Americans are suffering under a combined $1 trillion in outstanding student loan debt. But, according to the Consumer Financial Protection Bureau (CFPB), nearly 33 million workers who qualify to have their student loans forgiven, fail to take advantage of their options.
In 2007, Congress passed the College Cost Reduction and Access Act which created a new loan forgiveness program for those employed in the public service sector. Under the program, any debt remaining after 10 years of full-time employment in public service will be forgiven.
In order to receive the loan forgiveness, workers will have to have made 120 payments as part of the government’s William D. Ford Federal Direct Loan (Direct Loan) Program. Borrowers can consolidate other loans into the Direct Loan program to qualify for the loan forgiveness program.
While the loan forgiveness program is only for those who work in the public service sector, as alluded to by the Consumer Financial Protection Bureau, the term “public service sector” is so broad that many people may not even realize they qualify.
“We estimate that one in four working Americans has a job that meets the definition of public service under this program. Many of these teachers, health care workers and other public servants could be eligible to have their college loans wiped out after ten years,” said Richard Cordray, director of the CFPB.
According to the US Department of Education:
“Qualifying employment is any employment with a federal, state, or local government agency, entity, or organization or a not-for-profit organization that has been designated as tax-exempt by the Internal Revenue Service.”
In addition,
“A private not-for-profit employer that is not a tax-exempt organization under Section 501(c)(3) of the IRC may be a qualifying public service organization if it provides certain specified public services. These services include emergency management, military service, public safety, or law enforcement services; public health services; public education or public library services; school library and other school-based services; public interest law services; early childhood education; public service for individuals with disabilities and the elderly.”
Another great feature of the loan forgiveness program is that those with federal loans who can show partial economic hardship may also be eligible to enroll in the Income-Based Repayment Plan. This plan caps monthly student loan payments as a percentage of a worker’s discretionary income.
To find out more information about the government’s public service loan forgiveness program visit these resources:
Consumer Financial Protection Bureau
BMWK – Have you ever looked into qualifying for student loan forgiveness?