Loan Forgiveness Eases Debt Burden for New Social Workers
by Barbara Trainin Blank
Despite having an advanced degree and being respected as somewhat of an expert, I barely get by due to student loan repayment.
—respondent to NASW survey
I believe that unmanageable debt, poor preparation for job negotiations, and low salaries in the social work profession make the...profession untenable.
—another respondent
Practically no one pursuing higher education comes away without some accumulation of loan debt before graduating college or graduate school. The debt tends to be more burdensome for social work graduates than others because their salaries, as a rule, are lower.
According to In the Red: Social Workers and Educational Debt, a 2008 report released by the National Association of Social Workers and the NASW Center for Workforce Studies, educational debt is one of the factors that influence recruitment and retention in social work. The survey, which was a follow-up to the 2004 benchmark study by NASW, was administered online over a three-month period and received a total of 3,653 responses.
As the report states, “While the amount of educational debt is not confined to a particular segment of the student population, the implications are vastly different for those who choose careers, like social work, in which salaries tend to be lowered....” Further, the report says, “Educational debt has also been blamed for deterring students from public service careers, thus increasing pressures on a workforce already facing shortages.”
Among the respondents, 69% had incurred debt to finance their social work education. Debt burdens ranged from less than $5,000 to $100,000—with 52% owing between $10,000 and $39,999. Ninety-five percent reported that the debt they had incurred was for student loans, 31% had used credit cards to finance their education, and 12% listed “other.” Forty-one percent of those who had incurred debt were solely responsible for their household income, and more than a third of respondents (36%) with educational debt had social work salaries of less than $40,000 a year. Only 13% earned more than $70,000.
When the survey report compared educational debt amounts with annual salary levels, the report found that 53% of respondents who earned less than $19,999 had educational debt that was greater than their annual salaries. Twenty-five percent had debt more than twice their annual salaries.
Furthermore, nearly a quarter (21%) described their debt load as “unmanageable.” Those with such debt are more likely to be younger, female, single, and African American (more than Caucasians). Sixty-seven percent of those with unmanageable debt earned less than $49,999 a year, compared with 54% of those with manageable debt.
Intae Yoon, Assistant Professor at the School of Social Work, College of Human Ecology, East Carolina University, conducted a survey of his own of BSW and MSW graduates to understand better how they finance their degrees and how much debt burden they have upon graduation. He also wanted to explore how social work educators help students to avoid accumulating unmanageable debt.
After his research, which he hopes to extend further with more respondents, Yoon concluded that another debt they often end up with is of greater concern.
“Yet to me, the more serious concern is students’ credit card debt,” Yoon says. “There is a serious national trend, in which more and more students are using credit cards, especially during the current recession. It’s very hard to get private educational loans.”
For example, 11.1% of the BSW graduates had a minimum of $10,000 in credit card debt. And among those who used credit cards to finance their BSW education, 42% indicated that the availability of these cards was either “very” or “extremely” important to cover their educational expenses.
In the case of MSW counterparts, about 20% indicated that credit cards are very important to cover their educational expenses. Sixteen percent of them have at least $10,000 debt upon graduation.
Yoon continues, “In the case of credit cards, there is no forgiveness. The interest rate is much higher than that of loans. In the case of federal education loans, there’s a 6-month grace period; with credit cards, you have to pay back immediately.”
On the plus side, though, social work students are eligible for some loan forgiveness programs after they have paid off at least part of their student loans.
The College Cost Reduction Act of 2007 allows federal student loan borrowers to choose an income-based repayment program, which is up to 15% of their discretionary income. For social workers and professionals in nationally needed areas, educational loans can be forgiven possibly after repaying the loans for 10 years with no default after signing up for the program.
To qualify for the College Cost Reduction Act loan forgiveness, a graduate must be working full time in a public service job, which could include social work in a public child or family service agency, public service for the elderly, public service for individuals with disabilities, or employment in a 501(c)(3) organization.
After 120 monthly payments have been made, and if the graduate has worked in public service during those payments and at the time of the loan cancellation, 100% of the remaining balance will be forgiven. To find out if you qualify, contact the U.S. Department of Education, which will also be issuing regulations to clarify the program (800-433-3243).
Second is the Higher Education Reauthorization and Opportunity Act of 2008. Eligible borrowers must be employed full time in an occupational area of “national need”—such as child welfare workers or public sector employees. This program relates to social workers, because child welfare workers with a degree in social work or a related field with a focus on serving children and families and who are employed full time in public or private child welfare services are eligible, as are mental health professionals with a master’s degree in social work, psychology, or psychiatry who serve children, adolescents, or veterans. Interested social work students and social workers should call 800-433-3243 to find out if the work they do “fits.”
Funds are available on a first-come, first-serve basis and are subject to Congressional appropriations. (See http://studentaid.ed.gov). Eligible participants may receive up to $2,000 per year of service, up to a maximum of $10,000 over a five-year period. The exact amount received is determined by the appropriations. Eligible borrowers may not be in default on the loan for which they are asking loan forgiveness.
