Are there student loan forgiveness programs for people who have founded their own non-profits? (I am not able to pay myself a salary yet…)

Susan,

This is a tricky one.  The regulations say that you must have full-time paid work.  501(c)(3) employment qualifies, but if you’re not earning any salary, that doesn’t sound like paid work to me.  I was just having an email discussion with another borrower who did some research indicating that the Fair Labor Standards Act (FLSA) provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees but that to qualify for the exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week.

The question we are wondering about now is whether full-time paid work for PSLF has to be at least as much as the minimum wage ($455 per week), or whether people in your situation might be allowed to earn a lower salary during the first few years of operation…

I’m working with some folks to try to get more information.  Check back with me in a bit to see where we’ve gotten with this.

Congratulations on establishing a nonprofit!  That’s exciting.

Yours,
Heather

Hello Heather. I was wondering if you could point me in the right direction for student loan forgivenness. I am the associate ex director of a non profit (501 C3) and have been employed there more than 12 years. We serve the entire community from kids to adults. Are there any programs that would assist me with this? I was hoping to fall into the category of non profit forgiveness or public service forgiveness. Thanks in advance and for any guidance that you can give me—Johnny     Ps. Yes, I am presently employed by the same organization now

I’m confused.  Do you work for the c3 now?  Check out the PSLF in 5 Easy Steps on the tools page to see all the requirements and let me know if other questions arise.

Hello Heather. I was wondering if you could point me in the right direction for student loan forgivenness. I am the associate ex director of a non profit (501 C3) and have been employed there more than 12 years. We serve the entire community from kids to adults. Are there any programs that would assist me with this? I was hoping to fall into the category of non profit forgiveness or public service forgiveness. Thanks in advance and for any guidance that you can give me—Johnny   Ps. Yes, I am presently employed by the same organization now

OK, then.  (Anybody seen Raising Arizona?)

Full time paid work for a 501(c)(3) is definitely qualifying employments. Public Service Loan Forgiveness is earned by making payments.  You have to make the right kind of payments, on the right kind of loans, while you are in the right kind of job.

Start by reading through Public Service Loan Forgiveness in 5 Easy Steps and the other one pagers on my tools page under Tools for Student Loan Borrowers, especially the Borrower Action Plan.  Also think about attending one of my free webinars.

Dear Heather -

Please can you offer feedback on this train of thought? I am starting the process of founding a non-profit 501(c)(3), possibly with 1 or 2 others.  Once established legally, start-up funds will be used to pay myself a salary as a “full-time” employee at “minimum-wage,” for starters.  I have high student debt.  I am currently in a Master’s Degree program.

Is there anything wrong with thinking that when (1) the organization is officially established and I am an employee, and (2) I start paying student loans (previous ones before this degree) under IBR, that I am officially starting my 10-year repayment for PSLF?

Alan

Hi Heather,
Just wondering if you had any updates on this topic.  Did you ever determine whether non-profit founders have to be paid minimum wage or greater in order for payments to qualify towards PSLF? 
Thanks so much, 
Amanda

Heather - 24 May 2011 04:42 PM

Susan,

This is a tricky one.  The regulations say that you must have full-time paid work.  501(c)(3) employment qualifies, but if you’re not earning any salary, that doesn’t sound like paid work to me.  I was just having an email discussion with another borrower who did some research indicating that the Fair Labor Standards Act (FLSA) provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees but that to qualify for the exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week.

The question we are wondering about now is whether full-time paid work for PSLF has to be at least as much as the minimum wage ($455 per week), or whether people in your situation might be allowed to earn a lower salary during the first few years of operation…

I’m working with some folks to try to get more information.  Check back with me in a bit to see where we’ve gotten with this.

Congratulations on establishing a nonprofit!  That’s exciting.

Yours,
Heather

Hi Heather,

Do you have an update with regards to nonprofit founders?

Thank you!
Kathy

I’m not an expert on employment law, but from what I can tell, a nonprofit executive’s compensation must be “reasonable”.  Some good information is here: http://www.501c3.org/blog/nonprofit-executive-compensation/

This is kind of outdated but from the IRS and good: http://www.irs.gov/pub/irs-tege/eotopici93.pdf

Ooo, here’s more: ]http://www.dol.gov/whd/regs/compliance/fairpay/fs17b_executive.pdf]
Does this mean you must be paid at least $455 per week? 

And it seems like most start up non profits wouldn’t be covered by the Fair Labor Standards Act anyway, so I’m not sure minimum wage is even an issue. 

Listen y’all, we need an employment lawyer.  Anybody got one?

OK, y’all.  I posed the employment question to the Wage and Hour division of the US Dept of Labor.  See below:

Thank you for contacting the U.S. Department of Labor National Contact Center.

With reference to salary basis requirements, to qualify for exemption, employees generally must be paid at not less than $455 per week on a salary basis. These salary requirements do not apply to outside sales employees, teachers, and employees practicing law or medicine. Exempt computer employees may be paid at least $455 on a salary basis or on an hourly basis at a rate not less than $27.63 an hour. Being paid on a salary basis means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee s work.  An exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked.  Exempt employees do not need to be paid for any workweek in which they perform no work.  If the employer makes deductions from an employee s predetermined salary, i.e., because of the operating requirements of the business, that employee is not paid on a salary basis.  If the employee is ready, willing and able to work, deductions may not be made for time when work is not available.

In relation to paid volunteer work, U.S. Department of Labor regulations address employment relationships between employers and employees.  However, if the volunteer or intern will be paid for their hours worked, the best office to assist you is the Wage and Hour Division.

The office to best answer your questions pertaining to salary basis requirements and paid volunteer work is the Raleigh NC - WHD - District Office. You may contact this office at (919) 790-2741 or please visit the website at http://www.wagehour.dol.gov for additional information.  When calling listen carefully to all of the options in order to make the appropriate selection and make note of the dates and times you attempted to call the office. If you are unable to reach a representative or have not received a return call within 2 business days, please contact us in order to forward your information to your local office. Please be advised that you may be put in a hold queue status until a WHD representative can take your call if you decide to contact this office.

Relating to unpaid internships and volunteer work are not considered employment relationships since they are usually at-will and not compensated.  If your state has a law covering this issue, your State Department of Labor office is the best resource to help you with state employment laws.

State labor offices operate under a variety of titles.  There is also a variety in the scope and scale of labor enforcement carried out by individual states.  Some states may have rigorous enforcement of all labor laws, while others may have minimal labor enforcement.  If you have a question about your states labor laws, you should contact your state labor office or search their website.

Referring to unpaid volunteer work, please visit the State Department of Labor Offices website at http://www.dol.gov/whd/contacts/state_of.htm, to locate your state office.

If you need any additional information on our services please feel free to contact us via telephone at 1-866-4-US-WAGE (1-866-487-9243).

Thank you,

The U.S. Department of Labor National Contact Center

Hello Heather,

Did you receive any update on this issue? It seems the DOL punted on its response here.

Are there any updates on this issue? I am in the process of starting a non profit as well. 

Any updates on this process? Interested in going down this route as well