College Loan Forgiveness: Know your benefits and spread the word

As we witness what Bill Moyers calls the “arc of history” from the civil rights laws of the 1960’s to the election of Barack Obama, it reminds us that our movement towards greater social justice takes time and comes in baby steps.

The nonprofit sector’s emerging leaders have received a baby step with the passage last year of the College Cost Reduction and Access Act (CCRAA) and the finalization of regulations this October. While the major focus of the law was on income-based repayment plans and making college debt more manageable – see the IBR website for more on these details – at the National Council of Nonprofits, our focus was on the college loan forgiveness provision and extending that to all nonprofit employees. We succeeded in our lobbying and the Public Service Loan Forgiveness Program does include service in full-time jobs at Section 501(c)(3) nonprofits.

The Program is an incentive for college grads to enter and continue in public service by forgiving the remaining balance of their eligible federal loans after they satisfy the Program’s requirements. Specifically, those individuals with Federal Eligible Direct Loans may qualify to have the outstanding principal balance and accrued interest cancelled under the following conditions:

1. The borrower makes 120 monthly payments on the loan after October 1, 2007; 
2. The borrower is employed by a “public service organization” (including nonprofits) at the time that loan forgiveness is requested and granted, as well as during the period the borrower makes the required 120 monthly payments; and 
3. The loan is not in default at the time of the request. For more information on how this works, see the Information sheet on the National Council’s website.

Now you may be thinking: “If I read that correctly, it sounds a bit like indentured servitude!” Yes, there is that flavor. But remember that this is a baby step: prove to us that you are dedicated to public service, do it for ten years, and then your remaining debt will be forgiven. Actually, it also has that mythological flavor of the knight going out to do good deeds and receiving the reward at the end.

(And the “arc of history” is in the right direction: this year, the Higher Education Opportunity Act, which overhauled many aspects of higher education, included yet another loan forgiveness provision for those working in areas of “national need,” including early childhood educators; nurses; foreign language specialists; librarians; highly qualified teachers serving ESL students, low-income communities or underrepresented populations; child welfare workers; and many, many more. This brand new provision takes a different tack and authorizes the Secretary of Education to forgive college loans for employees working full time in these areas in amounts up to $2000 a year, each year for five years. In other words, the loan forgiveness benefit kicks in right away.)

THE MOST CRITICAL FACTOR RIGHT NOW for those with college debt is that you become aware of these benefits, determine whether they help you, share the information with your friends and colleagues, and overall help spread the word. One of the major problems remaining with the CCRAA provision is that you have the ten-year responsibility to keep the records to demonstrate eligibility. You cannot expect the Department of Education to market this benefit and support you making claims, or that employers will always make you aware of it. It’s your responsibility to learn more and do the recordkeeping it will take. So please spread the word!