Kiss Those Student Loans Goodbye

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Participants in the Public Service Loan Forgiveness Program can now make monthly loan payments through the new Income-based Repayment initiative, rolled out in July, which lets borrowers with student loans enroll in a plan that lets them cap their payments based on income and family size. It's a program geared towards those with a high debt load and low income. For most borrowers, the loan payments will be less than 10% of their income, and will be even less for those with low incomes, says Irons. Worth noting: this program is open to anyone with federal loans, regardless of what profession they are employed in.

Those looking for a field with especially hefty student loan-forgiveness options should look closely at the programs available to nurses and other healthcare professionals, Irons says. For example, the National Health Service Corps Loan Repayment program provides up to $50,000, tax-free, in student loan forgiveness, for primary care health-care professionals—a category that includes dentists, psychologists, and physician assistants—who agree to work for two years at an approved site in an area designated a "health professional shortage area," typically a public hospital or clinic. "For two years of service, that's a pretty generous program," says Irons.

GET RETRAINED: A number of states have received millions in federal stimulus funding that allows unemployed workers to participate in job training programs at local community colleges or universities, often tuition-free. One of the most successful retraining programs to date is recession-battered Michigan's No Worker Left Behind program, which provides up to two years worth of tuition, up to $5,000, for laid-off workers looking to get retrained in a high-demand occupation such as nursing, emerging industries, or an entrepreneurship program. As of June 30, 81,667 had participated in the program, according to a state fact sheet on the program.

If you've been laid off recently and are looking to gain some new skills, short-term retraining programs at community colleges may be a more sensible option than going back to graduate school full-time, says FinAid's Kantrowitz. In some cases, unemployed workers may qualify for dislocated worker training funds that will pay for some or all of the tuition. He recommends that people interested in these opportunities start off by looking at the Web sites like America's Service Locator. "Retraining programs are much cheaper than four-year institutions, so if they have the right program for you and you don't need the full degree, you can get skills in a new area," says FinAid's Kantrowitz. "Often, you just need the skills and don't necessarily need to have a degree."

JOIN THE MILITARY: The military has always offered a number of programs that help people pay off or avoid taking out student loans. The army's Loan Repayment Program is perhaps the best know: for every year of service, new recruit get a portion of their student debt repaid. For those in the Army and the Navy, loans can be repaid up to $65,000. The Air Force's program, the College Loan Repayment Program, pays up to $10,000 a year per recruit.

One new program that those considering joining the military will want to take note of is the Yellow Ribbon Program, created under last year's GI Bill. This is not a loan-forgiveness program, but it does allow post-9/11 veterans to get full tuition and fees, plus housing stipends, covered at the most expensive public four-year university in their state. Some private colleges and universities have signed on as well, agreeing to pay any excess costs not covered by the program. "It is essentially a tuition waiver that they can take to any public college and also to any private college that agrees to accept it in lieu of tuition," says FinAid's Kantrowitz. "It seems like it is going to be very popular."

TAP EMPLOYER BENEFITS: Those fearful of racking up student loan debt may want to go the backhand route and see if their employer will pay the cost of graduation school. Some companies, even in this economy, still will pay 100% of the cost of tuition and fees for graduate school for promising employees. For example, professional services firm KPMG, tech company IBM, and even the IRS are a few of the employers that will completely foot the bill for a graduate education. Other companies will often partially sponsor a student and partially reimburse some of their education costs.

The only caveat? Students whose companies pay for their education are typically expected to go back to the firm after their education is completed, leaving a little less wiggle room for job-hopping. No matter what company you work for, it's always worth asking if they will help you pay for graduate school or any additional training that will help you move forward in your careers, says Irons, of the Project for Student Debt. "It's more efficient for a company to keep a valued employee than to lose you to graduate school and have to hire someone else," says Irons. "If you have a company that might be able to do that and you want to stay with them, it's always worth asking."

Damast is a reporter for BusinessWeek.com.

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