Your Money: Programs to help shed student debt

• Higher-education funding is down which can lead to higher tuition costs
• If you work in a public service job%2C you may qualify for a loan forgiveness program
• Eligibility requirements differ among the programs

Corey Nelson, 27, graduated from Michigan State University's law school in 2012 with a plan to work his way out of a six-figure student loan debt.

His goal was to work in public service by getting a job as an attorney for the government, maybe on the state or local level, and qualify for a federal student loan-forgiveness program to tackle that debt.

First challenge: Getting hired in a government job. It's not all that easy.

Many students would like to see their student loans just go away. But getting rid of student loans can take real talent, discipline and some creative solutions.

A student loan-forgiveness program typically rewards graduates for taking careers in public service, such as police officers, teachers, social workers and firefighters. The college graduate still makes regular monthly payments on a student loan but can look forward to having a good chunk of debt forgiven in the long run, if he or she follows specific requirements.

Some individual states have specific student loan breaks for specific career choices, too.

Sure, Nelson has a job. But Nelson has been working for a year at a small general practice law firm in Shawano, Wis. If he kept working there, he wouldn't qualify for public service loan forgiveness.

But finally he found a government job, and he just accepted an offer as an attorney from the city of Madison, Wis.

For the debt-forgiveness program to work, he's going to need to keep making payments for 10 years and continue working in public service.

"The hope, obviously, is that the program will still be there," said Nelson, who pays about $400 a month in student loans and expects to save "five figures" in student debt with loan forgiveness.

Will it work? He doesn't know. "Is the job security going to be there to see it through?"

Many students and parents aren't even aware that loan-forgiveness programs exist, though. A federal consumer watchdog agency is trying to bring more light to the federal Public Service Loan Forgiveness program, which was created by Congress in 2007.

Tyler Shelton, 23, who just started graduate school for urban planning at Wayne State University in Detroit, said he's never even heard of loan-forgiveness programs. But if it works, he might consider it as an option to deal with what could end up at $50,000 in student loan debt.

Students need to follow specific rules to make this work, too.

Many borrowers would need to sign up for an income-based repayment plan to ensure maximum savings. You'd need to keep track of the necessary paperwork.

As it takes 10 years of on-time qualifying payments before debt is forgiven, it will be at least 2017 before the first round of federal student loans would be forgiven.

"No one knows quite how this program will work yet, or if Congress may decide it costs more than they counted on and change it once they start the loan forgiveness in 2017," said Val Meyers, associate director for the Office of Financial Aid at Michigan State University.

But is a public service job really right for you?

Katelyn Lietz, 25, a senior majoring in mathematics at Wayne State University, said she might be able to get a break with the federal public service loan-forgiveness program on about $40,000 in student debt — if she found a job as a teacher.

But Lietz says that is a big if.

She works as a substitute teacher and said finding a teaching job in Michigan is tough. She might have to move to Virginia or Arizona.

Her plan to get out of debt involves getting a job as an actuary at an insurance company or elsewhere in Michigan. She expects starting salaries to be around $70,000.

"Employees can still earn more money in the private sector," said Mark Kantrowitz of Edvisors.com.

Kantrowitz said graduates have to take care with their career choices to qualify. He noted that some nurses could qualify if they work in certain areas, such as social work, public health or a not-for-profit hospital. But nursing itself isn't necessarily a public service occupation.

Some other points to consider: Federal loan forgiveness for public service would only apply to federal Direct Loans, not private student loans. Borrowers could consolidate their federal loans into the Direct Loan program to qualify, Kantrowitz said.

How much money could college grads save in forgiven debt?

One example: a public school teacher earning $35,000 a year with $70,000 in undergraduate and graduate school debt. Because of the low income-based payments, it's tough to make any progress paying down the principal. After making 120 monthly payments, for example, Kantrowitz calculated the borrower could still have $70,000 in principal and more than $13,000 in interest to be forgiven in 10 years.

You can explore the rules and options at www.consumerfinance.gov/students.

Some students, particularly those interested in public service jobs relating to health care, may want to review loan-forgiveness options in various states.

Betsy Mayotte, the director of regulatory compliance for the American Student Assistance, a non-profit that gives information about student loans, said she gets questions all the time, including at cocktail parties, about how to find a way to have student debt forgiven.

So her non-profit group researched various programs throughout the country and put together a report called "60+ Ways to Get Rid of Your Student Loans (Without Paying Them)."

The report includes details on loan-forgiveness programs for dental or health care professionals in Wyoming and other states. Loan forgiveness, she said, typically involves doing something good and getting a reward of forgiveness.

"This program enables people to be able to follow their passions rather than following their bills," Mayotte said.

One of the best bets, of course, is to hold down debt as much as possible while in college. Leeann Drees, 26, who graduated from the University of Michigan-Dearborn in 2010 and works as a freelancer in Web design and development in Detroit, said she didn't think hard enough about how she'd pay back her loans. She now has about $15,000 in student loans but doesn't see a job in public service as doable for her.

"It doesn't seem incredibly feasible for someone who wasn't planning on doing that in the first place," she said. "I don't think there are a lot of public sector jobs available. It doesn't seem like those jobs are easy to come by."