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Loan Forgiveness Trap

Updated on March 26, 2013

Read the Fine Print!

If you are considering signing a contract with the Federal Government to have your Student Loans forgiven...BEWARE!!!

You could be setting yourself up for one incredible nightmare! Especially if you are signing up with the National Health Service Corps (NHSC).


This sounds insane but it is the truth. Read the contract. This is not some flimsy "upgrade my software" agreement that you click on and forget about. This is hard-core legally binding. No lawyer will help you fight it. Attorney's will not pick a fight with an entity of the Feds unless they know they can win AND make a lot of money off the case. Neither can be done with the NHSC contract.

They will not allow you to file bankruptcy to get out of it and they will not let you return the original loan amount to get out of the contract. Believe me. I know people who have tried. Once you sign it, there's no getting out. They can even take away your license to practice if you fail to pay.

Think about it. What if you sign up for the 2-year contract and get laid off from your designated site before you complete the two years? They say they'll find you another site, but the reality is that the new site might be several states away. If your okay with that, then maybe it's not so bad. But if you already have a significant-other or wife and kids or some other kind of major family obligation, this can be devastating.

The bureaucratic barriers are thick and monstrous on this thing. It's a Federal contract, of course. Finding a sympathetic human ear to hear your grievances and actually make some changes to help you out are all but impossible.

If someone in your company's HR department approaches you with this, be very skeptical. The HR rep is not the one who will be on the hook for a quarter-to-half a million dollars when you go into default. They will sweep you under the rug. Most employers are under no obligation to make adjustments to your job description or find a new position for you. They will tell you what I'm telling you now: you should've read the contract!

If you work in Head Start be especially weary. The contract stipulates that you see your clients at your designated site, NOT at schools, residences, etc. Sounds insane that two mutually exclusive federal programs could be encouraged to interact in such a disastrous way, but it does happen. I have personally witnessed it. Federal bureaucrats write up these contracts without ever knowing how these programs actually operate in reality. They unwittingly create enormous financial and occupational traps for some people.

You don't have to take my word for it. Just READ THE CONTRACT and have an attorney look at it for you. It will be well worth it.


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