Capitol Chronicle

The President has signed into law a bill that provides some relief for public-service lawyers burdened by educational debt.

Entitled the “College Cost Reduction and Access Act of 2007,” it has two key provisions that will directly affect public-interest lawyers. (1) It creates a new income-based repayment option for federal loans. It will cap monthly student loan payments at 15% of the borrower's discretionary income. “Discretionary income” is adjusted gross income less 150% of the poverty guideline for the borrower's family size. Private loans, Parent PLUS loans, and consolidation loans that pay off Parent PLUS loans are not eligible for repayment under this option. Borrowers can elect to use this program beginning July 1, 2009.

(2) It also creates a loan-forgiveness program for public-service employees. If a public-service employee makes 120 payments under the federal direct-lending program while employed full-time in public service, the remaining balance on qualifying loans will be forgiven by the government. “Public service jobs” includes “emergency management, government, military service, public safety, law enforcement, public health, public education (including early childhood education), social work in a public child or family service agency, public interest law services (including prosecution or public defense or legal advocacy in low-income communities at a nonprofit organization), public child care, public service for individuals with disabilities, public service for the elderly, public library sciences, school-based library sciences and other school-based services, or at an organization that is described in Section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) of such Code.”

Effective July 1, 2008, borrowers who have already consolidated within the Federal Family Education Loan program can–and must–consolidate again into the direct lending program for the purposes of participating in the new loan-forgiveness program. These borrowers can then elect the income-contingent repayment option and switch to the new IBR option when it becomes available July 1, 2009.