All across North America we see pastors who have followed God’s call on their lives and have pursued higher education. In doing so, many have needed to secure loans to finance their schooling, and some of those pastors struggle to make their monthly loan payments on a pastor’s salary. Sadly, there are some who have left the ministry because of the financial pressure.
It doesn’t have to be this way. Help is available!
Below are a variety of resources to assist pastors in the repayment of their student loans, and in some cases, help them achieve loan forgiveness.
All of the U.S. resources listed below are available together in one PDF called:
A Guide to Assisting Pastors with Student Loan Repayment: A toolkit for district leaders, churches, and pastors
The Canadian Guide to Student Loan Repayment
Repayment Assistance Plan Eligibility
The COMPASS Initiative also accepts donations to its Ministerial Excellence Fund from anyone that desires to see other pastors benefit from this initiative now and into the future. https://compassinitiative.org/donate-now
An educational assistance program is a separate written plan that provides educational assistance to a church’s employees, as part of the employee’s fringe benefits. Up to $5,250 of educational assistance can be excluded from the employee’s taxable wages each year. See the IRS Publication 15-B for additional details.
These expenses generally include the cost of books, equipment, fees, supplies, and tuition. Education expenses don’t include the cost of tools or supplies (other than textbooks) the employee is allowed to keep at the end of the course. Nor do they include the cost of lodging, meals, or transportation.
The employee must be able to provide substantiation that the educational assistance provided was used for qualifying education expenses.
Normally, no. However, section 2206 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), temporarily expanded the definition of educational assistance to include the payment of student loans. This change applies to student loan payments paid after March 27, 2020 and before January 1, 2026. See the IRS Publication 15-B for additional details.
The church board (or governing body) must create a written IRS-qualified Educational Assistance Program. The EAP is a fringe benefit offered to all employees of the church. A sample EAP is included in the Resources section above.
For more details consult a qualified tax advisor and read “Educational Assistance” under section 2 of the IRS Publication 15-B, “Employer’s Tax Guide to Fringe Benefits.”
Each employee must submit a written request for funds from the Educational Assistance Program each year, according to the policy established by the church when it created the Educational Assistance Program. A sample request for funds is included in the Resources section above.
Follow these five easy steps for public service loan forgiveness from student loan expert Heather Jarvis at askheatherjarvis.com.
1. Make the right kind of payment…
2. On the right kind of loan…
3. While you are in the right kind of job…
4. Repeat 120 times…
5. Prove it…
For most student loan borrowers seeking Public Service Loan Forgiveness, Income-Based Repayment (IBR) is the best repayment plan. The IBR calculates your monthly payment as a fixed percentage of your income. As your income goes up, your monthly payments will also go up.
Other eligible repayment plans are the Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and the Income-Contingent Repayment (ICR). To enroll in any of these repayment plans you must contact your loan servicer directly. Remember, before you enroll in one of these repayment plans, be sure that your loan(s) is a federal Direct Loan.
For more information about the different types of federal loan repayment plans, go to StudentAid.gov.
Only Direct Loan Program loans that are not in default are eligible for PSLF and TEPSLF. Loans you received under the Federal Family Education Loan (FFEL) Program, the Federal Perkins Loan (Perkins Loan) Program, or any other student loan program are not eligible for PSLF.
However, if you have FFEL Program or Perkins Loan Program loans, you may consolidate them into a Direct Consolidation Loan to take advantage of PSLF and TEPSLF. Consolidation must take place before Oct. 31, 2022 and the PSLF/TEPSLF form must be submitted by Oct. 31, 2022.
To find out which types of loans you have, log in to your “Aid Summary” using your username and password (FSA ID). StudentAid.gov.
Every local Church of the Nazarene is incorporated as a 501(c)(3) not-for-profit organization, and 501(c)(3) organizations are qualified employers.
