New Program Paves Way for Public Service Jobs

Print

E-Mail

Reprints

Text Size

Latest News

• Financial Groups Mobilize Against Bill
• Dodd Unveils Sweeping Financial Overhaul
• Dreier: GOP Can’t Stop Democrats From Procedural Scheme to Pass Health Bill
• Reid Thanks Colleagues for Concern for Wife
• HOH’s One-Minute Recess: I Know You Are, but What Am I?

Becca Eden always knew she wanted to go into public service. But as a second-year law student who had already taken out $120,000 in loans, she also knew it would be an uphill battle to pay back her six-figure debt on a modest public servant’s salary.

“At a certain point you do have to step back and say, ‘Oh my God — I am going to have $150,000 in debt hanging over me,’” Eden said. “Corporations pay $115,000 and you’ll be making half of that in public service.”

Lucky for Eden, a new law granting loan forgiveness for graduates who go into public service should ensure that she never has to join the corporate world just because she’s saddled with student debt.

Signed by President Bush on Sept. 27, 2007, the College Cost Reduction and Access Act will allow more graduates to pursue careers in public service without worrying about debt. The act introduces an income-based repayment plan to lower monthly student loan payments and cancels any remaining debt after 10 years for those who work in public service.

“This is the most significant of breakthroughs for public service in a generation,” said Heather Jarvis, an expert on employment debt for Equal Justice Works, an organization that provides support for lawyers interested in pursuing public service. “We have many other smaller-scale loan repayment assistance options, but this is the first federal solution on such a grand scale.”

For Eden, the existence of the program makes public service feasible. “If I want to get married or have a family, I need some sort of stability rather than eating ramen noodles for the rest of my life,” she said.

And for Mike Siudzinski, who graduated from Fordham Law School last spring with $170,000 in debt, the law allowed him to accept a position with the New York State Attorney General’s Office with fewer reservations.

“For me the law was sort of a godsend because I was going to do [public service] anyway,” Siudzinski said. “It will be helpful for those who are really committed, like myself.”

Although the law is especially beneficial for students pursuing public service, graduates in other fields are not completely excluded.

The income-based repayment plan that goes in effect July 1, 2009, can benefit any student who graduates with debt but does not earn a high salary, regardless of career.

To qualify for the income-based repayment program, an individual’s annual student loan payments (under a 10-year standard repayment plan) must be greater than 15 percent of the amount by which his adjusted gross income exceeds 150 percent of poverty. For example, if an individual earns $115,000 per year and has $108,276 or more in qualifying student debt, he is likely to qualify for IBR under normal conditions. This is called a “partial financial hardship.”

“In other words, Congress has capped the amount of money that a person has to pay on a monthly basis,” Jarvis said. “IBR bases student loan payments on income rather than on the amount of debt.”

If an individual owes $100,000 in qualifying debt at 6.8 percent interest and takes a job that pays $40,000, for example, then that student will pay $309 per month under IBR instead of $1,151 under a standard, 10-year repayment plan. This example is based on the 2007 Federal Poverty Guideline for a one-person household of $10,210.

Only federal direct loans and federally guaranteed loans are eligible for IBR. Commercial or alternative private student loans do not qualify.

In addition, IBR offers its own version of loan forgiveness. If an individual still has student debt after 25 years of IBR, the federal government will cancel whatever remains.

But for public servants like Eden and Siudzinski, the government will cancel student debt after only 10 years, as long as they meet certain requirements. This is called public service loan forgiveness.

To be eligible, a person must make 120 qualifying payments on a federal direct loan while working full time in a public service position for 10 years.