Home > Student Loans > How We Lost $6000 in Student Loan Forgiveness

How We Lost $6000 in Student Loan Forgiveness

Image: Freedigitalphotos.net

Image: Freedigitalphotos.net

May is the first month in well over a decade when the Eyes on the Dollar household hasn’t had to make a student loan payment. While we certainly took our eyes off the dollar in paying those loans back, I wanted to share some final thoughts on student loans and why I think it’s important to consider all of your options before you do something big like consolidating or even paying them off. We’ve made our share of financial mistakes, but a huge one was losing $6000 because we consolidated the wrong loans. Hopefully you can use our mistakes to save yourself some serious money.

Student Loan Forgiveness

If you work full time in certain occupations, you could be eligible for loan forgiveness. Keep in mind, this is for the US only, and I don’t have enough room to include all the details. You’ll need to research them if one seems like it could work for you.

Public Service Loan Forgiveness– This is the newest loan forgiveness program that was put into place in 2007. Basically if you work for the federal, state, or local government or for a tax exempt non-profit organization, you could be eligible for this program.  If you make 120 consecutive, on time payments, the balance of your loans are forgiven. In order to maximize the benefit, you would need to make the lowest possible payment, usually the income based option. You also cannot put loans into deferment or forbearance. I would not bother with this for small loan amounts, but if you have tons of student loan debt and work in this type of job, it is worth looking into.

Teacher Loan Forgiveness-If your student loans were first dispersed after October 1, 1998 and you teach in a low income or Title I school for five consecutive years, you could be eligible for this program. If you teach math or science in a secondary school or special education, you can qualify for up to $17,500 in loan forgiveness of certain federal loans. If you teach in an elementary classroom or teach a non-math or science subject related to your major, you can receive up to $5000. We almost got this one, but Jim’s first loan was dispersed in 1997, so we missed it by one year.

Perkins Loan Cancellation-If you hold a public sector job, like a head start teacher, law enforcement officer, an attorney who works as a public defender, a nurse, teacher in a low income school, or volunteer for organizations like the Peace Corps, you could be eligible to cancel a percentage of your Perkins Loans. This one is a bit complicated, but Jim would have been eligible if we hadn’t consolidated his loans with a private company. Because we did that, he missed out on about $6000 in loan cancellation. If you think you might be eligible someday for this program, then don’t consolidate your loans or consolidate them through the Federal government’s  Direct Consolidation Loan Program.

If you call the government for information, make sure you get the terms correct. I asked about Perkins Loan forgiveness, and the lady kept telling me there was no such program. I knew I’d seen it online, so I made her stay on the phone while I looked it up. I realized it was called cancellation instead of forgiveness, and she then gave me information. Honestly, when calling the government for anything, if you don’t get the answers you need, call again. Eventually you’ll get someone who knows or is willing to help you out.

National Health Service Corps Loan Forgiveness-If you are a medical or dental professional, you could qualify for loan forgiveness by working in an approved site for two years. Generally, these are places where the population is under served. If approved, this program offers forgiveness for federal and private student loans.

Consolidating Loans

Consolidating loans can be a smart move if you are concerned about variable interest rates. Keep in mind that when you consolidate, the rate is based on an average of all your rates for various types of loans. If you have some loans sitting at a very low rate, you might want to leave those out because the higher rate ones are going to increase the over all interest you’ll be paying. Consolidation offers you the ability of one convenient payment, but the term usually stretches to 20 years or more. Of course you can pay more than the minimum payment, but we fell into the trap of not doing that. Our loans were like that Titanic song, they went on and on.  Also, don’t miss out on cancellation or forgiveness options because you consolidated with the wrong company.

Should You Invest While You Have Student Loans?

I’ll take the easy way out and say, it depends. If you have a small amount of student loans that you can knock out in a year or a large amount  that you are willing to sleep on a couch and eat ramen to pay off quickly, then I’d say get the student loans done before you’re old and gray. However, I would never pass up a company match on a 401k to pay off student loans. I also would not lose years of compound interest to pay off a student loan that has a reasonable rate.  I would certainly buy a house with interest rates at all time lows if that is a goal you have.  Waiting 5-10 years to pay of student loans before you buy real estate or start investing in retirement is too long in my opinion. However, if you start to adjust your lifestyle upwards before you pay for your education, you could end up on AARP while sill paying off student loans.

I’m sure there are other loan forgiveness programs that I’ve missed. If you’re like me and work for yourself, you don’t qualify anyway. You might as well get used to the idea of paying off your debt. In conclusion, I think looking at the long term picture before you make any big decisions about your student loans is very important. Otherwise, you could be like us and lose $6000 because you made a hasty decision.

Have you qualified for any type of student loan forgiveness? Would you invest or buy a home while still paying off student loans?


About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.


