Young federal workers worry about how to pay student loans if they are furloughed

WASHINGTON - Joe Hyde thought that getting a job with the Department of Defense was a safe career path. But faced with sequestration and a 20-percent pay cut, he and other federal employees are worried about how they will afford to repay their student loans.

Hyde, 25, graduated from the California University of Pennsylvania in 2010 with five student loans totaling $18,000. He moved to California and took a job at the military's Naval Postgraduate School in Monterey, Calif., as a travel assistant, where he makes $41,000 a year.

Hyde calculated it would take 20 years to pay off his debt if he makes only the minimum payment of $227 per month. But with Congress and the president unable to agree on spending cuts, Hyde and all civilian employees at the school are being furloughed without pay for one day a week beginning in April. Hyde will lose $336 every two weeks until the end of the fiscal year.

The cuts will first hit federal employees, many of whom are being furloughed for at least a few days until the end of fiscal 2013 on Sept. 30.

According to a survey conducted last spring by the Young Government Leaders Institute, a professional networking organization for young people in government, their average federal employee had $47,000 in student loans.

Tyler Robinson, public policy director for the institute, said furloughs are worrisome for federal workers in the organization, whose primary expenses are mortgages and student loan payments.

He also said that 43 percent of those surveyed had a total of one month or less in savings.

Hyde pays $1,400, plus utilities, for his apartment, which he shares with a roommate, in an area with a high-cost of living.

"When it comes down to it, am I going to pay my rent? Or am I going to pay off my student loans?" he said. "It's kind of a no-brainer. I'm going to pay my rent."

He is applying for a hardship deferment of six months and a year, which will mean he doesn't have to make payments during that time, but the loans will still accrue interest at 3.5 percent and 5 percent.

The U.S. Department of Education offers a separate plan, called the Income Based Repayment Plan, for those who qualify for financial hardship. The plan allows loan repayments based on earnings. If the monthly payments do not cover the loan interest, the government makes up the difference.

Chris Greene, a spokesman for Federal Student Aid, urged workers to talk to their loan service providers if they have trouble with repayment.

"Whether or not they qualify for the IBR, there are other benefits they can avail themselves of that will help them manage their student loans, like deferments and forbearance," Greene said.

For federal employees searching for relief, the Federal Employees Education and Assistance Fund helps workers who are behind on rent or car payments. But Robyn Kehoe, the program's director of field relations, said there may not be enough money to cover the needs of all applicants.

"For our loan program, we get a lot of single parents, lower-grade employees and people who are working hard and living paycheck to paycheck," Kehoe said.

In a typical year, the fund provides about $600,000 total in interest-free loans with money raised from federal employees. However, Kehoe said that since employees were made aware of the possibility of furloughs last year, fundraising has lagged.

"We're very concerned that it's going to very quickly outstretch the amount of money that we're able to loan out on a regular basis," Kehoe said.

That could affect employees like Sonya Atamanchuk, 35, who graduated a year ago from ECPI University, a for-profit college in Virginia Beach, Va.

Atamanchuk, who lives in Norfolk, Va., borrowed about $38,000 to earn her bachelor's degree in business and Internet technology. She has paid off about $2,000, but she said it's been hard because her job as a program analyst with the U.S. Army Corps of Engineers pays $30,000 a year.

She said right now Corps employees are "playing the waiting game." They know that hours will be cut, but they are not sure yet on the specifics.

She's been living without cable, making payments on her car and saving for a house, all while paying off her loans. Now she faces a likely furlough.

"I'm just really scared. I don't want to miss any of my payments, and I'll only be able to pay bare minimum, and the interest is going up," Atamanchuk said.

Atamanchuk said she is planning to apply for the Income Based Repayment Plan.

She is likely to qualify; Hyde does not. His salary is too high.

"When you're growing up, you're always told that anyone can go to college," Atamanchuk said.

"You have a dream. Well, I had a dream ... But how am I going to pay for it if I don't have a job? Or if my hours get cut? How do I determine what to pay for? Food in my stomach or paying back my student loans?"

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