Student Loan Update: Maybe You'll Get a Handout After All

This week brings an update on the student-loan front: Congress has decided to do something. No, not the total loan forgiveness that some are asking for, but a couple of things that should help, particularly for those who pursue public-interest careers.

The National Law Journal had the story last week, and FindLaw's Strategist followed up with a summary of the key provisions. The College Cost Reduction & Access Act, which was actually signed into law last year and takes effect July 1, includes two programs that can help law graduates struggling with debt from certain types of  loans made or subsidized by the federal government. The first will allow people in qualifying types of jobs -- essentially, public-interest lawyers -- to have their loans forgiven after making payments for 10 years. The second will allow people who meet certain income qualifications to have their monthly payment capped at a percentage of income, and to have debt forgiven after 25 years.

The Project on Student Debt also has created a site, IBRinfo, that describes in fairly clear terms the nature of the two programs, and attempts to direct users to an application process -- no small feat considering that the public-service forgiveness program does not appear to have an application process in place yet.
We can expect that the details of this program, hazy as they are currently, will start to emerge shortly. We thought the program raised two important questions at the start, though:

1. Retroactivity. These 10-year and 25-year windows; when could they start? IBRinfo has some guidance. It appears that the 10-year window attached to the public-service plan can reach back to any payment made after October 1, 2007. So under this plan, you could be within about eight years of your "forgiveness day" already. For the income-based, 25-year plan, it appears you can apply any number of earlier payments made through the Income Contingent Repayment plan (you know, this one) to the total of 300 you must make to qualify for forgiveness. So there is some retroactivity here with respect to fulfilling the payment periods.

2. Private loans. IBRinfo again comes through with a concise summary of the types of loans that can qualify for the income-based repayment program. Most important to many: private loans are not eligible. So, if the bulk of your debt is in private loans, you may not see as much benefit from this program as you'd like.

Still, these two programs should benefit a fair number of lawyers whose debt burden has turned out to be more difficult to address than they'd expected.