The Peace Corps does not pay for college in the sense of writing a tuition check, but serving does open a stack of education-related benefits that can substantially reduce what you owe or pay for graduate school. Volunteers can qualify for graduate scholarships at more than 150 partner universities, Public Service Loan Forgiveness credit, partial cancellation of Perkins Loans, deferment of federal student loans during the 27-month service term, and a post-service payment of $10,800 that you can spend on tuition or debt however you choose.
Graduate School Scholarships Through Coverdell Fellows
The Paul D. Coverdell Fellows program is the closest thing the Peace Corps offers to a direct tuition benefit. More than 150 colleges and universities partner with the agency to give returned volunteers financial assistance for graduate degrees and professional certificates.1Peace Corps. Paul D. Coverdell Fellows Program Packages vary widely by school and can include tuition reductions, full scholarships, stipends, or assistantships. One school might guarantee a scholarship of more than $28,000 for an international development program; another might pair an $8,000 annual stipend with a tuition reduction. Every university sets its own package, so the dollar value depends entirely on where you apply.
Every Fellow also completes an internship in an underserved U.S. community during the graduate program, applying skills from overseas service to domestic work.1Peace Corps. Paul D. Coverdell Fellows Program You still need to meet the standard academic admissions requirements, and you apply directly to the university, not through the Peace Corps.
Eligibility is broader than most volunteers assume. Returned volunteers earn lifetime eligibility if they completed the full tour, were medically separated, or received interrupted service status due to circumstances beyond their control. Peace Corps Response Volunteers who completed 12 months of service within a 24-month period also qualify. Volunteers who resigned or were administratively separated are not eligible unless they earned eligibility on a previous tour.1Peace Corps. Paul D. Coverdell Fellows Program There is no deadline. You can return from service, work for a decade, and still apply.
Public Service Loan Forgiveness Credit
Peace Corps service counts as qualifying full-time employment for Public Service Loan Forgiveness.2Federal Student Aid. What Is Qualifying Employment for Public Service Loan Forgiveness PSLF discharges the remaining balance on Direct Loans after 120 qualifying monthly payments made while working for a qualifying employer. A standard 27-month assignment can contribute up to 27 of those payments.
The useful quirk here is that $0 payments count. Enroll in an income-driven repayment plan before you leave, and your payment will be recalculated against the modest living allowance you receive as a volunteer. That recalculated payment is often zero, and each zero-dollar month still ticks toward the 120-payment total.3Peace Corps. Student Loan Information Qualifying plans include Income-Based Repayment, Pay As You Earn, and Income-Contingent Repayment.4U.S. Department of Education. Peace Corps and Repayment of Your Federal Student Loans
There is a second path worth knowing. You can request an economic hardship deferment for the duration of service and then, within six months of receiving the post-service transition payment, make a single lump-sum payment on your Direct Loans. That lump sum can count as up to 12 qualifying PSLF payments.4U.S. Department of Education. Peace Corps and Repayment of Your Federal Student Loans It’s a good option if you’d rather not manage repayment paperwork from abroad.
One catch: PSLF only applies to Direct Loans. If you hold FFEL or older Stafford loans, you’d have to consolidate them into a Direct Consolidation Loan first, and consolidation resets your qualifying payment count to zero. Do it before service begins if PSLF is part of your plan.4U.S. Department of Education. Peace Corps and Repayment of Your Federal Student Loans
Perkins Loan Cancellation
Federal regulations cancel a portion of Perkins Loans for Peace Corps service. The rates are 15 percent of the original principal plus accrued interest for each of the first two 12-month periods, and 20 percent for each of the third and fourth years, for a maximum of 70 percent.5eCFR. 34 CFR 674.60 – Cancellation for Volunteer Service Finish the standard two-year term and 30 percent is cancelled. Extend into a third or fourth year and you can reach 50 or 70 percent.
