Peace Corps Benefits: Navient Deferment Options Explored

Volunteers in the Peace Corps have access to various student loan forgiveness programs that can help reduce their overall debt burden. While the Peace Corps cannot grant or deny student loan deferment, cancellation, or forgiveness, there are several options available to borrowers. These include deferment, forbearance, income-driven repayment plans, and loan forgiveness programs. The best option for borrowers depends on their individual circumstances, such as the type of loan they have, the specific loan, and their plans after their Peace Corps service.

Navient's history of regulatory violations

Volunteers in the Peace Corps are responsible for any student loans they have during their service. However, there may be benefits available to them, including deferment, partial cancellation, income-driven repayment, or forgiveness. These benefits depend on the type of loan, the specific loan, and the volunteer's plans after their service.

As for Navient's history of regulatory violations, the company has been accused of engaging in unfair, deceptive, or abusive acts or practices. In 2014, the Department of Justice and the Federal Deposit Insurance Corporation ordered Navient and its predecessor, Sallie Mae, to pay almost $100 million for illegally overcharging nearly 78,000 servicemembers. In 2021, the Department of Education ordered Navient to return more than $22 million in overcharges. In the same year, Navient's contract with the Department of Education to service Direct Loans ended. In 2022, 39 state attorneys general announced a $1.85 billion settlement with Navient for predatory student loans and forbearance steering practices. The Consumer Financial Protection Bureau (CFPB) has also banned Navient from federal student loan servicing and ordered the company to pay $120 million for wide-ranging student lending failures. Navient has also settled a $2.5 million TCPA lawsuit.

Income-driven repayment plans

Volunteers in the Peace Corps are still responsible for any student loans they have. However, there may be benefits available, including deferment, partial cancellation, income-driven repayment, or forgiveness. These benefits depend on the type of loan, the specific loan, and the borrower's plans after their Peace Corps service.

• Income-Based Repayment (IBR): This plan sets the monthly payment at 10-15% of the borrower's discretionary income. It is important to note that this plan may not be beneficial for those who do not plan to work in public service after their Peace Corps service.
• Income-Contingent Repayment (ICR): This plan calculates the monthly payment as either 20% of the borrower's discretionary income or the amount the borrower would pay on a fixed 12-year repayment schedule, adjusted according to their income.
• Pay As You Earn (PAYE): This plan generally caps the monthly payment at 10% of the borrower's discretionary income.
• Revised Pay As You Earn (REPAYE): This plan also caps the monthly payment at 10% of the borrower's discretionary income but includes additional benefits such as interest subsidies.

It is important to carefully consider the available options and understand how they can impact loan forgiveness eligibility. Contacting the lender as soon as a Peace Corps invitation is accepted is recommended to discuss the best course of action. Additionally, the Peace Corps cannot directly grant or deny student loan deferment, cancellation, or forgiveness.

Student loan forgiveness programs

Volunteers with student debt can get out of debt faster through AmeriCorps and Peace Corps loan forgiveness options. Peace Corps service is considered qualifying employment for the Department of Education's Public Service Loan Forgiveness (PSLF) Program. The PSLF program allows for tax-free federal loan forgiveness after 120 months (10 years) of qualifying payments.

If you have federal student loans, such as Stafford, Perkins, direct, and consolidated loans, you may be eligible for deferment, partial cancellation, income-driven repayment, or eligibility for the Public Loan Service Forgiveness Program during Peace Corps service. Volunteers with Perkins loans may be eligible for a 15–70 percent cancellation benefit.

If you don’t plan to work for a PSLF-qualifying employer after your Peace Corps service, then you’ll have an additional safety net for repaying your loans. By continuing to make low monthly payments on an IDR plan, you’ll be eligible to have your remaining federal loan balance forgiven after 20 to 25 years, depending on your IDR plan. However, this type of loan forgiveness is taxable, so save money for a potential tax bomb.

If you have a private loan, you will need to contact your loan servicer to see if they provide any student loan relief for Peace Corps Volunteer service. It is important to understand how deferment or forbearance affects your ability to receive credit for public service loan forgiveness (PSLF). While your loans may be eligible for a deferment or forbearance when you serve in the Peace Corps, there may be better repayment options for you to consider. Forbearance pauses payments and gives you a window to get back on your feet if you're struggling. Sometimes lenders agree to reduce your debt permanently as part of a forbearance. You are still responsible for the interest accrued during a forbearance. Deferment postpones your payments but doesn't change the terms of your loan. This means that short-term, your payments are paused, but long-term, the cost of your debt probably increases.

Deferment or forbearance options

If you are a Peace Corps volunteer with federal Direct Loans, an income-driven repayment (IDR) plan is often a better option. IDR plans, such as Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), or Saving on a Valuable Education (SAVE), can offer monthly payments as low as $0, interest benefits that prevent your balance from growing, and progress toward loan forgiveness each month. Additionally, each payment made under an IDR plan, even if it is $0, counts toward the overall IDR forgiveness timeline, which can be as early as 20 to 25 years.

For those with Perkins loans, there is also the possibility of loan cancellation. Volunteers can also utilize their transition payment or the Segal AmeriCorps Education Award to make a lump-sum payment on their Direct Loans after completing their service.

It is important to note that the Peace Corps itself cannot grant or deny student loan deferment, cancellation, or forgiveness. Therefore, it is essential to contact your lender as soon as you accept your Peace Corps invitation to discuss your specific circumstances and explore all available options.

Public service loan forgiveness

In 2007, the US Congress established the Public Service Loan Forgiveness (PSLF) Program to encourage Americans to enter the public service sector. The program promises to forgive the remaining student loans of individuals who complete 10 years of service in public service jobs while making 10 years of minimum payments.

The PSLF Program applies to federal Direct Loans, and an income-driven repayment (IDR) plan can be the best repayment strategy for most people working in public service. Some IDR plans include Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), or Saving on a Valuable Education (SAVE). Under these plans, monthly payments may be as low as $0, and interest benefits may prevent the balance from growing due to unpaid interest. Additionally, individuals will make progress toward loan forgiveness each month they are enrolled in these plans.

It is important to note that deferment or forbearance may affect an individual's ability to receive credit for PSLF. While deferment or forbearance can provide short-term relief from loan payments, they may make the total repayment amount more expensive in the long run. During deferment, the loan payments are postponed, but the interest continues to accrue, increasing the cost of the loan over time. On the other hand, forbearance may allow lenders to reduce the debt permanently, but the borrower is still responsible for the interest accrued during that period.

For Peace Corps volunteers, it is recommended to contact the lender as soon as a Peace Corps invitation is accepted to discuss available options. While serving in the Peace Corps, volunteers are still responsible for any student loans they have. However, benefits such as deferment, partial cancellation, income-driven repayment, or forgiveness may be available, depending on the type of loan, the specific loan, and the individual's plans after their Peace Corps service. For federal student loans, such as Stafford, Perkins, Direct, and Consolidated loans, borrowers may be eligible for deferment, partial cancellation, income-driven repayment, or the PSLF Program during their Peace Corps service.

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