Seminary School Loans: How to Pay Them and Focus on Your Calling

Before the era of debt financed education, I doubt pastors and ministers faced anything like the student loan burdens of today.

In the modern era, future religious leaders must contend with indebtedness from two sources. To get to seminary, you probably have to go to college and incur undergrad student loan debt to cover the cost of attendance. Then you gain admission to seminary, and you incur seminary school loans.

Added together, some pastors and ministers are coming out of seminary owing more than $50,000. The absolute dollar figure involved with seminary school loans is much smaller than other professional schools. But the debt-to-income ratio of most ministers is more than 1:1 when they graduate.

I'm really interested in helping pastors and ministers come up with a plan for their seminary student debt. Part of that stems from faith. The other part comes from deep gratefulness in how ministers and pastors have helped me through life's hills and valleys.

Seminary graduates with loans have received different treatment than other nonprofit sector employees

Historically, the Public Service Loan Forgiveness program (PSLF) explicitly excluded religious workers from qualifying for tax-free loan forgiveness after 10 years of work. Hence, ministers couldn't take advantage of PSLF if they were involved in any proselytizing activity.

Workers at faith-based employers can count hours not specifically devoted to worship. But it's very difficult to get any loan forgiveness while working for a church.

In my view, this is an odd statement of society values. Neurosurgeons receive six figures of loan forgiveness. Meanwhile, a pastor serving the poor doesn't get any on his $30,000 student debt because he mixes the gospel with his service.

However, new legislation has opened the door to allow faith-based leaders to participate in federal student aid programs, including PSLF, beginning July 2021. But the details and implementation of this new development are still up in the air.

For now, it's important to not be under illusions that your seminary school loans won't be yours to pay off. There are ways to mitigate their impact though.

Most seminary graduates can start with an income-driven repayment plan

It would be great to be able to afford the $400 a month or more to pay off seminary debt in 10 years or less. However, that's tough at a time when you might need to buy a reliable car or are thinking about starting a family.

Fortunately, college students who were able to take advantage of federal loans using the Free Application for Federal Student Aid (FAFSA) have many repayment options. Federal student loans include many types of loans, including Direct subsidized and unsubsidized student loans and Direct PLUS loans.

One major trick is to know if it's better to do the income-based repayments or refinance with a private lender to pay it down fast. If you haven't looked into the Revised Pay As You Earn program, you need to.

Most seminary grads will want to start paying their federal loans using the Revised Pay As You Earn program. The government pays half the interest left over after you make the required payments. That could result in an interest rate subsidy worth a few percentage points after graduation.

Eventually, you probably want to pay seminary school loans off

Some seminary students will leave school owing more than double their income. However, the majority still owes less than two times their income.

For clergy who marry, this is especially true. Pastors, ministers, and other faith leaders often have higher earning spouses. Since student loan repayment counts spousal income, it could very well make sense just to pay back seminary school loans.

You'll save money by paying down your seminary school debt quickly, thereby incurring less interest. You should try refinancing at a place like Credible or LendKey.

I've seen both refinancing lenders give good personalized prequalified rates to lower income, lower debt folks. Also, don't be afraid to see if a wealthier family member might be able to cosign. You could receive a lower personalized prequalified rate by adding a cosigner.

I suggest paying loans back as quickly as you can after getting $2,000 to $5,000 saved in the bank. This will protect your family against an emergency. That means doing a 10 year loan or less so you can get out of debt sooner rather than later.

What are seminary school loans like in different denominations?

Different denominations have different levels and ways of dealing with seminary student debt. One common thread is that church financial assistance has declined through the years for most Christian seminaries. Here's a short description of seminary school loans in a few major traditions of Christianity in America.

Methodist seminary school loans are among the highest

I went to a Methodist college ministry in undergrad and really appreciated the ministers there. They were very well read and knew the Bible backwards and forwards. They even wove literature and CS Lewis stories into their sermons.

Unfortunately for indebted graduates, Methodist seminaries are typically located in university settings where costs are higher.

The average debt for a graduating MDiv from a Methodist seminary is about $49,303. But that's as of the most recent data I can find from 2014. The average today is likely significantly higher.

According to the same article, the total income for a Methodist coming out of seminary (including housing allowance) is $49,742.