Cancellation is not automatic. You submit a written request with supporting documentation to the school that issued the loan.6eCFR. 34 CFR Part 674 Subpart D – Loan Cancellation Your Peace Corps Description of Service serves as the proof of qualifying service.7Peace Corps. Certifications of Service for Returned Volunteers
The Perkins program stopped issuing new loans after September 2017, so this only helps borrowers who already hold one. If you do, be careful with consolidation. Rolling a Perkins Loan into a Direct Consolidation Loan permanently eliminates your Perkins-specific cancellation eligibility.4U.S. Department of Education. Peace Corps and Repayment of Your Federal Student Loans Check with the school before consolidating anything.
Deferment on Federal Student Loans During Service
Volunteers can defer federal student loan payments for the duration of service. Most current borrowers use the economic hardship deferment, which Peace Corps service qualifies for because of the modest living allowance.8Federal Student Aid. GEN-98-16 Economic Hardship Deferments for Peace Corps Volunteers Perkins Loan borrowers are generally eligible for a categorical Peace Corps deferment, and during that deferment neither principal nor interest accrues.9eCFR. 34 CFR 674.34 – Deferment of Repayment
On subsidized Direct or Stafford loans, the government pays the interest during an economic hardship deferment, so the balance stays flat while you’re abroad. Unsubsidized loans are different. Interest keeps accruing and capitalizes when the deferment ends, meaning you’ll owe more than when you left. If you hold unsubsidized loans and can manage even small interest payments during service, they keep the balance from growing.
Coordinate with your loan servicer before you depart. Filing paperwork from a rural village with limited internet is far harder than handling it stateside. The Peace Corps provides certification forms that simplify the deferment application, but your servicer still has to receive and process them.
What About Private Student Loans
None of the federal deferment, forgiveness, or cancellation benefits above apply to private student loans. Contact your lender directly to ask what, if anything, they offer.3Peace Corps. Student Loan Information Some private lenders voluntarily offer forbearance or reduced payments to borrowers in national service, but they are not required to. The Servicemembers Civil Relief Act, which caps interest at 6 percent for active-duty military, does not extend to Peace Corps volunteers. Missing payments for 27 months will damage your credit and could push you into default, so factor private debt into your planning before you accept an invitation.
The $10,800 Post-Service Payment
At the end of service, the Peace Corps pays a lump sum to help with the transition home. Volunteers who complete the full 27-month term receive $10,800 before taxes.10Peace Corps. How Can I Use My Service Award The money accrues each month, so shorter terms produce a smaller payment. One-year volunteers receive about $5,000, and Peace Corps Response Volunteers receive between $3,000 and $6,000 depending on service length.11Peace Corps. Finance
There are no restrictions on how you spend it. Many returned volunteers put it straight toward tuition, loan payments, or living expenses while starting graduate school. If you’re pursuing the PSLF lump-sum route described above, this is the payment you’d use to make the qualifying contribution within six months of receiving it.12Office of the Law Revision Counsel. 22 U.S. Code 2504 – Peace Corps Volunteers
How These Benefits Are Taxed
The post-service payment is fully taxable as earned income. Peace Corps withholds Social Security at 6.2 percent, Medicare at 1.45 percent, and federal income tax, and the amount appears on your W-2.13Peace Corps. 2025 Tax Guide for Peace Corps Volunteers The net you receive will be noticeably less than $10,800.
PSLF forgiveness is not taxable. That has always been the case for PSLF and remains true after the American Rescue Plan Act’s broader student loan tax exemption expired on January 1, 2026. Perkins cancellation for qualifying public service, including Peace Corps, is also tax-free under a longstanding IRS exception for student loans with public-service cancellation provisions.14IRS. Topic No. 431, Canceled Debt – Is It Taxable or Not
Income-driven repayment forgiveness is where taxes could surprise you. If you stay on an IDR plan after service and eventually have a balance forgiven after 20 or 25 years, that forgiveness may now be taxable federally, because the ARPA exemption expired at the start of 2026. PSLF is unaffected, but IDR-based forgiveness is, and some states impose their own income tax on forgiven debt.