  1. I would still invest in real estate or the stock market while repaying student loans since the rate on those loans is usually pretty low. So as long as I can comfortably make the standard payments, I would buy a house with the extra cash flow. Chances are the built equity could allow you to settle the loans the next time you move houses.

    • Yes, we did pretty well when selling our first house. Had we decided to rent, we would have had no equity or assets to build up.

  2. I actually did qualify for loan forgiveness as a post-doc. But I didn’t have any loans to forgive. The joke was on me, I should have lived it up in undergrad and grad school instead of being cheap and making sure that I stayed in the black.

    And yes, you should probably invest while you’re paying back student loans. Take a look at the interest rate on the loan and compare it to the average return on a generally standard investment like an S&P500 index fund.

  3. I think you need to look at the interest rate and then determine if your expected rate of return would be more than the interest on your loan. If it is then go for it, if not then don’t.

  4. Thanks for the great info here, Kim. Ouch on the $6k loss. :-(. We are struggling right now with the decision to invest while we still have so much credit card debt – it’s such a tough choice!

    • Laurie, if I remember right, you just got your rates lowered on your credit card debt, so in that case, I’d maybe put a little into retirement. Although, I know you want to get rid of the debt. I don’t think you can make a wrong decision as long as the debt is going down.

  5. Sorry about the $6k loss. My brother is actually going to try and take advantage of the Teacher Loan Forgiveness program. He just graduated this past weekend with a degree in Tech Ed and is applying to Title I schools to try and take advantage of that. In regards to investing, I think it depends, but would generally say you should still try and invest something to not lose out on time.

    • Good luck to your brother. I would study the rules on the government website to make sure all the requirements can be met. I think it’s a great program and there are probably lots of teachers who are eligible and don’t know that. If I was in charge of the school district here, I would make that part of the orientation for all teachers, since they are all eligible where we live. Maybe I’ll suggest that to Jim in his new job role.

  6. We absolutely would invest and buy a home while paying off student loans (and we did buy a home!). I do want to pay them off within the next ten years, though even the minimum is quite the cash outflow each month. If I get my MBA that could be a LOT more debt we are taking on, but I would expect to be making at least $20k/year more and have better future job prospects. I think student loans can definitely be a good investment and people sometimes get a little too emotional about them when they come due.

    • They are totally a good investment if you don’t take out $100K to get a degree in something that doesn’t help you get a better salary. I think 10 years is completely appropriate and even smart since you got a home with an income suite. I also know you aren’t going to go out and run up a bunch of credit card debt or something stupid like that to derail the payoff.

  7. I actually gamed the system a little bit and ended up with almost $1000 in forgiveness through a state cancellation program on loans that I basically had earning interest for me. I paid less in interest than was forgiven, so I kindof came out ahead.

  8. I’m hoping to get the Public Service Loan Forgiveness. But right now with the IBR plan I owe $0 on my loan because I make so little money (yay me?). So since I’m paying $0, I guess my time working for the state isn’t counting towards the 10 years of service to get loans repaid?

    • That is one I haven’t heard of! Is your payment actually zero or are you in forbearance? I would call the number on the website and ask what you need to be doing to get the forgiveness. I would think you’d have to actually have some sort of payment for it to count, but I honestly don’t know. Good luck!

  9. I hate it when money is wasted like that. My husband and I realized that we lost a considerable amount of money from student loans by making choices that we later regretted. UGH! This is great information for those who are on the road to repaying student loans. Hopefully this helps others avoid mistakes!

  10. I have never considered student loan forgiveness personally. However, I did buy a place while I was paying back student loans and if I had to do it over, I would do it differently. I would have paid off my student loans and then save up at least 10% in cash for a down payment.

    • I do think having some equity in your house early on is a good idea. We didn’t have to put much down on our first place, but it was a pretty good fixer and we got a great deal, so it wasn’t hard to do a little work and the value went up pretty quick. We sold that house after three years for a $35K profit, so that was a pretty good return on investment and made a great down payment on our house we live in now. If we’d waited to buy a house, we would probably never have found such a good deal, but who knows? I think everyone has to look at their situation, but you are certainly ready to go buy something with that first real job!

  11. I am late to teaching although I do not have loans. I had an APLE grant for my credential. I think you should always invest as well as repay your loans. The most important element to investing is time. If you defer investing for even 5 years,it makes a big difference. Better to invest a smaller amount than not at all.

  12. Congrats on this month being the first month without a student loan payment 🙂

  13. Nice overview. Some of these programs are great and very helpful, but most of them tend to not be worth it. If you waited 10 years to pay off your loans just to get the forgiveness, a lot of times you’d be paying more during those 10 years than if you would’ve just sucked it up and paid them off as soon as you could. Luckily my wife and I are free of all student loans just 2 years after graduating.

