The College Cost Reduction and Access Act of 2007 has been in effect since October, 2007 but it is its loan forgiveness provision for public service employees that is infusing hope in a shaky economy. Is the hope justified and do you qualify?
The College Cost Reduction Access Act
When President Bush signed the College Cost Reduction and Access Act of 2007, it was hard for students to find fault with the measure. There are a number of provisions in the legislation that make college loans a lot more affordable over the course of the years.
For example, undergraduate students with subsidized Stafford loans disbursed from July 1st of 2006 to July 1st of 2009 will see a 6.8% interest rate. In comparison, students with loans disbursed between 07-01-11 to 07-01-12 may expect a 3.4% interest rate. While also the income based repayment program is of interest, it is the loan forgiveness that is making the biggest headlines.
Loan Forgiveness under the College Cost Reduction Access Act
Students groaning under the massive weight of their education loans may take heart and consider that there is hope for loan forgiveness. The National Association of Student Financial Aid Administrators (NASFAA) reports that the Secretary of Education has the authority to forgive the balances of federal direct loans – Stafford, Plus and even consolidated – if the student has made 120 scheduled payments on the loan after October 1, 2007.
Given the precarious economic times, finding students who will make their 120 payments faithfully might be difficult. Nevertheless, if the student conscientiously makes the payments, s/he must also clear a second hurdle. The second provision of the College Cost Reduction Access Act stipulates employment in the public service during the 120 payment timeframe.
Defining Public Service Employment under the College Cost Reduction and Access Act
If you are sending in money on your 120 college loan payments and you work full time for an agency that is defined as providing a public service, you may take advantage of the loan forgiveness provision of the College Cost Reduction and Access Act. This includes employment in the fields of social work, public education, law enforcement, public safety, military service, child care, and more! Moreover, if your employer is a tax-exempt 501(c)(3) organization, you also meet the requirements.
Does Banking on the Future Help You Today?
The potential for debt forgiveness that may encompass huge chunks of money is staggering, but will there really be a lot of qualified applicants for the loan forgiveness under the College Cost Reduction and Access Act? First and foremost, the requirement of public service employment is a bit of a double edged sword, as pointed out by the National Law Journal. According to their numbers, fledgling attorneys employed in the private sector make an annual income of about $160,000. The same candidates employed in the public service only bring in about $41,000.
Can new grads really afford to work in the public sector for a down the line loan forgiveness? That being said, with the private sector registering job losses and even the public sector instituting hiring freezes, will new grads with student loan debt really have a fighting chance to aim for loan forgives by meeting both requirements of the College Cost Reduction Access Act?
http://www.nasfaa.org/ ; http://www.law.com/