If I had to guess, I would wager that undergrad debt has skyrocketed for new ministers in the Methodist church. My expectation is that if you look at just cash compensation and exclude housing allowance, the most indebted third now owe more than 150% of their income.

Another issue with Methodist seminaries (this is me guessing) is their location in higher cost of living areas. Housing and food costs at Duke and Emory's seminaries will run you a lot more than housing and food at a rural seminary. All of these factors can quickly bump up average loan amounts for seminary students.

Baptist seminary school loans have gone from insignificant to challenging

Southern Baptist churches have provided significantly more aid to their seminaries than they currently do. Some still have strong financial support, but others have turned to student loans to cover the gap.

The average Southern Baptist seminary has increased tuition, leaving new ministers with larger burdens. However, the typical balance is mostly due to undergraduate students' tuition from what I've been able to find online.

Checking out Southern Baptist Theological Seminary, the yearly tuition cost for a student from a Southern Baptist church is slightly over $5,000. That's not nothing, but it's much smaller than some of their Protestant brethren.

Baptist seminaries seem to also benefit from large individual gifts and location in lower cost of living areas. That said, if you come out of undergrad with the standard $37,000 in student loans and then pick up another $15,000 or so, that's still much higher than the salaries of many starting pastors.

I also found that many seminaries choose to opt out of federal student loan programs in favor of less restrictive alternatives, like private loans that have their own loan eligibility requirements and maximum loan funds.

That decision is probably for reasons of independence. But it makes it more challenging for borrowers to afford repayment as you'll lack income-driven repayment options.

If you're Baptist and feel called to ministry, you're luckier than most other future Christian leaders. Try to find support in part-time work or scholarships to come out with as little seminary school debt as possible.

The Catholic church is turning away some qualified candidates because of concerns for their debt

I've seen anecdotal stories about some folks being turned away from becoming priests or nuns because of concerns that debt will burden them. That makes sense as financially rewarding endeavors aren't supposed to be top on the priority list for priests and nuns who already give up so much.

In fairness, the Catholic church does not want leaders of its flock to be stressed financially. That way, they can focus on leading and ministering to their fellow Catholics.

In fact, according to one study, seven in 10 Catholic religious institutions turned someone away because of concerns over their high student debt. You know that student loan debt is a problem though when the Catholic church turns away otherwise qualified candidates. It seems as if most of the concern is being created by burdensome undergrad loans.

What about student loans for imams, rabbis or other religious leaders?

There isn't great data surrounding the financing of other fields of religious studies. I tried to find some stuff online, and it looks like rabbi student loans might come in between $20,000 to $40,000, depending on the school. That's similar to Christian ministers and pastors.

I'm no religious scholar, but I know that many faithful Muslims do not believe in taking out debt with interest. The searches I did on cost of Islamic seminary programs came up with more modest figures than I expected. The institutes mentioned that they encouraged communities to sponsor promising candidates and provide additional financial resources.

Get a plan for your seminary student debt so you can focus on your calling

As a Christian, I have tremendous admiration for those who sacrifice time, energy and financial security in the service of God and the faithful. Seminary student loans are a barrier to fulfilling your call to ministry. But it doesn't have to get in the way as much as you might think.

Even though pastors and other ministers are not eligible for the most generous loan forgiveness programs, you still have income-driven repayment. If your income is low enough because you're a student minister making $30,000 with three kids, then your interest rate could be cut in half with the Revised Pay As You Earn program.

If your spouse has a higher income, you might consider asking him or her to cosign to lock in a lower interest rate to pay it off quickly. Maybe consider asking churches that you interview at for a loan repayment assistance benefit instead of a substantial parsonage that might not be as important to you.

I want to be a source of help to those who give themselves to ministry

If you have seminary school loans, I want to help you make a payment plan unique to your situation. To support your calling, I'd like to give back by giving you a significant discount if your combined household income is below $100,000.

If you're married to someone with a lot of loans for professional students and your income is above $100,000 combined, then I'll just charge my standard default rates on the hire me page.

That offer extends to anybody with loans for a grad school program that prepared them for being a leader in their religious community.

Just send us an email if you'd like help figuring out what to do. We need you fulfilling your calling and not worrying about how you're going to repay your loans. The world is a richer place with your sermons, counseling, prayer and inspiration.