Signing up for the Peace Corps after graduation gives you the opportunity to volunteer and see the world, before becoming settled into a routine at home. Those who are interested in this voluntary service but hold high levels of student debt can still serve in the Peace Corps, as arrangements can be made to have the loans deferred. However the Peace Corps does not offer a loan forgiveness program.
Although certain concessions are allowed for federal student loans whilst volunteers serve, it is up to the individual to make all their loan arrangements directly with their lenders before leaving the US. Here are the key points which those with student loans outstanding need to be aware of if considering the Peace Corps as a vocation for the next 27 months.
1. Basic living costs will be paid by the Peace Corps which also gives a transitional living allowance of $7425 upon completion of 27 months of service.
2. Some private lenders may be willing to offer a deferment on private student loans but rules are complicated and you must speak directly with the lender to find out their position.
3. Federal loans which are Stafford, Perkins, Direct lending and consolidated, may all have their principals deferred by up to 3 years. This includes a 6 month period after finishing the term of service in the Peace Corps.
4. In addition any subsidized loans will not be subject to interest accruing in this period.
5. If subsidized loans and the Perkins loan are consolidated with other federal loans then the interest will be applied so be sure not to consolidate any subsidized loans.
6. The first two years of service will each cancel out 15% of the Perkins loan: additionally further service of 2 more years will cancel out a further 20% of the Perkins loan, provided it has not been consolidated with any other student loan. Thus 4 years service would cancel 70% of the Perkins loan with no interest having accrued on the remaining principal.
7. Federal loans which are not subsidized will have interest due during this period unless the student applies to defer it. However arrangements can be made to have up to $168.75 per month made available to pay the interest whilst volunteering. This sum will be deducted from the transitional living allowance.
8. It is up to the individual to appraise themselves if lenders allow deferment of loans for the full 27 months or if they need to be reapplied for.
9. It would be wise for anyone with loans considering joining the Peace Corps to have someone at home as their Power of Attorney to deal with any incidental matters which arise concerning the loans.
If you plan carefully before leaving the country as a volunteer member of the Peace Corps, then all the arrangements can be set in place before hand to deal with student loans. For those who do have unsubsidized loans accruing interest it is highly recommended that the interest is paid from the readjustment allowance whilst serving, so the principal debt does not continue to rise.