The last program is the recently passed Health Care Education Reconciliation Act of 2010. This new policy is a generous expansion of the College Cost Reduction Act of 2007. It lowers the mandated repayment ratio to borrowers’ discretionary income from 15% to 10%. Yet, the new policy won’t be effective until July 1, 2014. Basically, these programs are very similar and are only applicable to the borrowers of federal student loans.
The Perkins Forgiveness Act is expected to become operational, but probably not before 2017. It will involve 120 monthly payments over a 10-year period.
Another federal program that helps social workers is the National Health Service Corps Loan Repayment Program, which offers fully trained and licensed clinical social workers $50,000 to repay student loans in exchange for two years serving in a community-based site in a high-need Health Professional Shortage Area that has applied to and been approved by the NHSC as a service site.
According to Nancy McFall Jean, NASW lobbyist, the organization has been working to secure student loan forgiveness for years and was instrumental in securing such loan forgiveness in the College Cost Reduction Act.
“Social work debt is often in excess of $20,000, which is on par with other professions, but the social work field gets paid less,” she says. “Part of the issue is the way the student loan program is set up—that they have to be repaid in 10 years, which is very difficult for BSWs or MSWs making $30,000 [a year]. The salary may not be much higher than the loan—especially in this economy.”
Jean recalls one woman with a $10,000 debt who couldn’t qualify for a loan forgiveness program because she was in default. “I hear stories like this one after the other,” she says.
Also working on behalf of loan forgiveness programs is the Council on Social Work Education (CSWE).
“The past couple of years, we have put in a fair amount of effort for social workers to have loans forgiven and for different payment plans, as well as into pointing directions to fellowships for students,” says Julia Watkins, CSWE’s executive director. “We need to be proactive, because it’s a modestly paid field. All the loan forgiveness programs are vulnerable, and the need is great.”
Some loan forgiveness programs have been targeted through the Veterans Administration, she points out, as well as through the Indian Health Service. “With the termination of the National Institute of Mental Health program, we’re out looking for other funding sources,” she adds.
There are also private educational loans with much higher interest rates than government loans, which are also hard to get, says Yoon. “Students need to be aware of the pros and cons of private loans,” he points out.
If a student has difficulty paying his or her student loan, the borrower can rearrange his or her repayment schedule or choose either a deferment or forbearance option. That allows the borrowers to temporarily stop payments or lower monthly payment amounts. But these programs must be granted by the lender or the government.
“Whatever the amount and terms of your loan, it’s important to contact your lender immediately if you’re having trouble paying off the loans,” says Yoon. You may qualify for deferment, forbearance, or another form of payment relief.
It’s important to take action before you accrue late fees. Not doing so may affect your eligibility for payment relief or loan forgiveness programs.
Title IV-E Programs Assist Student Financing
Although her undergraduate major was in journalism, T. J. Rutherford decided to pursue an MSW degree in clinical social work at Savannah State University in Georgia. When the director of the program told her about Title IV-E, Rutherford was immediately interested.
Title IV-E of the Social Security Act authorized the Foster Care and Adoption Assistance programs to provide federal matching funds to states for directly administering these programs. The objectives of Title IV-E are to improve the quality of care of children in foster care, reduce their number, and to return children to their homes as soon as conditions permit. A further goal is to facilitate the adoption or permanent placement of children who cannot be returned to their homes.
“I didn’t know if I wanted to go into child protective services, but I knew I didn’t want to take on extra educational debt,” she says. “I decided to give it a try, because I always liked working with children.”
People tried to talk her out of child welfare, because it’s “tough work” and doesn’t pay as well as private practice. But once Rutherford started her field placement, she realized it was a “good fit.”
“The purpose is to help families stay together,” she says. “Children do better when they stay with their families, although sometimes it’s not an option.”
In addition to the grant that covered her tuition, Rutherford is getting a salary and good benefits at her state job, where she is technically still in training. She is interested in moving up to a regional specialist position to help several child welfare agencies. “My goal is to take it day by day and learn as much as I can,” she says.
Several schools participate in the Title IV-E program. For example, the Education for Public Welfare Program is a partnership between the University of Maryland School of Social Work and the Maryland Department of Human Resources to prepare BSW and MSW candidates for public child welfare social work practice. Participants agree, upon graduation, to accept employment in Maryland’s public child welfare programs located in local departments of social services.
“Every state is different,” says Susan Mankita, who administers the Title IV-E program at Florida International University. “The money comes down from the federal government and is administered by the states based on their child welfare and foster care and adoption needs. Students can apply before going to social work school and then work for a child welfare agency, whether privatized or public.”
The State of Florida, for example, provides several stipends a year to schools of social work to entice social workers into the child welfare field and train them. Both undergraduate and graduate students are eligible.
Some states go beyond education or training and give social work students a “free ride, including room and board,” says Mankita. Title IV-E money can also be for those already working in child welfare who want to further their education. Others help with student loan repayment if there’s money in the budget for it.
Thanks to Title IV-E, the needs of many children are met.
Barbara Trainin blank is a freelance writer in Harrisburg, PA. She would like to acknowledge the National Association of Social Workers for providing much of the background information for this article.