Prior to July 2021, most pastors did not qualify for the U.S. Public Service Loan Forgiveness program because pastors could not count the hours they spent in “religious instruction, worship services, or any form of proselytizing” toward their full-time work requirement. This restriction was removed as of July 1, 2021, making more pastors eligible for the PSLF program.
According to the Federal Student Aid website:
“For PSLF, you’re generally considered to work full-time if you meet your employer’s definition of full-time or work at least 30 hours per week, whichever is greater. If you are employed in more than one qualifying part-time job at the same time, you will be considered full-time if you work a combined average of at least 30 hours per week with your employers. If you are employed by a not-for-profit organization, time spent on religious instruction, worship services, or any form of proselytizing as a part of your job responsibilities may be counted toward meeting the full-time employment requirement.” [emphasis added]
The PSLF requires 120 qualifying monthly payments that you make:
Your 120 qualifying monthly payments don’t need to be consecutive. For example, if you have a period of employment with a nonqualifying employer, you will not lose credit for prior qualifying payments that you made.
As part of the COVID-19 emergency relief, federal student loan payments were paused. The student loan payment pause is extended until the U.S. Department of Education is permitted to implement the debt relief program or the litigation is resolved. Payments will restart 60 days later. If the debt relief program has not been implemented and the litigation has not been resolved by June 30, 2023 — payments will resume 60 days after that.
Suspended payments count toward PSLF and Temporary Expanded PSLF as long as you meet all other qualifications. You will receive credit as though you made on-time monthly payments in the correct amount while on a qualifying repayment plan. Note: In-grace, in-school, and certain deferment, forbearance, and bankruptcy statuses are not eligible for credit toward PSLF. StudentAid.gov/pslf
Yes, you will need to submit the PSLF/TEPSLF form every year, and provide your updated financial information (income, family size, etc.) to your loan servicer every year.
You can get information about all of the federal student loans you have received and find the loan servicer¬ for your loans by logging in to “My Federal Student Aid.” Only your federal loans – not private loans – will appear here.
On Oct. 6, 2021, the U.S. Department of Education announced a change to the PSLF rules for a limited time as a result of the COVID-19 national emergency. Now, for a limited period of time, borrowers may receive credit for past payments made on loans that would otherwise not qualify for PSLF. It is known as Temporary Extended Public Service Loan Forgiveness (TEPSLF).
Under the new rules, any prior payment made will count as a qualifying payment, regardless of federal loan type, repayment plan, or whether the payment was made in full or on time. All you need is qualifying employment. This change will apply to student loan borrowers with Direct Loans, those who have already consolidated into the Direct Loan Program, and those who consolidate into the Direct Loan Program by Oct. 31, 2022.
As long as you consolidate into the Direct Loan Program by Oct. 31, 2022, you can get credit for any of these federal student loans:
NOTE: Parent PLUS loans are not eligible under the limited PSLF waiver, even if you consolidate them into a new Direct Consolidation Loan by Oct. 31, 2022.
The TEPSLF requires that a separate PSLF/TEPSLF form must be submitted for each qualifying employer for which you have worked while making payments on your federal student loans, in order for those loan payments to be considered as qualifying payments toward the 120 required payments.
The TEPSLF program is only available for a limited period of time. Any necessary loan consolidation must be completed before Oct. 31, 2022 and the PSLF/TEPSLF form(s) must be submitted by Oct. 31, 2022.
You will need your most recent W-2 from your employer(s) or your employer’s Federal Employer Identification Number (EIN). Most people complete the form using the “PSLF Help Tool” in less than 30 minutes. NOTE: The process must be completed in a single session.
If you are filing a PSLF form regarding previous employment, you will need the EIN of each employer/church and the signature of an authorized official from that church verifying your start and end dates.
The Church of the Nazarene is a Protestant Christian church in the Wesleyan-Holiness tradition.
Organized in 1908, the denomination is now home to about 2.5 million members worshipping in more than 30,000 congregations in 165 world areas.
