PHOENIX, AZ -- 07/21/08 --
Student loan borrowers who commit to a decade
of public service may see the remaining balance on their federal student
loans forgiven under the government's new public-service loan forgiveness
program.
Borrowers who enter public-service fields such as law enforcement, public
education, or certain nonprofit work could have their remaining federal
student loan debt forgiven, provided they work full-time for 10 years in an
eligible public-service field and make 120 monthly payments on their college loans during that time.
To be eligible for the loan forgiveness program, borrowers must have taken
out student loans, parent PLUS loans, or a federal consolidation loan
through the Department of Education's federal Direct Loan Program.
Borrowers who took out their federal student
loans from a private lender through the Federal Family Education
Loan Program (rather than directly from the government through the Direct
Loan Program) will have to consolidate their FFELP student loans into the
Direct Loan Program in order to qualify for the loan forgiveness benefit.
The public-service loan forgiveness program is a provision of the College
Cost Reduction and Access Act of 2007, which also increased federal grant
aid to needy students and was intended to provide student loan borrowers
with the incentive to consider and continue working in often low-paying
public-service fields.
Borrowers will only be able to count payments made on their federal Direct
student loans after October 1, 2007, toward the 120-payment requirement.
FFELP borrowers who consolidate their FFELP college loans into a federal
Direct Consolidation Loan will only be able to count the payments they make
on their Direct Consolidation Loan toward their payment requirement. Any
payments made prior to October 1, 2007, or to any lender other than the
federal government won't count.
The first batch of loan forgiveness payments, to be issued in 2017, will
cover any federal student loan balance, including principal and interest,
that remains after a borrower has made 10 years of payments, while working
full-time in a public-service field, under one of three possible student
loan repayment plans: the standard 10-year repayment plan, the
income-contingent repayment plan, or the income-based repayment plan, which
becomes available July 1, 2009, as another provision of the College Cost
Reduction and Access Act.
Both the income-contingent and income-based repayment options allow
borrowers to make smaller monthly payments than what is typically required
under the standard repayment plan. For borrowers in other Direct Loan
repayment plans, only those payments they make that are at least equal to
the monthly payment amount that would be required under the standard
repayment plan will count toward the 120-payment requirement.
Because the standard repayment plan positions borrowers to pay off their
student loan balance in 10 years -- the same period of public service
required before any student loan balance can be forgiven -- financial aid
experts are encouraging borrowers in low-paying public-service jobs who are
interested in the loan forgiveness program to look into their eligibility
for the income-contingent or income-based repayment plans. Borrowers
enrolled in the standard repayment plan throughout their required 10-year
service period may not have any student loan debt left to be forgiven after
10 years.
The fact that borrowers may have already paid off their student loans before the loan
forgiveness program can even go into effect is a flaw of the program that
could prove misleading to students, say government opponents.
Diane Auer Jones, assistant secretary for postsecondary education for the
U.S. Department of Education, says students taking the program's benefits
into consideration as they plan their college financing strategy may end up
being disappointed.
"Some students will see the program and take on more debt than they would
have otherwise," Auer Jones explains, "not realizing it is unlikely that
most of it will be forgiven."
About NextStudent
NextStudent, Federal Lender Code 834051, is dedicated to helping students
and their families find affordable ways to pay for college. NextStudent
offers one-on-one education finance counseling and has a portfolio of
highly competitive education finance products and services, including a
free online scholarship search engine, private
student loans, and information on federally guaranteed parent and
student loans, student loan consolidation programs, and college savings
plans.
For more information about NextStudent and its student loan programs,
please visit our website at NextStudent.com.
Contact:
Philip J. Tannenbaum
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