Get Out of Debt Guy

Go to Prison and Get Your Federal Student Loans Forgiven

Posted October 12

My friend Damon Day were talking about federal student loan issues and somehow we got to taking about inmates in a federal prison and how they could deal with their student loans.

The conversation came around to wondering if inmates who had prison jobs would be eligible for Public Service Loan Forgiveness (PSLF) for their federal student loans. Under the PSLF program the balance due on qualifying federal student loans is eliminated tax-free after 120 payments. And those payments can be made under an income driven repayment program like the IBR.

The Income Based Repayment (IBR) program can given you a qualifying payment of $0 (zero) per month based on income and certainly inmates would qualify for the $0 monthly payment. Their wages are minimal. Typically between 23 cents to $1.15 per hour.

I thought this could not actually be true, but it appears to be a compliant option for inmates to get their loans forgiven. Here is why.

Under the PSLF program if you are employed by "A government organization (including a federal, state, local, or tribal organization, agency, or entity; a public child or family service agency; or a tribal college or university)" you would be eligible for the PSLF program.

Federal inmates are employed through Federal Prison Industries, Inc. (FPI) which is more commonly known as UNICOR. The goal of this entity is "to employ and provide job skills training to the greatest practicable number of inmates confined within the Federal Bureau of Prisons."

UNICOR is "a wholly-owned government corporation created by Congress in 1934." Their website can be found at And as the federal Department of Justice agency UNICOR says on their annual report, "Other expense is comprised primarily of inmate wages." So they are a federal corporation and pay wages to inmates.

To be eligible for the PSLF program an inmate would need to work at least 30 hours per week or an average of 30 hours per week over an eight month period per year.

So it appears if you are headed to federal prison or in federal prison and anticipate being employed by UNICOR that you should get your student loans into a Direct Consolidation Loan and then opt for an income driven repayment program and get the IBR $0 per month payment.

The process to consolidate federal student loans is very easy, free, and can be accomplished online, probably even from prison.

You apply for a Direct Consolidation Loan through This process offers both electronic and paper options. You can complete the electronic application as explained below or you can download and print a paper application from for submission by U.S. mail.

Once you sign in to, you will be able to electronically complete the Federal Direct Consolidation Loan Application and Promissory Note. The electronic application on consists of the following five steps:

1. Choose Loans & Servicer
2. Repayment Plan Selection
3. Terms & Conditions
4. Borrower & Reference Information
5. Review & Sign

After you submit your application electronically via or by mailing a paper application, the consolidation servicer selected will complete the actions required to consolidate your eligible loans. The consolidation servicer will be your point of contact for any questions you may have related to your consolidation application.

Still Not a Good Reason to Go to Jail

It goes without saying that getting your student loans forgiven is not a good reason to go to jail but then again neither is taking your own life or turning tricks. Things readers have told me they are contemplating.

But don't count on going to a federal prison and taking out federal student loans, you can't. But while you would be eligible for some select loans, even the Department of Education says you probably won't get them while in the pen. For your information, once you are released you would be eligible for federal student loans. However, if your incarceration was for a drug-related offense or if you are subject to an involuntary civil commitment for a sexual offense, your eligibility may be limited.

But if you happen to find yourself incarcerated with about ten years on your hands and you are lucky enough to land a job in a federal prison, then this is something you could pursue so you can exit prison with a better chance of starting over.



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About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.