloansherpa.com/…..rgiveness/

The best way to handle this situation comes down to the math. If you don’t stand to have much forgiven, there isn’t much benefit to staying in public service for that reason alone.

The math gets tricky because you really don’t know what your future salary will be at either job, no do you know what your investments might earn if you put the money aside for retirement.

However, with each passing year the math becomes more clear. And remember, it is 120 total payments, not consecutive. So if you leave for a year, realize it was a mistake, and then come back, you can pick up where you left off.

For starters, I’d recommend you get with your lender to get your previous 24 payments certified as public service payments. You want to have it in writing that they count towards your 120. If for some reason they didn’t, it could change your math.

If you really want to make the math complicated, keep in mind that there are many lenders who consolidate federal loans into private loans. If you decide to go private sector and get a huge raise, you could potentially get a lower interest rate than what you are currently paying. A huge list of companies offering this service can be found here: https://studentloansherpa.com/…..n-reviews/ (Note: the downside here is that you can’t undo this move… there is no going back to IBR and forgiveness if you go this route)

I know this doesn’t really answer your question, but it is one that is highly specific and can really depend upon both the math and your employment prospects. All options have major pros and cons, so the best thing you can do is give it careful consideration and revisit your decision as things change. Hopefully you at least have a few more things to consider.

Good luck,


February 25, 2015
10:49 am

Thanks for the response!

I’m embarrassed to admit this, but I did read the topic on student loan forgiveness…which is where I found out that public service loan forgiveness would not count as taxable income. This bit of information is actually what got my “wheels turning.”

I have student loan debt from both undergrad and grad school, and it adds up to more than 130K. So, even after making 120 IBR payments, there will be a decent chunk leftover. I will definitely take your advice and make sure my previous 24 IBR payments are certified as public service payments.

As a 29-year-old female, the public sector has additional “pros” (maternity leave, flexible schedules, etc) that make continuing to work for my local government attractive. I also thought that if I were to contribute the max to my IRA each year, my IBR payments would become lower. I should have also said that I live in NYC and the cost of living (RENT!!!) is extremely high, so the idea of being able to find a private sector job where my salary is enough to pay rent + the standard 10 year repayment amount (~1500/mo in my case) seems unattainable. The interest rates on my loans are currently pretty low, so consolidation doesn’t seem particularly attractive to me.

As an exercise, I will still sit down to do the math, taking my actual amount of debt and future earning potential into consideration. I have also considered working in the public sector and going back to school to earn an advanced degree (I currently have a terminal master’s degree) for the next several years and THEN jumping into the private sector…and this could end up being the most realistic scenario for me. I just truly appreciate your response, and I’m hoping it was helpful for other recent grads/public service employees in similar positions.


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