    • Congrats on paying off your loans in 2 years! I do think it is sort of an odd program because it encourages you to pay as little as possible to milk the loans out for ten years. I can see the beauty of it if you have really high loans and work in a job that pays pretty low, like teaching. The best idea is not to rack up huge loans for a low paying job, but I think it happens fairly often.

  14. Good information to know. We don’t have any student loans, but our neighbors were able to apply for a similar type of forgiveness and had half of their mortgage erased. I was so jealous !!!

  15. When I was going to be a teacher, loan forgiveness was part of my long-term plan. Now I’m making even less than I would have as a teacher and not eligible for any forgiveness programs!

  16. Congrats on your first month with no student loans to pay – most feel great! Loan forgiveness is something that easy to overlook and that’s a great list of resources you provided. I do believe that investing while repaying debt, especially your 401k with a company match, is generally a good idea too. Time is your ally when it comes to investing, but if your financial situation is incredibly topsy turvy then it may make more sense to right the ship before you jump into investing.

    • It’s really ironic that there was a page in our state optometric society newsletter today about the National Health Service Corps. I never even heard of it before I started searching recently. We should have looked into this stuff years ago, but regardless, they are paid off now, and it does feel good.

  17. Hey there!
    First off, congrats on paying off your student loan! That must be a fantastic feeling. On the topic of student loans, I also made a mistake when I consolidated all those loans into my “Orderly Payment of Debts” program. I was in a bad spot and thought it would be the best thing, however, I am wondering if I should have advocated for myself a little more and tried to qualify for Canada Interest Relief on my loans first. As it stands, I don’t qualify for anything like that now that I’ve consolidated – it sucks.
    On your other point about waiting to invest/buy real estate, I agree. If you are paying on loans for the long term (for me, eight yers), waiting to take advantage of good interest rates or compounding interest rates is a little nuts! Thanks for the post!

    • I do wish I’d researched a bit more before we consolidated. The companies are very anxious to get your loans, so I remember getting offers in the mail saying things like interest rates are going up to 8%, which they never did. I do think 8 years is too long to miss out on retirement contributions, but it really isn’t that long in a student loan pay off. Good luck.

  18. Great post, and definitely something people should look into. Too bad we don’t have student loan forgiveness in Canada, at least that I know of.

  19. I’ve always paid cash for my education so no student loans here. Sounds like there are plenty of programs in place for forgiveness if one qualifies. I would invest for sure if I had a student loan depending on the interest rate and how much debt I had at the time.

    • I certainly hope to have enough saved to help my daughter get through school without loans. If she does have to take them, hopefully she’ll be smart enough to pay them off quickly.

  20. Great post Kim and congrats on getting out from under the student loan burden! Feels good I’m sure. I’ve had my student loans paid off for years so had no idea these types of forgiveness programs existed. We did purchase our first house while I was still paying off student loans and am glad we did. It was a good time for housing appreciation so we made out well when we sold that house.

    • I honestly had no idea about teacher forgiveness programs either, and we certainly should have been looking, as all the schools near us are title I eligible. I came very close to taking a job early on with the Public Health Service that would have offered loan repayment, but I chose another path that has been also very rewarding in other ways. If I were just starting out, I would certainly search for any programs that could help. I would totally do 2 years in an underserved place if I didn’t have a family to move around.

  21. I was lucky I never had any student loans because my scholarships covered it all. But if I did, I’d probably still invest, depending on the market environment, the rate of interest, and if I had any other cash needs at the time.

  22. Good post Kim!I guess this just goes to show that you really need to do your homework before paying off a loan or making any other big financial decisions. Losing a six thousand dollar opportunity sucks, but it’s a lesson learned (albeit the hard way).

  23. Sounds like I may qualify for public service loan forgiveness eventually; thanks so much for the heads up!

    • I hope you do. Ten years seems like a long time to wait, but if you have lots of loans, it would be worth it.

  24. Sometimes I’m glad I didn’t go to college just because of all the student loan nightmares I’ve heard. On the other had it may have brought me more job opportunities but like they always say the grass always look greener on the other side of the fence. Good to hear you got your student loans paid down Kim.

  25. Tough call – I was lucky enough to graduate without loans, so I’m not sure what I’d do.

  26. We still have Cheryl’s student loans and invest aggressively. In fact, they’re at such a low interest rate that we don’t even think about them…except for the ugly payment…..

  27. Kim,

    These are some good ways to get loan forgiveness, but if you do the math, it may not make any sense as you’d make lot less doing the work our government wants you to do in order to qualify for the loan.

    Congratulations on getting freedom from your student loan!! way to go.

  28. Ugg that’s a painful consolidation. I know several peers who thought they would qualify for loan forgiveness and then worked for 10 years (paying min. payments thinking they loans would be paid in full) and didn’t realize they didn’t qualify, ouch.

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