The College Cost Reduction and Access Act offers a loan forgiveness program for those who work in public service. As I am strongly considering a career in public service when I graduate from law school I decided to do more research on the loan forgiveness program.
The details of how the program works are somewhat complicated but this fact sheet from Brooklyn Law School and this one from NASFAA give a good overview of the program. First, you need to consolidate your loans(private loans aren’t eligible) with a Federal Direct Consolidation Loan. Next you need to make payments for 10 years(120 payments) while employed in a public service job. The remaining debt then will be forgiven.
In order for this to work you need to be on the income-based repayment plan. Otherwise,under the standard repayment plan after 10 years the loan would be paid in full and there wouldn’t be any balance remaining to be forgiven. The income-based repayment plan limits your annual debt repayment to 15% of your discretionary income-adjusted gross income minus 150% of the poverty level. By my calculations this would result in $37,035.00 in payments for someone making $40,000 a year. Since I expect to have around $70,000 total in loans I would have about half my debt forgiven. Over the 10 years one’s income would most like rise though which would also increase the total of payments.
There are some drawbacks. If you don’t stay in public service for 10 years than you won’t receive any loan forgiveness and any interest that remains unpaid because of IBR payments is capitalized when the borrower leaves the program. You don’t have to be in public service to use the IBR program though and it forgives any remaining debt after 25 years. Another potential pitfall is that the amount of forgiven debt is treated as income in the year it is forgiven. This could result in a huge tax bill. They may address this issue but I’m not aware of any solutions yet.
All in all it is a good deal though and I’m worrying a little less about my huge student loan debt. Make sure you get all the relevant information if you wish to take advantage of this program.
11 thoughts on “The CCRAA and Law School Loan Forgiveness”
Ten years seems like an awful long time to commit yourself such a specific career path! Good luck if you choose to do this.
Every time I read about these loan forgiveness programs I’m reminded of [dating myself] the TV show “Northern Exposure” 🙂
The ten years of service do not have to be consecutive and they do not have to be in the same field – you could be a teacher for five and then work at a non-profit for five, etc.
Stacie- That is correct. Thanks for adding that information.
Would it pay for a JAG who has been in the USAF since 2001, and paying on loans since then, to re-consolidate federally for 10 years? The problem is that now that my husband been in for 8 years, he’s a Major and the pay is finally catching up to private sector…would he even qualify for reconsolidation and the income-level requirements?
I’m not qualified to say whether it would be worth it for him or not. If I understand correctly he would get credit for payments made since Oct 1, 2007 so he would really only have about 8 1/2 years left to qualify for forgiveness. I would check with a lender or someone who knows this better than me though to be sure.
Does it matter what your income is after law school–for example if I’m working in public interest but making a significant amount of money? I know you’re also a law student doing some personal research, so you may not have all the answers, but I’m looking into this also, and after hearing some negative things about many LRAP Programs, I want to verify a few things. For example, if I went into corporate for a year or two in between I could come back and work for public interest and still ultimately qualify for the CCRA?
From what I’ve read my understanding is that it doesn’t matter how much money you’re making as long as you are doing what is classified as public service work. The ten years do not have to be consecutive. They are still working on the details of this you might want to check out ibrinfo.org from time to time for updates.
Hello Andy (and others!)
I have just come across this site and it is quite informative. I am looking into student loan forgiveness options, as well. I am living abroad, working as a Native Speaker English teacher and I am wondering if you have, by chance, heard of any forgiveness programs available for English language teachers who are teaching abroad. My salary has been (and continues to be) modest with teaching English and I feel that it is a form of public service or even “citizen diplomacy”, in working abroad and having a chance to share and exchange so much inter-culturally. I would appreciate any suggestions you may be able to provide, in terms of what you have learned in your own searches on this topic.
many thanks and all the best to everyone!
Lisa – I am not an expert on this but from what I’ve read I’m doubtful that teaching English abroad would qualify for the forgiveness program. Here is a link for the rules regarding the eligible jobs for public service loan forgiveness. Without knowing the details of your job I can’t say for sure whether it would qualify but since most foreign teaching jobs are for private employers they wouldn’t qualify. When the rules refer to being employed by the government that is probably limited to governments in the U.S. so that wouldn’t qualify either but I’m not positive about that. I’d try contacting the Department of Education and see if they could give you a definitive answer.
*** I’d like to teach abroad myself so it would be nice if that would qualify. If you taught through the Peace Corps you would qualify but of course you wouldn’t make much money. Depending on your situation it might be worth it.