All across the country, nurses are in demand, which makes it a very attractive career choice. However, the nursing field is very demanding, requiring specialized knowledge obtained from an advanced education. That can be a financial challenge for many nursing students, especially for those who choose the Bachelor of Science in Nursing path. Many new nurses are left with a mountain of student loan debt.
What Nurses Who Recently Graduated Need to Know About Repaying Student Loan Debt
The total cost of a college education and completion of a nurse practitioner (NP) program can exceed $100,000. So, it’s not surprising that the majority of NP program graduates are among the millions of who leave school with an average of $31,000 in debt.
Nurse practitioners can earn a good living, but with loan payments that approach 25% of their income, NP grads can easily become a part of the 40% of student borrowers who are in or near default.
Fortunately, the nursing profession is so revered that the federal government has created a number ways to ease the burden of student loan debt for student nurse graduates. While student nurses have access to the same range of federal loans and repayment options as any other student, they also have access to special loan programs and repayment plans designed specifically for students in the health care field.
Federal Loan Repayment Options
Nursing students, who attend a two- or four-year college in pursuit of a nursing degree, can apply for federal student loans. Depending on their financial status, they can qualify for subsidized or unsubsidized loans.
There are also additional federal loans for nursing students offered through the Nursing Student Loan program. These loans, available to nursing students pursuing a nursing degree through an Associates, Bachelors or Masters program, are offered by the school’s financial aid department.
Federal loans have standard repayment terms of 10 years. If their loan payment creates a financial hardship they can select from among several income-driven repayment options which cap the loan payment based on a percentage of discretionary income:
- Income-Based Repayment (IBR): Caps loan payments at 10% of discretionary income with loan forgiveness available after 25 years.
- Income-Contingent Repayment (ICR): Caps loan payments at 20% of discretionary income. Available for Parent Plus loans.
- Pay As You Earn (PAYE): Limited to direct or FFEL loans. Caps payments at 10% of discretionary income.
- Revised Pay As You Earn (REPAYE): No hardship requirements. Qualification is based on both spouses’ income.
The availability of these plans depends on your financial situation and the type of student loan you have. All income-driven repayment plans are eligible for early loan forgiveness after 20 or 25 years if you are current with the loan.
Special Loan Repayment Plans for Nursing Students
Beyond the income-driven repayment plans available for federal student loans, nursing students may qualify for special programs designed for students entering the nursing or health care field. These programs typically require a time commitment of two to three years in a qualifying health care facility in underserved or critical shortage areas. You know going in how much of your loan will be repaid by your employer and you are free to move on to other opportunities at the end of your commitment.
- U.S. Department of Health and Human Services Repayment Program
For nursing school graduates who work in a high need facility, this program offers to repay up to 60% of outstanding loans. In most cases, the benefits received from these programs are taxed as ordinary income.
- Indian Health Service Loan Repayment Program
The program will repay some or all outstanding loan balances for nursing grads who commit to two years of practice in an eligible Indian Health Service facility.
- NURSE Corps Loan Prepayment Program
For Registered Nurses who commit to working two-years in a critical shortage facility, they may be eligible to have a large portion of their loan balance repaid. A longer commitment could result in additional repayment. Critical shortage facilities could include public hospitals, nursing homes, and rural health clinics.
- National Health Service Corps (NHSC) Loan Repayment
This program is available for Primary Care Nurse Practitioners, Psychiatric Nurse Specialists, and Certified Nurse Midwives who work at eligible facilities. Depending on the type of facility and the length of your commitment, it is possible to have 100% of your loan balance repaid. The types of eligible facilities include, critical access hospitals, free clinics, school based health programs and correctional facilities. Benefits received from NHSC are not taxable.
- State Repayment Programs
Most states that experience a high demand or a shortage of nurses offer their own version of a repayment plan. For example, Colorado will repay up to $50,000 for a three-year commitment to an eligible facility. Nurse practitioners in Pennsylvania can receive up to $60,000 for a two-year commitment. Washington requires a three-year commitment at a qualifying facility in exchange for repaying up to $75,000.
- Public Service Loan Forgiveness
Nursing grads who pursue opportunities in other parts of the health care field may not qualify for a rich repayment plan, but they still have access to the Public Service Loan Forgiveness Program (PSLF).
This program offers complete loan forgiveness for eligible federal loans after 10 years of full-time work in public service, including most health care-related fields. Borrowers must be in good standing after making consecutive payments for those 10 years. The program requires that you work a minimum of 30 hours a week for an eligible employer. Unlike loan forgiveness under the income-driven repayment plans, the forgiven loans do not trigger a tax consequence.
These repayment programs for nursing grads are among the best available for reducing or eliminating student loan debt. It is important to note that none of these repayment or forgiveness programs are available for private student loans, which is a big reason to exhaust all of your federal loan options before seeking college financing through a private lender.
Also, the eligibility requirements for these special programs vary widely, so it would be important to thoroughly study all of your student loan options and consider your career direction when planning for future loan repayment.
About the Author: Jacob is a self-proclaimed student loan expert and personal finance blogger. Follow him on Twitter @DollarDiligence or on his blog, Dollar Diligence.
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